1. Presented By: Bradley R. Heinrichs, FSA, EA
Actuarial Potpourri
Presented By:
Bradley R. Heinrichs, FSA, EA

2. BREAKING NEWS!!!

3. You’re Going to Remember Where You Were When….

4. It’s the Moment We’ve All Been Waiting For…
Public Pension Mortality Study Exposure Draft Has Been Released By the SOA!!!!

5. Why Such a HUGE Deal?
Prior mortality tables had ZERO public plan data!!!
78 public plans submitted data
Collected information from calendar years
Central year of study is July 1, 2010-June 30, 2011
Can be utilized for 2019 valuations
Three sets of mortality tables based on job category
Teachers
Public Safety (Police/Fire)
General Employees
Also split by income level in addition to job category
Actuaries like for everybody to be dead on time

6. Fun Naming Conventions
The full set of all public plan mortality tables produced in the study is denoted Pub-2010
Individual table names indicate job classification
PubT-2010 for Teachers
PubS-2010 for Public Safety
PubG-2010 for General Employees
Headcount-weighted tables are indicated with an “.H”
Tables based on above and below median amount (salary or pension amount) are indicated with an “A” or “B”

7. Fun Naming Conventions
For example:
PubG-2010 : Amount-weighted General Employees
PubT.H.-2010(B): Headcount weighted below-median Teachers

8. Results of the Study--Teachers

9. Results of the Study—Public Safety

10. Results of the Study—General

11. How Does This Impact Us?
I predict that most public plans will migrate towards this table with generational projection
Most public plans will see increases in costs
Teachers plans will likely see largest increases
Public safety plans will be surprised…but will also see increases
General employees plans also will see higher costs
Increases will be more pronounced (and likely double) if currently not projecting mortality improvements and then move to fully generational improvements

12. How Does This Impact Us? Real-life example:
Effect on Louisiana Teachers’ plan liabilities:
Current mortality assumption is RP-2014 white collar with some minor adjustments for plan experience
MP-2017 generational improvements
Population is 80% females
Moving from current assumption to new Teachers table with MP-2017 generational improvements increases retirees’ liability by 3.6% (headcount-weighted) and 4.1% (amount-weighted)
Not as large of an increase as seen in the annuity factors

13. In closing…. In accordance with ASOP 35, consider…
All relevant covered population characteristics (including both Job Category and Income Level) when selecting base mortality rates
The use of different mortality assumptions for different participant subgroups
Appropriate mortality projection scales
• Pub-2010 report and mortality tables can be found at
• End of comment period: October 31, 2018
• Comments should be sent to Patrick Nolan at

14. Service Purchases
Members are typically allowed to buy back prior service at “no cost to the plan.”
What does “no cost” actually mean?
No increase in Present Value of Future Benefits?
No increase in the Unfunded Actuarial Accrued Liability?
No increase in the Present Value of Accrued Benefits?
No increase in the Sponsor Contribution Requirement?
Sometimes the method is legislated, but other times it is at the discretion of the actuary/board

15. Service Purchases
Regardless of method, there may be problems treating a person who is buying service like the others
People who purchase service don’t exhibit the same withdrawal rates as others
People who purchase service typically retire sooner than many of the others
Also typically live longer
Should we use “Service Purchase” assumptions?
What if the plan doesn’t make assumed rate of return?

16. Service Purchases Plan Provisions: Accrual Rate: 3.0%
5-Year Average Final Compensation
Normal Retirement: Age 55 with 10 Years of Service,
or Age 52 with 25 Years of Service
Assumptions:
8.0% Interest
RP2000 Mortality Table Projected to Valuation Date
Purchase Request: 3 Years

17. Service Purchases Member Info: Age: 23 Service: < 1 Year
Salary: $35,000
Purchase Request: 3 Years
Method
Before Purchase
After Purchase
Cost
PVB
$8,601,716
$8,608,192
$6,476 AL
$7,567,402
$7,572,558
$5,156
PVAB
$6,767,660
$6,771,383
$3,723
Contribution Req.
$167,997
$168,830
$833 per year

18. Service Purchases Member Info: Age: 42 Service: 5 Years
Salary: $55,000
Purchase Request: 3 Years
Method
Before Purchase
After Purchase
Cost
PVB
$8,601,716
$8,641,707
$39,991 AL
$7,567,402
$7,595,846
$28,444
PVAB
$6,767,660
$6,787,069
$19,409
Contribution Req.
$167,997
$173,826
$5,829 per year

19. Service Purchases So what’s most common? Change in PVB
“Service purchase” assumptions becoming more common
Change in AL or Sponsor Contribution rate least common

20. Service Purchases Regardless of approach, issues remain…
What to do about calc requests just before or just after valuation delivery?
Are “service purchase assumptions” unduly harmful to the member?
Some use 6-7% interest, no termination, immediate retirement at earliest eligible, no pre-retirement mortality

21. Questions?