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Bill ID: Amendment Numbers 06917, 07089, and 07096 to
House Bill Number 1353, Printer's Number 2152
System: Public School Employees' Retirement System and
State Employees' Retirement System
Subject: Hybrid Retirement Benefit Plan
HYOPSIS
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Amendment Numbers 06917, 07089 and 07096 to House Bill Number 1353, Printer's
Number 2152, would amend both the Public School Employees' Retirement Code and the
State Employees' Retirement Code to: 1) implement a hybrid retirement beneft plan; 2)
exempt State Police offcers fom membership in the new hybrid benefit tier; and 3) fr
PSERS, restore the part-time membership eligibility threshold to pre-Act 120
requirements. More specifcally, the amendments would amend the Codes in the fllowing
manner.
Amendment Number 06917 would amend the Public School Employees' Retirement Code
to:
1) Efective July 1, 2015, establish a hybrid beneft tier, which includes defined
beneft and defned contribution components, applicable to all new school
employees or employees returning after a break in service. Current members of
PSERS would be ineligible to participate in the new hybrid tier.
2) Under the defned beneft component, school employees would become members
of "Class T-G" and would earn benefts at a 2% beneft accrual rate. A member
would be vested in the defined benefit component after accumulating 10 years of
service credit. The beneft frmula would be equivalent to 2% multiplied by the
member's years of service (maximum of 25 years), multiplied by the member's
final average salary (highest fve years), with an annual pay limit of $50,000
indexed at 1% per year. Class T-G members would contribute 6% of
compensation for the frst $50,000 for the frst 25 years of service.
3) Establish a defined contribution plan under a new chapter of the Code, Chapter
84, called the School Employees' Defned Contribution Plan, fr school employees
to contribute 1 % of compensation of the first $50,000 fr the first 25 years of
HYOPSIS (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
service, and 7% of compensation on pay above $50,000 or any service over 25
years. The employer contribution would be 0.5% of the member's first $50,000 of
compensation fr the first 25 years of service, and 4% of compensation on pay
above $50,000 or any service over 25 years.
Amendment Number 06917 would amend the State Employees' Retirement Code to:
1) Efective January 1, 2015, establish a hybrid beneft tier, which includes defined
beneft and defned contribution components, applicable to most new State
employees or employees returning afer a break in service. Current members of
SERS would be ineligible to participate in the new hybrid tier.
2) For the defned benefit portion, most State employees would become members of
"Class A-5" and would earn benefts at a 2% beneft accrual rate. A member
would be vested in the defned beneft component after accumulating 10 years of
service credit. The benefit frmula would be equivalent to 2% multiplied by the
member's years of service (maximum of 25 years), multiplied by the member's
fnal average salary (highest five years), with an annual pay limit of $50,000
indexed at 1 % per year. Class A-5 members would contribute 6% of
compensation for the first $50,000 for the first 25 years of service.
3) Establish a defined contribution plan under a new chapter of the Code, Chapter
58, known as the State Employees' Defned Contribution Plan, fr most State
employees to contribute 1 % of compensation of the frst $50,000 for the frst 25
years of service, and 7% of compensation on pay above $50,000 or any service
over 25 years. The employer contribution would be 0.5% of the member's frst
$50,000 of compensation for the frst 25 years of service, and 4% of compensation
on pay above $50,000 or any service over 25 years.
Amendment Number 07089 to House Bill Number 1353, Printer's Number 2152, as
amended by Amendment Number 06917, would amend the State Employees' Retirement
Code to:
1) Exempt a sworn offcer of the Pennsylvania State Police from membership in the
new hybrid beneft tier. All prospective employees of this group would continue
to be eligible fr membership in Class A-3 in the State Employees' Retirement
System until they become eligible fr the enhanced State Trooper retirement
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SYNOPSIS (CCNTD}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bi Number 1353, Printer's Number 2152
benefts upon attaining 20 years of credited service. Additionally, for new State
Police offcers hired on or after July 1, 2017, overtime compensation would be
limited to 10% of base salary.
Amendment Number 07096 to House Bill Number 1353, Printer's Number 2152, as
amended by Amendment Number 06917, would amend the Public School Employees'
Retirement Code to:
1) Reinstate the Public School Employees' Retirement System (PSERS) Pre-Act 120
membership qualification requirements applicable to part-time employees.
Under the bill as amended, a part-time school employee compensated on an
hourly or per diem basis would be required to re-qualify fr PSERS membership
each year. This would require an employee to work at least 80 days (per diem) or
500 hours (hourly) each year to meet the membership eligibility threshold.
DISCUSSION
The Reti rement Codes and Systems
Currently, most full-time public school and state employees are members of either the
Public School Employees' Retirement System (PSERS) or the State Employees' Retirement
System (SERS). Both PSERS and SERS are governmental, cost-sharing, multiple-employer
defned beneft pension plans. The designated purpose of the Public School Employees'
Retirement System and the State Employees' Retirement System is to provide retirement
allowances and other benefts, including disability and death benefts to public school and
state employees. As of June 30, 2013, there were approximately 766 participating
employers, generally school districts, area vocational-technical schools, and intermediate
units in PSERS, and as of December 31, 2013, approximately 105 Commonwealth and other
employers participating in SERS.
Membership in PSERS and SERS is mandatory fr most school and state employees.
Certain other employees are not required but are given the option to participate. As of
June 30, 2013, there were 267,428 active members and 209,204 annuitant members of
PSERS, and as of December 31, 2013, there were 105,186 active members and 120,052
annuitant members of SERS.
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DISCUSSION (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
For most members of both Systems, the basic benefit frmula used to determine the normal
retirement beneft is equivalent to the product of 2.5% multiplied by the member's years of
accumulated service credit ("eligibility points") multiplied by the member's fnal average
(highest three years) salary. Since the passage of Act 9 of 2001 (which increased the
accrual rate fr most members fom 2.0% to 2.5%), most members of PSERS are Class T-D
members and contribute 7 .5% of compensation to PSERS, while most members of SERS are
Class members and contribute 6.25% of compensation to SERS. Within both Systems,
there are a number of additional membership classes with corresponding beneft accrual
and employee contribution rates that difer fom the majority of school and state employees.
Act 120 of 2010 implemented major pension beneft refrms, including the establishment of
new beneft tiers applicable to most new members. Efective January 1, 2011, most new
members (including members of the General Assembly), are required to become members of
one of two membership classes, known as "Class A-3" and "Class A-4." Most new members
of SERS, other than State Police offcers or members employed in a position fr which a
class of service other than Class A or Class is credited or could be elected, become
members of Class A-3 beginning January 1, 2011 (or if a member of the General Assembly,
beginning December 1, 2010). Class A-3 members are eligible fr an annuity based upon an
annual beneft accrual rate of 2% and have a corresponding employee contribution
requirement of 6.25% of compensation. As an alternative to Class A-3, an employee who
becomes a member of SERS on or after January 1, 2011, may elect Class A-4 membership
within 45 days of becoming a member of SERS. A Class A-4 member is eligible fr an
annuity based upon an annual beneft accrual rate of 2.5% with a corresponding employee
contribution requirement equal to 9.3% of compensation.
Effective July 1, 2011, new members of PSERS are required to become members of one of
two membership classes, known as "Class T-E" and "Class T-F." Most new members of
PSERS are required to become members of Class T-E beginning July 1, 2011. Class T-E
members are eligible fr an annuity based upon an annual beneft accrual rate of 2% and
have a corresponding employee contribution of 7.5% of compensation. As an alternative to
Class T-E, an employee who becomes a member of PSERS on or after July 1, 2011, may
elect Class T-F membership within 45 days of becoming a member of PSERS. A Class T-F
member is eligible for an annuity based upon an annual beneft accrual rate of 2.5% with a
corresponding employee contribution requirement equal to 10.3% of compensation.
Under the Codes of both Systems, superannuation or normal retirement age is that date on
which a member may terminate service with the public employer and receive a full
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DISCUSSION (CCNTD}

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Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bi Number 1353, Printer's Number 2152
retirement beneft without reduction. Under the Public School Employees' Retirement
Code, superannuation or normal retirement age fr most members is age 62 with at least
one full year of service, age 60 with 30 or more years of service, or any age with 35 years of
service. Under the State Employees' Retirement Code, superannuation or normal
retirement age fr most members is age 60 with three years of service or any age with 35
years of service, while age 50 is the normal retirement age fr members of the General
Assembly and certain public safty employees. For most members of the Systems who frst
became members after the efective dates of Act 120, the superannuation requirement is
age 65 with a minimum of three years of service credit, or any combination of age and
service that totals 92 with at least 35 years of credited service, and age 55 fr members of
the General Assembly and certain public safety employees.
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In a "defned beneft" plan, such as PSERS and SERS, the pension beneft to be provided at
retirement is defned, while the contributions to be made over the period of employment are
variable based on the experience of the pension fund. Upon retirement, a defned benefit
plan participant is entitled to receive a defnitely determinable beneft that is calculated
using a frmulation that considers fctors such as age, duration of service with the
employer and compensation. Because the benefit is defned and calculated using a frmula
and is not dependent on an individual's account balance, members of defined beneft plans
are largely insulated from both negative and positive fuctuations of the investment
markets.
By contrast, in a "defned contribution" pension plan, the contributions to be made over the
period of employment are defned, while the pension beneft to be provided at retirement is
variable based on the experience of the pension fund. Upon retirement or separation fom
the employer, a defned contribution plan participant is generally entitled only to the
balance standing to the credit of the individual's retirement account. Market perfrmance
directly impacts the value of an individual's retirement account.
The distinction between the defined beneft and defined contribution approaches is most
signifcant in the placement of the risk associated with investment earnings over the period
of employment. The fixed beneft in a defned beneft pension plan means that the
investment experience impacts the contribution requirements, increasing them when
investment earnings are lower than anticipated and decreasing them when earnings are
greater than anticipated. The fixed contributions in a defned contribution pension plan
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DISCUSSION (CONT'D)
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
mean that the investment experience impacts on the beneft amount, increasing it when
earnings are higher and reducing it when earnings are lower. Therefre, the employer
bears the investment risk in a defned beneft plan, and the employee bears the investment
risk in a defined contribution pension plan.
For most employees, defned contribution plans are generally regarded as more valuable fr
those in the early stages of their careers or fr those who are employed in careers that
entail greater mobility. Defned contribution accounts are portable and can readily move
with the employee as that employee moves fom one employer to the next. In contrast,
defned beneft plans are relatively more valuable fr those employees who tend to remain
with one employer and to long-service employees in the later stages of their careers,
because the value and cost of the defned benefits earned each year increase as employees
approach retirement age.
Hybrid Benefit Tiers for School and State Employees
The bill as amended would establish two new "stacked" hybrid benefit tiers applicable to all
new public employees or employees returning after a break in service who are hired by
school or State employers within the Commonwealth afer July 1, 2015, in the case of
PSERS, and January 1, 2015, in the case of SERS. The hybrid benefit tiers would include
both a defned beneft and defned contribution component. The bill as amended would not
afect the retirement benefts of current active members of the Systems unless or until
there is a break in service. Instead, the bill as amended seeks to create reduced beneft tiers
within PSERS and SERS applicable only to new employees or returning members on or
after the efective dates fr each System. Current members of PSER$ or SERS cannot elect
to become members in the new hybrid plan.
The following table illustrates the major benefit provisions of the new hybrid beneft tiers.
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Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bill Number 1353, Printer's Number 2152
DISCUSSION (CCNT'D)
Table 1
Hybrid Benefit Tiers
Members of Class T-G in PSERS and Class A-5 in SERS
Defined Benefit Component Defined Contribution Component
Benefit Accrual 2%7 Years of Service on first $5O,OOOof Balance of participant's account in form of
compensation (Ma. frst 25years of service) anuity
7Final Average Salary (High 5Years)
Employee Contribution 6%contribution on frst $5O,OOOof l %contribution on frst $5O,OOOof
compensation fr frst 25years of service compensation fr frst 25years of service
O%contribution above $5O,OOOor over 25 7%contribution above $5O,OOOor over 25
years of service years of service
Employer Contribution Actuarially deterined rate fr compensation O.5O%contribution on frst $5O,OOOof
below $5O,OOO compensation fr frst 25years of service
O%fr compensation above $5O,OOO 4%contribution above $5O,OOOor over 25
years
Vesting lOyears Immediately fr participant, J years fr
employer contributions
Superannuation Age Age 65(with J yeas of service fr PSERS) Not applicable
Death Benefit If more than lObut less than 25years of Payment of paricipant's account balance
service, eligible for annuity based on service
Disability Benefit If at least 5years of service, eligible fr annuity Payment of participant's account balance
based on service and compensation
Subject to the shared-risk provisions of Act 120
Any employee who first becomes a member of PSERS or returns after a break in service on
or afer July 1, 2015, would become a mandatory member of the hybrid beneft tier and a
member of a new membership class, known as "Class T-G." A Class T-G member would be
entitled to a defned beneft equal to a 2% annual beneft accrual rate multiplied by the
member's years of service (maximum of 25 years) multiplied by the member's final average
salary (highest five years), with an annual pay limit of $50,000 indexed at 1 % per year.
Class T-G members would be required to make employee contributions equal to 6% of
compensation fr the frst $50,000 fr the frst 25 years of service. Employer contributions
on behalf of the member fr the defined benefit plan would be an actuarially determined
rate.
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DISCUSSION (CONTD)
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
Likewise, any employee who frst becomes a member of SERS or returns after a break in
service on or after January 1, 2015, would become a mandatory member of the hybrid
beneft tier and a member of a new membership class, known as "Class A-5." A Class A-5
member would be entitled to a defned benefit equal to a 2% annual benefit accrual rate
multiplied by the member's years of service (maximum of 25 years) multiplied by the
member's fnal average salary (highest fve years), with an annual pay limit of $50,000
indexed at 1 % per year. Class A-5 members would be required to make employee
contributions equal to 6% of compensation fr the first $50,000 fr the first 25 years of
service. In the case of employees in Act 111 collective bargaining units, the efective date is
delayed until current agreements expire. For Capitol Police and park rangers, the date is
July 1, 2015. Employer contributions on behalf of the member fr the defned beneft plan
would be an actuarially determined rate.
For members returning after a break in service, benefts already accumulated as a frmer
PSERS or SERS member would be frozen in the Systems, but available to the employee
upon retirement in conjunction with benefts accrued as a member of Class T-G or Class A-
5 and as a participant in the defined contribution plans (Plans). If the member becomes
vested in both an existing membership class and either Class T-G or Class A-5, then the
member may receive only one annuity under one option upon attaining superannuation
age. After becoming a participant in one of the Plans, an employee would be prohibited
fom purchasing any previous school or creditable nonschool service, in the case of PSERS,
or any previous State or creditable nonstate service, in the case of SERS, except fr non
intervening military service.
In addition to the defined beneft portion of the hybrid tiers, the bill as amended would
amend the PSERS Code by adding Chapter 84, efectively integrating into the Code a
defned contribution beneft component, known as the "School Employees' Defned
Contribution Plan." Similarly, under the SERS Code, a new chapter, Chapter 58, would be
added to incorporate a defned contribution beneft component, known as the "State
Employees' Defned Contribution Plan." Participation in the respective defned
contribution plans would be mandatory fr all Class T-G and Class A-5 members. After the
first 25 years of service, benefits would cease to accrue in the defned beneft plan and the
defned contribution component would exist in lieu of a defned beneft, but with
significantly larger contributions.
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DISCUSSION (CCNT'D}
Vesting
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Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2 152
Whereas the defned beneft component of the hybrid plan does not entitle new members to
vesting of retirement benefts until 10 years of service, the defned contribution plan
provides 100% vesting fom the frst day of membership. For both Class T-G and Class A-5,
superannuation age is age 65, with 3 years of service required fr PSERS. Vested members
may not withdraw contributions and interest in lieu of receiving a beneft. Vested members
are eligible to receive an early retirement beneft after completing 25 years of service. To
receive an unreduced retirement beneft, however, members must attain age 65.
Defined Contribution Plans
The hybrid beneft tiers also contain a defned contribution component. For the purposes of
the Commission's discussion, the major issues of the new defned contribution portion of the
hybrid benefit tier have been divided into the fllowing fur categories: 1) establishment,
organization and operation; 2) coverage, benefts and contributions; 3) investments; and 4)
ancillary issues.
tstob|ishment, Orgonizotionond Operotion
The bill as amended mandates that the School Employees' Retirement Board and the State
Employees' Retirement Board administer or ensure the administration of the respective
Plans, and sets frth the Boards' powers and duties. Most of the details governing the
actual operation of the new Plans are delegated to the Boards which will be responsible fr
establishing the rules and regulations governing the Plans. These rules and regulations
will presumably address the many specifc details involved in the operation of a public
pension plan. It also appears that most of the new Plans' investment and administrative
fnctions may be handled by third-party administrators contracted by the Boards to
provide the necessary services.
Coueroge,Henefitsond Contributions
School and State employees who participate in the new defned contribution plans would
contribute 1 % of the first $50,000 of compensation fr the frst 25 years of service, and 7%
on pay above $50,000 and fr service over 25 years. Employers will contribute 0.5% of the
member's first $50,000 of compensation fr the frst 25 years of service, and 4% of
compensation above $50,000 and for service over 25 years. Future Pennsylvania State
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DISCUSSION (CCNTD}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bi Number 1353, Printer's Number 2152
Police Offcers would be exempt fom joining the new defined contribution plan, with new
employees of this group continuing to be eligible fr membership in Class A-3 of SERS after
2015.
Participants in the Plans may make additional contributions to the Plans up to the limits
imposed by federal law. Contributions on behalf of the participant and the employer would
be credited to an "individual investment account" fr each participant of the new Plans,
along with all interest and investment gains or losses. For investment purposes, the
Boards may pool the assets of the participants in the Plans.
Participants in the Plans would become flly vested I the employer-matching
contributions after three years of employment. The participant's contributions would vest
immediately.
1nuestments
While the bill as amended does not specifcally mention the type of investments that will be
ofered to the participants, governmental defned contribution plans typically offer a variety
of investment options, including lifestyle funds that are based upon age and projected
retirement date. The Plans will most likely also make available investment options that
represent a broad cross-section of asset classes and risk profiles. The bill as amended
states that the PSERS and SERS Boards will not be held responsible fr any investment
losses incurred by participants in the Plans or fr the failure of any investment to earn a
specifc or expected return. The Boards will bear the expenses arising from the
establishment of the Plans, but all other expenses, fes and costs of the administration of
the Plans will be assessed against the accounts created on behalf of participants.
Anci||o1ssues
Death and Disability Benefits. Beyond payment of the participant's account balance to the
designated benefciary upon the death of an active participant, there are no special death
beneft provisions to provide fr the surviving spouse or children of a Plan participant.
Holding Vehicle Trust. The bill as amended creates a temporary "holding vehicle" fr each
of the Systems in the event that the defined contribution plans are not ready to accept
contributions by the efective dates. All employee and employer contributions would be
held in a qualifed holding vehicle trust until the Boards certif that the defined
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DISCUSSION (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bi Number 1353, Printer's Number 2152
contribution plans are operational and able to accept the employee and employer
contributions. Contributions in the holding vehicle would earn annual interest at a rate of
4%, increased or decreased by any investment earnings or losses.
Pension Forfeiture Act. Under Act 140 of 1978, known as the Public Employee Pension
Forfeiture Act (43 P.S. 1311- 1315), a public oficial or public employee who is convicted
or pleads guilty or no defnse to a crime related to public office or public employment is
disqualifed to receive a retirement or other beneft or payment of any kind except a return
without interest of the contributions paid into a retirement system. Under the bill as
amended, the accumulated contributions of a participant shall not be frfeited, but will be
made available fr payment of any fnes or restitution.
Limitations on Compensation and Final Average Salar
The bill as amended proposes two new changes to the limits on compensation that may be
used fr purposes of calculating the retirement benefts of prospective members of PSERS
and SERS. The two changes are: 1) increasing the period over which the member's fnal
average salary may be calculated fom three years to five years; and 2) imposing an "annual
compensation limit" to limit the amount of compensation eligible to be calculated under the
defned benefit plan fr retirement benefts to $50,000. The limit will be indexed at 1 % per
year. The overall impact will be to reduce fom current beneft levels the potential future
retirement benefits of the afected members.
The Systems currently employ a member's "fnal average salary" as one of the components
of the statutory formula that is used to compute a member's retirement beneft entitlement.
Currently, a member's final average salary is calculated as the average of the highest three
years of compensation. The bill as amended would amend the Codes to change the fnal
average salary calculation fom the average of the highest three to the average of the
highest fve years of compensation fr all prospective employees afected by the bill as
amended.
The bill as amended would also apply a new limit on the level of compensation that may be
used fr fnal average salary determination purposes. Under this provision, the
compensation calculated fr the defined beneft component cannot exceed $50,000. All pay
above the $50,000 limit (indexed at 1 % per year) would not be included in the calculations
fr employee and employer contributions to the defned beneft plan, but would count
toward the employee and employer contributions fr the defined contribution plan.
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DISCUSSION (CCNTD}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
Shared-Risk Provision
One of the maJor changes to Act 120 was the implementation of a variable employee
contribution rate, known as the "shared risk contribution rate" which was applicable to new
members (Classes A-3, A-4, T-E, and T-F) of both Systems. The shared risk contribution
rate is tied to the investment perfrmance of each System's pension fund and would be
added to the basic contribution rate of each membership class under certain conditions.
Every three years, each System will compare the actual investment rate of return, net of
fees, to the actuarial assumed rate of return fr the previous 10-year period. If the actual
rate of return is less than the assumed rate by 1 % or more, the total member contribution
rate will increase by %% per year, up to a maximum total increase of 2.0%. If the actual
rate is equal to or more than the assumed rate, the total member contribution rate will
decrease by %%. New hires contribute at the rate in efect when they are hired. The
additional shared risk contributions are used to reduce the unfunded accrued liabilities of
the Systems. If the System is fully funded at the time of the comparison, then the shared
risk rate will be zero for that period. For any year in which the employer contribution rate
is lower than the fnal contribution rate, the employee contribution rate would be the basic
contribution rate. There would be no increase in the employee contribution rate where
there has not been an equivalent increase to the employer contribution rate over the
previous three-year period. Until there is a full 10-year "look back" period, the look back
period will begin as of the effective date of the act. The bill as amended would make
members of Class T-G and Class A-5 subject to the shared-risk provision as well, with a
maximum employee contribution of 8% of compensation.
Premium Assistance
Section 8509 of the PSERS Code governs administration of the Health Insurance Premium
Assistance Program. Through the program, health insurance premium assistance
payments are provided to a retired member who is receiving postretirement healthcare
benefts through either the PSERS-sponsored Health Options Program (HOP) or through a
healthcare provider approved by the retired member's frmer school employer. To be
eligible fr premium assistance, a member must have: 1) accumulated at least 24Y years of
credited service; 2) be a disability annuitant; or 3) have at least 15 years of service and have
both terminated school service and retired afer attaining superannuation age (age 65 fr
members of Class T-E and T-F).
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DISCUSSION (CONTD)
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House BiNumber 1353, Printer's Number 2152
Under current program prov1s10ns, participating eligible annuitants receive health
insurance premium assistance payments from the Health Insurance Account equal to the
lesser of $100 a month or the amount of the actual monthly premium. As of June 30, 2012,
there were approximately 87,977 retirees receiving premium assistance benefts fom the
program. An additional 45,321 retirees were eligible to participate but were either enrolled
in non-approved plans or did not purchase healthcare coverage, and so were not eligible to
receive premium assistance payments.
Assets to pay premium assistance benefts fom the Health Insurance Premium Assistance
Program are held in the Health Insurance Account, which is a separate fund within the
pension plan trust. The Health Insurance Account is credited with the contributions of the
Commonwealth and school employers and is fnded on a pay-as-you-go basis, with the
required contributions calculated by the consulting actuary as part of the valuation process
based upon expected annual disbursements and fnded fr one year in advance of the
actual disbursements. A review of the most recent actuarial valuation report fr the Public
School Employees' Retirement System (June 30, 2013) reveals contributions to the program
equal to 0.90% of total payroll.
The bill as amended would amend the defnition of "eligible annuitants" in Section 8102 of
the PSERS Code to exclude Class T-G members fom participating in the Health Insurance
Premium Assistance Program.
Amendment Number 07089
Membership Exemption for Pennsylvania State Pol ice Oficers
Special retirement coverage fr various public safety employees ofen is provided in public
employee retirement systems. The enhanced benefts are premised on the hazardous
nature of public safety employment and the physical and psychological demands of public
safety work. Under the State Employees' Retirement Code, the special retirement beneft
for most Commonwealth public safty employees, including correction and enfrcement
ofcers, is the eligibility to retire at age 50 with full retirement benefts. For public safety
employees who frst became members of SERS afer the efective date of Act 120,
retirement age is age 55. Because the death beneft fr any Commonwealth employee is
dependent on the retirement age, the special public safety employees' retirement coverage
also increases the death beneft.
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DISCUSSION (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House BmNumber 1353, Printer's Number 2152
The benefts of State Police offcers are afected by the DiLauro arbitration award. The
award provided that offcers with 20 years of service are eligible to receive a retirement
beneft of 50% of the ofcer's highest full year's salary, and those with 25 years of service
shall receive 75% of the highest fll year's salary. Years of service between 20 and 25 or
after 25 do not produce incremental beneft increases. The award applies to officers who
retire on or after July 1, 1989. (Class A members with less than 20 years of service are not
afected by the award and are eligible fr the statutory Class A beneft at a 2.0% benefit
accrual rate. No State Police offcer is entitled to the Act 9 beneft accrual rate of 2.5%
because members of the State Police were specifically excluded fom coverage by that
statute). By the act of August 5, 1991 [P. L. 183, No. 23], 71 Pa. C. S. 5955 was amended
to provide that SERS retirement benefits are exclusively statutory and cannot be changed
by collective bargaining agreements or arbitration awards under such agreements. That
section grandfthered pre-existing awards, including DiLauro, but the amendment does not
freclose the legislature fom prospectively altering benefts fr new State Police offcers by
statute.
Amendment Number 07089 would exempt a sworn offcer of the Pennsylvania State Police
fom membership in the new hybrid beneft tier. Al prospective employees of this group
would continue to be eligible fr membership in Class A-3 in SERS until they become
eligible fr the enhanced State Trooper retirement benefits upon attaining 20 years of
credited service. The amendment would also amend the bill to limit overtime compensation
fr new State Police officers hired on or after July 1, 2017, to 10% of base salary.
Special Membership Classes
Within SERS, there are a number of special membership classes entitled to enhanced
retirement benefits, reduced superannuation requirements or both. These include all
members of the judiciary, members of the General Assembly, certain enfrcement oficers
and Pennsylvania State Police Offcers. Additionally, certain highly compensated
employees would be entitled to enhanced retirement benefts by virtue of their higher than
normal final average salary calculations. Under the bill as amended, except fr
Pennsylvania State Police Ofcers, there would be no special beneft provisions fr these
groups of employees in the new hybrid beneft tier.
In 197 4, an attempt was made to refrm and make unifrm the benefit provisions of the
SERS Code. This attempt at refrm prompted a series of lawsuits brought by members of
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1 ~
DISCUSSION (CONTD}
Actuarial Note Transmittal
Aendment Numbers 06917, 07089 and 07096 to
House U Number 1353, Printer's Number 2152
the judiciary challenging the beneft changes as applied to members of the judicial branch.
These court cases ultimately resulted in the preservation of the judiciary's entitlement to
special membership status and enhanced benefts. The most salient of these cases were the
"Goodheart" Supreme Court decisions (See Goodheart U. Casey, 521 Pa. 316 (1989); 523 Pa.
188 (1989), and Klein U. State Employees' Retirement System, 521 Pa. 330, 555 A.2d 1216,
1221 (1989)). Essentially, the Supreme Court of Pennsylvania ruled that the 1974
amendments to the Code, which eliminated the option to elect special class membership,
were unconstitutional as applied to members of the judiciary. The Supreme Court ruled
that, in order to preserve an independent judiciary, judges must be adequately
compensated, pension benefts are part of compensation, and all members of a single-level
court perfrming similar functions and exercising similar authority must be compensated
at the same rate. As a result, all individuals who became members of the judiciary
fllowing the 1974 amendments to the SERS Code must be permitted to elect special class
(Class E-1 or E-2) membership, make the required higher member contributions, and
receive the higher pension beneft attributable to their membership class.
Based upon the independent status of the judiciary in Pennsylvania, the case law regarding
the special status of its members and the exclusion of State Police offcers and educational
employees (as noted below) as the only exemptions fom the new benefit tier, if enacted, the
bill as amended is likely to be challenged in the courts.
Treatment of Educational Employees
Under current law, "school employees" (employees of the Pennsylvania State System of
Higher Education [PASSHE] institutions, most employees of the Pennsylvania State
University, and community college employees) are eligible to choose coverage in an
employer-approved, defned contribution "alternative retirement program" as an
alternative option to membership in either the State Employees' Retirement System or the
Public School Employees' Retirement System. Of the school employees who are eligible to
choose membership in an alternative retirement program, approximately 50% elect
membership in SERS, 45% elect membership in an alternative retirement program and 5%
elect membership in PSERS. Section 5301(a)(12) of the SERS Code allows employers to
contribute up to 9.29% of pay into the independent retirement program, and all affected
employers currently contribute at that rate.
Under the bill as amended, eligible employees would continue to have the option of electing
the alternative retirement plan rather than the new hybrid beneft tiers offered by either of
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'
DISCUSSION (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
the Systems. Since the alternative defned contribution plan ofered to school employees
would have an employer contribution rate more than twice the amount of what would be
ofered under the new defned contribution plans and a lower employee contribution rate, it
is likely that a majority of fture eligible employees would choose the more attractive
alternative plan.
Funding Methodolo
The funding methodology used by SERS fr the defned beneft plan is a variation of the
entry age normal cost method. Under the traditional entry age normal cost method (as
used by PSERS), a contribution rate is determined fr all employees such that if that rate is
applied to the member's salary, fom date of entry into the plan until the member retires, it
will be suffcient to fund the member's lifetime retirement beneft. The method used by
SERS (which is set in statute) bases the normal contribution rate only on the benefits and
contributions for new employees, rather than for all current members. Since new Act 120
members are entitled to benefts of a lesser value than members hired prior to the effective
date of Act 120, the employer normal contribution is artifcially low. The difference
between the actual normal contribution rate and the rate determined under the SERS
methodology becomes a component of the unfunded accrued liability, which is then funded
over 30 years. The 30-year amortization period is a longer period than what is considered
the average future working liftime of the member. In other words, the methodology used
by SERS fnds the cost of the plan over a longer period of time resulting in an artifcially
low employer contribution rate. If enacted, the bill as amended would serve to further
compound this issue by reducing the normal cost calculation even more, since it would be
based on new entrants of Class A-5 which has a lower normal cost than Class A-3 and A-4
members.
Amendment Number 07096
Part-Time Membershi p i n PSERS
With the passage of Act 120, the annual membership qualifcation requirement previously
established under the PSERS Code was eliminated. This change allowed part-time school
employees that were paid on an hourly or per diem basis to become a member of the System
once the employee met the part-time threshold, and to remain an active contributing
member of PSERS even if they are only working a limited sc
h
edule. Prior to Act 120, a
part-time school employee would have to re-qualif fr PSERS membership each year. This
would require an employee to work at least 80 days (per diem) or 500 hours (hourly) each
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Y
'
DISCUSSION (CONTD)
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
year. If they did not qualify fr membership, they did not receive PSERS credit fr the year
unless later purchased when they did become a member. Amendment Number 07096
would amend the PSERS Code to restore the part-time membership eligibility threshold to
pre-Act 120 requirements and prohibit part-time members fom purchasing any previous
non-qualifed part-time service credit.
Miscellaneous Provisi ons
Contractual Benefit Rights of Defned Contribution Plan Participants. Section 402 of
Article 4 in the bill as amended explicitly states that a member in either of the Systems or a
participant in either the School Employees' Defined Contribution Plan or the State
Employees' Defned Contribution Plan shall not have "an express or implied contractual
right" in relation to requirements fr any of the fllowing provisions: 1) qualifcation of the
Plans as a qualifed plan(s) under the Internal Revenue Code; 2) compliance with the
Unifrmed Services Employment and Reemployment Rights Act (USERRA); 3)
contributions to, participation in, or benefts fom the Plans or Systems; and 4) domestic
relations orders regarding alternate payees of participants in the Plans.
Amortization Periods. Currently, changes in the unfnded accrued liability, except those
due to legislative action, are amortized on a level-percentage of compensation over 24 years
fr PSERS and on a level-dollar basis over a 30-year period fr SERS. Changes due to
legislative action are to be amortized over a ten-year period.
Under the bill as amended, for fiscal years beginning on or after July 1, 2015, fr PSERS,
any increase or decrease in the unfunded accrued liability will be amortized on a level
percentage of compensation of all active members and participants over a period of 24
years. Changes in the accrued liability of PSERS as a result of legislation will be amortized
on a level-percentage of compensation over a ten-year period. In the case of SERS, for the
fscal year beginning July 1, 2015, any increase or decrease in the unfunded accrued
liability will be amortized on a level-dollar basis as a percentage of compensation of all
active members and participants over a period of 30 years. Beginning July 1, 2014, changes
in the accrued liability of SERS due to beneft changes under the bill as amended will be
amortized on a level-dollar basis over a period of 20 years.
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SUMMARY OF ACTUARIAL COST IMPACT
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House BiNumber 1353, Printer's Number 2152
The Commission's consulting actuary has reviewed the bill as amended and prepared an
actuarial cost note. In preparing the actuarial note, the Commission's consulting actuary
reviewed actuarial cost estimates provided by Buck Consultants, consulting actuary to the
Public School Employees' Retirement System, Hay Group, consulting actuary to the State
Employees' Retirement System and Milliman, Inc., consulting actuary to the Governor's
Offce of the Budget.
In developing the estimates, the Commission's consulting actuary also utilized projected
future beneft streams, payroll projections and other relevant demographic and economic
data supplied to the Commission by the consulting actuaries fr PSERS and SERS. The
Commission's consulting actuary developed the cost estimates independently utilizing the
frm's own models.
There has been much discussion and some disagreement with respect to the cost-savings
likely to be generated by the proposed hybrid plan. It is important to note that,
fundamentally, actuarial science entails the study of risk. Actuaries use a variety of
assumptions and techniques in projecting costs of pension plans. Considering that the
hybrid plan will apply to fture employees only, the demographic characteristics of the
future employees used in the modeling will have an impact on the level of savings
estimated and ultimately realized. The amount of future savings will be dependent upon
the actual number of new employees entering the Systems, the demographics of those
employees and the experience of those employees.
While the cost notes fom Milliman (consulting actuary to the Budget Office) and Buck
(consulting actuary to PSERS) both showed cost savings under the hybrid plan for PSERS
over the projection period, there was some variation in the level of savings projected. For
the period 2015 through 2044, Milliman's results showed cumulative savings of $7.2 billion
whereas Buck's results showed cumulative savings of $3.5 billion. The results exclude the
savings fom the elimination of the Health Insurance Premium Assistance Program fr
Class T-G members. Buck's analysis indicated that there would be additional savings of
$2.0 billion fr the elimination of the Health Insurance Premium Assistance Program.
There are two main fctors that account fr the difference in the results. First, Buck's
analysis was based on the data used in the June 30, 2013, actuarial valuation whereas
Milliman's analysis was based on the data used in the June 30, 2012, actuarial valuation.
A comparison of the data in the valuation reports showed a reduction in the number and
compensation of active members. Milliman adjusted their preliminary results fr 2013
based on the December 10, 2013, PSERS Board presentation. Second, Milliman and Buck
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<
a
''
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
SUMMARY OF ACTUARIAL COST IMPACT (CONTD)
used diferent assumptions regarding full-time and part-time employees. Milliman kept
the full-time and part-time populations separate whereas Buck determined service accruals
for new entrants as a whole based on the average future service accruals data feld shown
on the valuation data fr new entrants over a three-year period.
The cost notes fom Hay (consulting actuary to SERS) and Milliman both showed cost
savings under the hybrid plan fr SERS. For the period 2015 through 2044, Milliman's
results showed cumulative savings of $7.2 billion and Hay's results showed cumulative
savings of $6. 5 billion.
Although the numbers appear large, in reality, the range of savings calculated by the
various actuaries is not signifcantly diferent. When you compare the accumulated savings
of the hybrid plan over the 30-year period to the total estimated employer contributions
under existing law fr the 30-year period, then the savings would range fom 11% to 13%
fr SERS and 2.5% to 5% fr PSERS. The actual savings will ultimately depend upon
actual plan experience.
However, regardless of the actual level of savings projected, the hybrid benefit plan will
have the fllowing efects: 1) decrease the level of risk to the Commonwealth and school
employers by shifting risk fom the employer to the members of the retirement plans; 2)
reduce costs on an ongoing basis by implementing a reduced beneft tier fr new employees;
and 3) apply any savings generated to help make required contributions in a timely fshion
over the projection period to ensure proper funding of the Systems over the long-term.
The actuarial cost impact is shown in the fllowing tables. Tables 2 and 3 show the impact
of the proposal on PSERS and SERS, respectively, in comparison with existing law. As the
tables show, there is a measureable savings under the proposed hybrid plan in comparison
to existing law.
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Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
SUMMARY OF ACTUARIAL COST IMPACT (CONTD)
Table 2
Public School Employees' Retirement System
Projection Employer Contributions (DB and DC)
Under the Existing Law Under Hybrid Plan Proposal
Increase/
Fiscal
Dollar Amount Dollar Amount (Decrease)
Year Percentage _I n Billions_ Percentage _I n Billions_ _I n Billions_
201 5 20.5% $ 2. 81 2 20.5% $ 2. 81 2 $
201 6 25. 0% $ 3.520 25.0% $ 3.523 $ 0. 003
201 7 29. 3% $ 4.228 27.3% $ 4.234 $ 0. 006
201 8 30.0% $ 4.469 27.8% $ 4.457 $ (0. 012)
201 9 30.9% $ 4.757 28.4% $ 4.727 $ (0.030)
2020 31 .6% $ 5.022 29.2% $ 4. 974 $ (0.048)
2021 31 .4% $ 5. 1 61 29.9% $ 5. 095 $ (0. 066)
2022 31 .4% $ 5. 31 6 29. 7% $ 5.230 $ (0. 086)
2023 31 .5% $ 5. 51 1 29.6% $ 5.406 $ (0. 1 05)
2024 31 .5% $ 5.689 29. 7% $ 5. 564 $ (0. 1 25)
2025 31 .5% $ 5.871 29.7% $ 5. 728 $ (0. 1 43)
2026 31 .5% $ 6.052 29.8% $ 5.892 $ (0. 1 60)
2027 31 .6% $ 6.236 29.8% $ 6. 064 $ (0. 1 73)
2028 31 .6% $ 6.420 29.8% $ 6. 234 $ (0. 1 86)
2029 31 .7% $ 6.603 29.9% $ 6.409 $ (0. 1 95)
2030 31 .8% $ 6.791 30.0% $ 6. 591 $ (0.200)
2031 31 .9% $ 6.984 30. 1 % $ 6. 780 $ (0. 204)
2032 32.0% $ 7. 181 30.2% $ 6. 974 $ (0. 207)
2033 32. 1 % $ 7.380 30.3% $ 7. 1 73 $ (0. 207)
2034 32.3% $ 7.586 30.4% $ 7.382 $ (0.204)
2035 32.4% $ 7.796 30.5% $ 7. 596 $ (0.201 )
2036 1 8.9% $ 4.735 1 7.0% $ 4. 542 $ (0. 1 93)
2037 1 5.5% $ 3.998 1 3.6% $ 3. 816 $ (0. 1 82)
2038 1 4. 0% $ 3.689 1 2.0% $ 3. 521 $ (0. 1 68)
2039 1 0.6% $ 2. 888 1 0.5% $ 2.736 $ (0. 1 53)
2040 9.0% $ 2. 521 9.2% $ 2.385 $ (0. 1 36)
2041 7.7% $ 2.209 8.2% $ 2.097 $ (0. 1 1 1 )
2042 6.6% $ 1 . 935 7.2% $ 1 . 849 $ (0.086)
2043 5. 3% $ 1 . 573 6. 3% $ 1 . 520 $ (0.054)
2044 4.7% $ 1 . 282 5.5% $ 1 .377 $ 0. 096
TOTAL PENSION SAVINGS $ (3. 530)
SAVINGS FROM ELIMINATION OF HEALTH INSURANCE PREMIUM ASSISTANCE PROGRAM $ (2. 000)
Excludes cost-savings from el i mi nation of Health Insurance Premium Assistance Program eligibility for Class T-G Members.
- 20 -


'
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House BmNumber 1353, Printer's Number 2152
SUMMARY OF ACTUARIAL COST IMPACT (CONTD)
Table 3
State Employees' Reti rement System
Projection Employer Contributions (DB and DC)
Under the Existi ng Law Under Hybrid Plan Proposal
Increase/
Fiscal
Dollar Amount Dollar Amount {Decrease)
Year Percentage (In Bi l l ions) Percentage (n Billions) (In Bil l ions)
201 5 20.5% $1 . 254 20.5% $1 .255 $0. 000
201 6 25.0% $1 . 576 25.0% $1 .577 $0.001
201 7 29.5% $1 . 91 7 29.5% $1 .920 $0. 003
201 8 30.4% $2.035 29. 7% $1 .991 ($0. 044)
201 9 29. 6% $2.045 28.9% $1 .994 ($0. 051 )
2020 28.9% $2.056 28. 1 % $1 . 998 ($0.058)
2021 28.2% $2. 066 27.3% $2.002 ($0. 065)
2022 27.5% $2. 077 26.6% $2.006 ($0.072)
2023 26.8% $2.089 25.8% $2.01 0 ($0.079)
2024 26.2% $2. 101 25. 1 % $2.01 5 ($0. 085)
2025 25.6% $2. 1 1 3 24.5% $2.021 ($0.092)
2026 25.0% $2. 1 26 23. 8% $2.027 ($0.099)
2027 24.4% $2. 1 39 23.2% $2. 034 ($0. 1 05)
2028 23. 8% $2. 1 52 22.6% $2.041 ($0. 1 1 1 )
2029 23.2% $2. 1 66 22.0% $2. 049 ($0. 1 1 7)
2030 22. 7% $2. 1 80 21 .4% $2.057 ($0. 1 23)
2031 22. 2% $2. 1 95 20.9% $2. 067 ($0. 1 28)
2032 21 .7% $2. 210 20.4% $2. 076 ($0. 1 33)
2033 21 .2% $2.225 1 9.9% $2.087 ($0. 1 38)
2034 20.7% $2.241 1 9.4% $2.098 ($0. 1 43)
2035 20.2% $2.258 1 6.8% $1 .873 ($0.385)
2036 1 9.8% $2.275 1 6.4% $1 .886 ($0.390)
2037 1 9.3% $2.293 1 6.0% $1 . 898 ($0.394)
2038 1 8.9% $2. 31 1 1 5.7% $1 . 91 2 ($0. 399)
2039 1 8.5% $2.329 1 5.3% $1 .926 ($0.404)
2040 1 8. 1 % $2.349 1 5.0% $1 . 940 ($0.408)
2041 1 4.2% $1 .894 1 1 . 1 % $1 .482 ($0. 41 2)
2042 1 1 .3% $1 .559 8. 3% $1 . 146 ($0.414)
2043 8. 1 % $1 . 1 55 5. 2% $0.739 ($0.416)
2044 6. 2% $0.902 3. 3% $0.484 ($0. 41 9)
TOTAL ($5.678)
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' ' l ' 1
Actuarial Note Transmitta
Amendment Numbers 1, 1b and 1to
House Number 1353, Printer's Number 2152
UMMAYOFACTUAULOST1MPACT (Coc)
Tables 4 and b show projections fr the afected Systems' fnded ratios under the existing
law compared with the bill as amended. The fnded ratio of a retirement system is equal to
the actuarial assets divided by the liability and is usefl in evaluating the relative health of
a retirement system. As the tables show, over time, the liabilities of the defned beneft plan
will decline as new members gradually replace current members in the new hybrid plan .
. 22 -
r ~
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Bi Number 1353, Printer's Number 2152
SUMMARY OF ACTUARIAL COST IMPACT (CONTD)
Table 4
Public School Employees' Retirement System
Projection of Funded Ratio and Unfunded Liabil ity
Under the Existing Law Under Hbrid Plan Proosal
Unfunded Liability Unfunded Liability
Fiscal Funded Ratio
Dollar Amount Funded Ratio
Dollar Amount
Year Percentage (In Billions) Percentage (In Billions)
201 5 59.6% $ 38. 574 59.6% $ 38. 574
201 6 58.4% $ 40.906 58.4% $ 40.906
201 7 57.7% $ 42.838 57.7% $ 42.838
201 8 56.6% $ 45.228 56.6% $ 45.228
201 9 56.2% $ 47. 012 56.2% $ 47. 012
2020 57.8% $ 46.664 57.7% $ 46.664
2021 59. 3% $ 46.326 59.2% $ 46.326
2022 60.5% $ 46.322 60.3% $ 46.322
2023 62.0% $ 45.789 61 .8% $ 45.789
2024 63.7% $ 45.036 63.4% $ 45.036
2025 65.5% $ 43.989 65.2% $ 43.989
2026 67.5% $ 42.628 67. 1 % $ 42.628
2027 69. 7% $ 40.937 69.2% $ 40.937
2028 72.0% $ 38.893 71 .4% $ 38.893
2029 74.4% $ 36.484 73.8% $ 36.484
2030 77.0% $ 33.690 76.3% $ 33.690
2031 79.7% $ 30.474 79.0% $ 30.474
2032 82.6% $ 26.799 81 .9% $ 26.799
2033 85.7% $ 22.629 85.0% $ 22.629
2034 88.9% $ 1 7. 921 88.3% $ 1 7. 921
2035 92.4% $ 1 2.629 91 .9% $ 1 2.629
2036 94. 1 % $ 9.980 93.7% $ 9.980
2037 95.5% $ 7.850 95. 1 % $ 7.850
2038 96.7% $ 5. 847 96.4% $ 5. 847
2039 97.6% $ 4.475 97.3% $ 4. 475
2040 98.2% $ 3.345 98.0% $ 3.345
2041 98.7% $ 2.422 98.6% $ 2.422
2042 99. 1% $ 1 .684 99.0% $ 1 . 684
2043 99.4% $ 1 . 237 99.3% $ 1 . 237
2044 99. 5% $ 1 . 038 99.4% $ 1 . 038
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Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House Number 1353, Printer's Number 2152
SUMMARY OF ACTUARIAL COST IMPACT (CCNT'D}
Table 5
State Employees' Reti rement System
Projection of Funded Ratio and Unfunded Liability
Under the Existing Law Under Hbrid Plan Proosal
Unfunded Li ability Unfunded Liability
Fiscal Funded Ratio
Dollar Amount
Funded Ratio
Dollar Amount
Year Percentage (In Billions) Percentage (I n Billions)
201 5 58.6% $1 8.276 55.5% $20.686
201 6 58. 5% $1 8.773 55.6% $21 . 083
201 7 58.6% $1 9. 1 31 56.0% $21 .325
201 8 60.2% $18. 814 57.7% $20.872
201 9 61 .6% $1 8. 520 59.2% $20.472
2020 63.0% $1 8.207 60.7% $20.044
2021 64.4% $1 7.871 62. 1 % $1 9.584
2022 65.8% $17.51 1 63.6% $1 9.089
2023 67.2% $17. 129 65. 1 % $1 8. 560
2024 68. 6% $1 6. 720 66.6% $1 7.992
2025 69.9% $16.282 68.0% $1 7.382
2026 71 .3% $15. 814 69.6% $1 6. 727
2027 72.7% $1 5. 31 3 71 . 1 % $16.024
2028 74.2% $14.777 72.7% $1 5.268
2029 75.6% $14.203 74.4% $1 4.457
2030 77. 1 % $1 3.589 76. 1 % $1 3. 584
2031 78.7% $12.930 77.9% $12.647
2032 80.3% $12.225 79.8% $1 1 .639
2033 81 .9% $1 1 .470 81 .8% $1 0.556
2034 83.5% $10. 660 83.9% $9. 392
2035 85.2% $9.793 86.2% $8. 141
2036 87.0% $8.864 88. 1 % $7.041
2037 88.7% $7.868 90.2% $5.858
2038 90.5% $6.800 92.4% $4.587
2039 92.4% $5.656 94.7% $3.220
2040 94.2% $4.429 97. 1 % $1 .751
2041 96. 1 % $3. 1 1 3 99.7% $0. 171
2042 97.3% $2. 1 94 1 01 .7% ($1 .035)
2043 98.2% $1 . 577 1 03. 1 % ($1 . 964)
2044 98.5% $1 .359 1 04.0% ($2.523)
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POLICY CONSIDERATIONS
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House BmNumber 1353, Printer's Number 2152
Fundamental Shift in Risk Sharing. The beneft reforms proposed in the bill as
amended will take several years to modify the risk profile of the Systems. Over
time, as defned beneft plan participation decreases and defned contribution plan
participation increases, the Commonwealth and school employers will assume less
risk and more risk will be shifted to members of the Systems. The General
Assembly and the Governor must determine if this shift in risk is appropriate.
Cost Containment. The bill as amended provides a measurable increase in savings
over existing law, which will serve to contain employer costs in fture years. These
cost savings result because new employees participating in the Systems will accrue
benefts that are less costly to the Commonwealth and school employers.
Beneft Value and Security. The hybrid beneft tiers proposed in the bill as amended
would provide new school and State employees and members returning after a break
in service with a retirement benefit that is likely to be less valuable, predictable and
secure than that provided by the current, traditional defned beneft pension plans.
Retirement planning based on projected defned contribution account balances is
likely to be less predictable and involve greater individual attention to risk
management than participation in a traditional defned benefit plan. The General
Assembly and the Governor must determine the appropriateness of such a change in
the Commonwealth's public pension policy.
Special Membership Classes. Under the SERS Code, there are a number of special
categories of public employees entitled to enhanced benefits, reduced
superannuation requirements, or both. These include members of the General
Assembly, the judiciary, Pennsylvania State Police offcers and certain other
hazardous duty personnel. Under the bill as amended, except fr Pennsylvania
State Police ofcers, there are no special benefit provisions for these groups of
employees. The unifrm beneft level under the bill as amended would result in a
major reduction in the value of employer-provided benefits fr these groups of
employees in the future and would result in signifcant benefit disparities between
similarly situated employees.
Annual Compensation Limit. The $50,000 annual compensation limit proposed in
the bill as amended would be increased (indexed) by 1 % each year fom the prior
year's limit. Because the 1 % index is, and can be expected to be, signifcantly less
. 25 .
'
POLICY CONSIDERATIONS (CCNT'D}
Actuarial Note Transmittal
Amendment Numbers 06917, 07089 and 07096 to
House U Number 1353, Printer's Number 2152
than either the cost-of-living index or infation, the effect will be to cause a gradual
erosion in the value of the defned benefit component of the hybrid plan over time.
Delegation of Legislative Authority. The bill as amended empowers the Boards of
the Systems to develop the details of major defned contribution plan design
elements and administrative details by rule or regulation. The General Assembly
and the Governor must determine if the broad powers afforded the Boards constitute
an appropriate delegation of legislative authority.
Technical Operational Issues. In reviewing the bill as amended, the Commission
staff noted the fllowing technical operational issues.
Risk Sharing. Under the defned beneft structure of PSERS and SERS, all
of the longevity risk (the risk of members outliving their retirement income)
and most of the investment risk is borne by the retirement system. Under
current law, only those members subject to Act 120 of 2010 (Classes T-E and
T-F, Classes A-3 and A-4) share in the investment risk of the Systems
through the shared-risk contribution requirement imposed by Act 120. All
pre-Act 120 members of the Systems are exempt fom the shared-risk
contribution requirement. Under the bill as amended, all new or returning
employees would be enrolled in a hybrid beneft tier and would be required to
bear all of the investment risk and longevity risk associated with managing
their defned contribution accounts. This situation creates signifcant risk
sharing disparities among the various classes of public employees.
Employee Contributions. Traditionally, school employees have contributed a
higher employee contribution amount, while receiving the same level of
benefts as most State employees. The bill as amended would mandate
employee contribution requirements that are consistent between the two
Systems, resulting in members of PSERS and SERS contributing an equal
percentage of compensation fr the same level of benefts.
COMMISSION RECOMMENDATION
The Commission voted to attach the actuarial note to the bill as amended, recommending
that the General Assembly and the Governor consider the policy issues identified above.
- 26 -
*
' ' l ' 1
ATTACHMENTS
Actuarial Note Transmitta
Amendment Numbers 11, 1b and 1to
House Nuiber 1, Printer's Number ZZ
Actuarial Note provided by Kenneth Kent of Cheiron, Inc.
Actuarial cost estimate provided by Buck Consultants, consulting actuar fr the Public
School Employees' Retirement System.
Actuarial cost estimate provided by the Hay Group, consulting actuary fr the State
Employees' Retirement System.
Actuarial cost estimate provded by Milliman, Inc., consulting actuary fr the Governor's
Offce of the Budget.
Amendment Number bJl.
Amendment Number oJ.
Amendment Number Jb.
- Z1 -
C|assk Vlues,| nnovatlvePCVO
M
ay 26, 2014
Jaes L. McAneny
Executive Director
Public Employee Retement Comssion
51 0 Fince Buldig
Har bug, PA 17120
Re: Stacked Hybrid Plan
Dea Jim,
ULVFLUYc
|A / .l
CJCMCNCOJVl55lUN
We ae witing wit regad to te proposed stacked hybrd retreent pla fr te State Employees' Retiement System (SERS) ad te
Public School Employees' Retrement System (PSERS) collectively refred to a te Systems.
Oeriw and Implicaons ofthe Stacked Hybrid Retirement Plan
For SERS efectve Jau 1, 201 5 ad PSERS efective July 1 , 2015, te stacked hybrid retrement plan (hereafer refred to as te
hybrd pla) creates two new membership classes (Class A-5 in SERS ad Class T-G in PSERS, respectively). These new members ad
any members retg to active membership wil be covered by te hybrid pla tat provides a defned beneft (B) fr sala up to
$50,000 (which wll be indexed by 1 .0% per yea) fr up to 25 years of service ad a defned contibution (C) pla fr salary in excess
of$50,000, as indexed, ad seice up to ad in excess of25 yeas.
The DB pla is tageted to provide beneft accras fr te frst 25 yeas of employment. Tereaer te DC pla will be te prmary
retirement beneft wt te employer DC contbution iceaing to 4.0% on all saa.
1 750;oas8u|evasc.tc J 00Nc|ean,VP22T U2 e.U3.93.1 45 |X. U3.93UU Ww.CherOD.U5
.James L. McAeny
May 26, 2014
Page 2
Te iplicaions of te hybrd pla ae:

To reduce te overl costs of te Systems trough potentally lower benefts to new members
To add to the potential savings by tansfrg a signifcat porion of ivestent risk ad longevit risk of providig retirement
securt to tese new membershp clases which wil provide lower retrement securty fr ftre employees At te sae time the
employees gan notg fom te upside investent risk fom te DB pla.
To fd te accred liabit contbuton over te tota payol of 3 actve DB members ad DC paicipats. Therefre, te DC
paicipat employers would be payng not ony teir employer contibution fr te DC pla, but aso pa of te unded
accred liability of te DB pla.

Provide dowside ivestent risk protecton by providig fr direct tsfe of the cost of lower dexpected investent ret
wt ftue inceases i member contbutons.

To matin a level of retement securt fr paicipats mag $50,000 however msfacial securt will erode over tme as
te pay level is to be idexe at I% a yea ad Mlose goud wit iaion.
From ou aysis te cost savngs paters will be very dferent between te two Systems because of te diferg metods of fding
ad aoraton of te unded liabiit. Typically a new ter of benefts results i no im ediate savngs ad tes efect over tme as
new entts replace te exstig workorce wit te lower cost benefts.
Specifcaly tere is some concer wheter tere will be long ter savings fr PSERS based on work submitted by te PSERS' acty.
Te employer DB
n
oral cost uder te existig law at te end of te 30-year projection, when most of te members ae Act 120
members, is approximately 3.25% of salay. Under te hybrd pla te totl DB plus DC employer contbution is approximately 3.5%
of sala. The act employer noral cost will depend on te assumptons used ad the demographics of the membership but on te
fce of it te cost of benefts being eed uder ts hybrid pla is higer befre tang ito accout te potential savigs to te
employer of te ivesent ad longevty rsk tasfrs fom te DB plan to te DC pla. None of te actes have atempted to
demonstate te potential risk tnsfr savgs whch coud be approxmated by considering te iplications on cost baed -on more
conerative ivestent asuptions ad morit tables.
Tere is aso concer over te long ter savings fr SERS due to te actua cost method used by SER. Tey use a variat of te
enty ae nora cost metod tat caculaes te norma cost based on te beneft ad demographics of te new hres. Te hybrid plan
+:-o.
. Jaes . McAeny
May 26, 2014
Page 3
reduces benefts uder te DB pla fr Clas A-5 members; terefre te nora cot as a percent of pay will be lower fr Class A-5
members tat of te curent members. Ths metod applies te Class A-5 nora cost rte to al members, regardless of te
benefts tat apply to te oter membershp clases. Because te tota present vaue of benefts has not chaged fr te oter
membershp classes, tis causes te liabilit fr cur ent members to icrease even tough their benefts have not chaged. has te
efect of deferg employer contbutions ito te fture sice te employer norl cost contibution will be lower ad te "increase"
in the liability due to te hybrid pla is aorzed over 20 yeas which is a longer period of te ta if it were fnded trough te
noral cost Goig frad, each yea te nora cost wil decrese a stg saaies fr new hires ae assued to increae a a
higher rate tan te icreae i te $50,000 compensation lt Te resulting adjustent to te liabilit is ten fnded over 30 yeas,
again defring contibutons ito te ftre. Due to ts metodology, ay cost savings uder te hybrid pla will be overstted.
Ts vaation of te ent age noral metod had been critcized when appled to new lower tier benefts becaue it results in lower
intial contbutons ad as a result defrs payent ito te ftue creatig itergeneratona equit issues. Under GASB 67 ad 68,
plas must use te taditional idividua enty age noral fdg metod.
Tere contiues to remain a long ter risk wit the discowt rate assupton. The curent 7 .50% assuption has been used in may of
te projections. The circustaces sur ouding the need to consider ts type of hybrid pla is based on the ipact of cost volatilit
ad usustanable fdig levels. Utis is addessed at te souce trough more conserative assuptions, the uderlying dscount rate
assuption, ad potentally oter actal assuptons, te projected revenue savings wl be geatly dimished. However te overall
risk of te Systems coud be reduced, providing cost stabilzation.
Based on te work by te oter actues te potential projected savings, excluding the savings fom te PSERS healtcae premium
assistce, over te 30 yea projection perod is sU aed in te fllowg table.
PSERS
SERS
CtSavings [ln S|||icns)
Buck

$ 3.5
N/A
May Vi|||man
NIA $ 7.2
$ 6.5 $ 7.Z
-..-o+
. Jaes L. McAeny
May 26, 2014
Page 4
Below we provide a detailed descripton of te hybrid plan, ad projectons of te implicaons of tis new beneft stctre on the fnded
stans of the Systems. From ou projections te bulk of the savigs is trough cost reductions i the ftre, anticipated by te emergig
new entat classes fr each System. However, te expectton tat te Systems V reman unchaged over te 30 yea projection
period is low. Coniderig how the level of beneft security baed on te low idexation of te $50,000 compensation limit will erode
with iation i excess of 1 % per yea will liely creae increasing pressure to modif te limit over tme.
Summar ofthe Stacked Hybrid Retrement Plan
The sacked hybrid retement pla creaes a new membershp class fr SERS (Class A-5) ad PSERS (Class T-G) fr employees hred on
or afer Jaua 1, 2015 fr SERS ad Juy i, 2015 fr PSERS ad fr frer actve members retg to actve serice. However, Stte
police hired on or afer Jaua 1 , 201 5 ad frer active stae police retg to actve serice will reman i Class A-3 ad Class A-4.
Uaddition te hybrid pla would revise certn fndig provisions of SERS ad PSERS ad would establish a defned contibution (DC)
pla fr tese membershp clases.
Ugenera, the fllowing defned beneft (DB) provisions would apply to Class A-5 ad Clas T-G members:
Defmed beneft compensaton limit - The defned beneft compenaton limit would be $50,000 U201 5, ad would increase each
year by 1 . 0%, rounded to te neaest $1 00.
Beneft frua 2.0% of 5-ye maaverage samut
p
lied by sere u
p
to 25 yeas. Te saa used in te caculaon of te
Daverage saay would be lted to te defned beneft compensaton lmit.
Member contbutons -6.0% of salay each yea up to te defned beneft compensaton limit fr te frst 25 yeas of service.
"Shaed-risk" - Members would be subject to te Act 120 "shaed-risk" contibutions if investent reU do not meet certin
tesholds, athough total member contibutions ca ot be less ta 6.0% or more tan 8.0%. Ute investent rate of ret is
cUto or exceeds te assued rate of ret based on te prior ten-yea period, ten member contibution rate will decrease by
0.5%. Likewise, the member contibution rate will icrease by 0.5% if te investent rte of ret dug te ten-yea period is
1 .0% or more below te assued te investent rate of ret.
Eligbilit fr supera uaton -Age 65 wit 3 yeas of serice.

Eligibility fr ealy retrement -25 years of service. Benefts will be actaially reduced fr early retirement.
-..-o
.Jaes L. McAeny
May 26, 2014
Page 5
Vesg - 10 years of service. Members ca ot retire ealy uess tey hae 25 yeas of serice. Vested members can ot receive a
refd of contbutons i leu of receivig a an uity. Members who terinate prior to becomig vested will receive a refd of
contbutons wt stutor H!19

Eligibilit fr deat ad disabilt benefts -Simla to Act 120.

Heath cae premu assisce (SERS ony) -Not eligible.


mgenera, the fllowg DC pla provisions would apply to Class A-5 ad Clas T-G pacipats:

Pacipat contibutons - 1 .0% of saay Qto te defned beneft compensaton lit fr te frst 25 yeas of servce ad 7 .0% of
saa in excess of te defned beneft compensaton limit ador fr serice i excess of25 yeas.

Employer contbution - 0.5% of saay up to te defmed beneft compensation lit fr te ft 25 yeas of servce ad 4.0% of
saa i excess of te defmed beneft compensation lt ador fr serice Uexcess of25 yeas.

Vesng -Pacipat contibutons would vest im ediately. Employer contbuons would vest aer 3 yeas.

Pa-tme servce (SER ony) -Re-ite te requrement fr an u quaicaon (500 hous or 80 days fr hourly or per diem
employees) by a member (ot exisng ad new) to accre retiement credit. Uaditon, eliminate te puchase of servce opton
fr nonquaifed pat-tie service.
mgenera, te flowng fnding provision wll apply:
.

The accred liabiit contbuton W be fded over te tota payroll of al actve DB members ad DC pacipats. Terefre,
te DC pacipat employers would be payg not ony tei employer contibutions fr the DC pla but aso pa of te
unded liabilit of te DB pla.
For SERS, te change W liabilit resultig fom te hybrid pla V be fnded over 20 yeas a level dolla aount. Futre
chages i liabilit fr SERS contue to be aortzed a a level dolla amout

For PSERS, the 10 yea asset smootng metod would be consned to be witin 30% of the maket value of assets. The
aorzaton of te uded labiity wa not addressed fr PSERS which is assued to stay at te curent 24 yeas
Te Act 120 employer contibuion collas vll rema i place. The curent colla is 4.5%.
-..-o+
W. Jaes L. McAeny
May 26, 2014
Page 6
HmjSU
The iplicatons of te hybrid pla ae to chage te cost of pension benefts over tme ad improve te fnded stts. To illustate the
implications we were provided wit te expected projected salary ad beneft payouts fom te SERS ad PSERS actuaries to prepae ou
ow model projectons. We did not hve acta census ad our metodologes i projecton VU D diferent fom te SERS ad
PSERS actuaies which wil resut i numerica diferences in values. However te projectons ae efective in providing insigt into te
long ter tends of te Systems, te implicatons of te hybrid pla ad when te savings ae aticipated. For PSERS te results exclude
te heatcae premum assistace.
Our frrst set of graph ae to set the stage in projecting te assets and liabilities based on a statona populaton ad. assug new
members contnue to paicipate in SER ad PSERS uder te exisng law. Te fst of to types of ghs we will be uing in our
ysis represent te liabilites, shown as te bas ad assets show a te lines over time. Te numbers at te top of te bas show the
fded stats a te actaial asets dvided by the liabiliies over tme. For exaple in the year 2020 SERS is projected to be 63%
fded Hal of te asumptions including te cu ent .5% investent ret ae exactly reaized each yea. Ts is aso predicated on te
actaally deterined contibuton being contbuted each yea. Ou projectons show SERS ad PSERS reachng 98% ad 100%
fded, respectvely, by te end of the 30 yea projecton.
$125
$105

$85

$65
$45
$25
$5
($IM
Graph I State Employees' Retement System DgLaw
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01 5 2017 2019 2021 2023 2025 . 2027 2029 203 1 2033 2035 2037 2039 201 2043
+...o
.Jaes L.McAeny
May 26, 2014
Pae 7
$25
Graph lB-Publc School Employee' Retirement System Extg Law
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O! 2017 2019 201 2023 2025 207 2029 203 1 2033 2035 2037 2039 201 2043
7

The nex graphs i ou aalysis show te projection of contibutons breag out te member contibutons ad the employer
contibutions each ye uder te exstg law. The total noral cost rate represents te cost of te benefts eaed each yea as a
percent of payroll. Te existg law rate represents te curent employer tota cost as a percent of payroll to provide a compason VU
projections tat demonstate costs uder te hybrid pla.
For SERS, te total nora cost rate remans at 1 1 .3% of pay over te projection perod. Because SERS uses a vaation of te enty age
noral cos metod where te nora cost is based on te benefts ad demogaphics of te new hies, tis rate dramatcaly decreases
as wll billusated uder te hybrid pla projectons.
For PSERS, te tditona individual ent age nora cost metod is used to caculate te norma cost. Terefre, fr PSERS, the
nora cost decreases slowly over tme as more members ae covered rder te Act 120 pla provsions.
Te balance of te cost represents te aorton of te unded liabilit ad te steep raping up of costs initialy is te application
of contibuton collas whch lit te contbution increase each year to no more ta 4.5% until the actuaaly detered
+..o+
'
'

. Jaes L. McAeny
May 26, 201 4
Page 8
contbution rate is lower. At tat point we project te employer costs will be approximately 30% of payoll fr SERS ad PSERS.
a projected basis tis aout is exected to decrease each yea fr SERS as te uded liabilit is aorized as a level dolla aount.
For PSERS, te projected employer contbuton is exected to icrease sligtly untl te inita unded liabilit base is aortized
becaue te unded liailit is being aortzed over 24 yeas d a level percent of pay. u each System te costs drop of d te
cu ent unnded bases get amorzed ultimately reducing the cost to te noral cost amounts.

s.
G
G

w
w
<
>7z-
20%
10%
0%
Graph lC State Employees' Retirement System Etg Law
fMember Rate WEmoloyer DB Rt WEmyer DRate - Total NCRte -ExtgLwRat

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2015 2017 2019 201 2023 2025 207 2029 2031 2033 2035 2037 2039 201 2043
+.-o.
.Jaes L. McAeny
May 26, 2014
Page 9
Graph I Public School Employees' Retirement System Exstg Law
Meber Rte -Employer DB Rt -Employer DCRte Total NCRte 0@WRat
20%
l~
- >Q - P ^ - P -
10%
1

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0%
2015 2017 ' 201 9 2021 2023 2025 2027 2029 203 1 2033 2035 2037 2039 201 203
Wit te cu ent stat of SERS ad PSERS a backgroud we ten apply te provisions of te hybrid pla fr te new membership
classes, icluding te additon of te DC pla costs, as a percent of te combied pla pa)roll. Under te hybrid pla, te cost of te
DB plas decrease over te ad te coss of te Lplas increase over te due to te defned beneft compensaton lit ad te 25
year service lit in te DB pla. Over te 30 yea projecton period tere is a net cost savings fr bot SERS and PSERS.
...o+
. J8CSL. McAen
May 26, 2014
Page 10
$25
$05
m
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=
$8

$65
$45
$25
$5
($IM
$225
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$I25
$75
$25
Grph 2A " State Employees' Retiement System -Hybrid Plan
~ OataaDI "Oata &cI8 ' atWI9618
Graph 2B " Public School Employees' Retiement System- Hybrid Plan
OaIaaDQ Oata W '8YKI88O
_.-o.
. Jaes L. McAneny
May 26, 2014
Page 1 1
Lookg at the fding requirements we now add te emergig DC pla costs along wit te DB pla cost components. By the end of
te 30 yea proj ecton, te employer DC pla contibuton as a percent of tota employee payoll represents 1 .9% ad 2.3% of SERS
ad PSERS payoll, respectively. Te black lie shows te level of costs under existig law to illutate how te cost savings is
aticipated to emerge. Member contibuions ae now combied to represent te DB ad DC member contbuton rates Also of note is
te gradua decline of te noral cost rate due to te defed beneft compensation lt ad te 25 year serice lit. The results sow
tat te employer contibution rate is sligtly lower uder the hybrd pla, under te existng law. Keep Umind tese contbution
res ae caculated under te combied projected payroll under bot DB ad DC plans.

t
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Graph 2C State Employee' Retrement System -Hybrd Plan
Member Rte WEmer DB Rte WEmyer DCRate - -TclNCRte Exm_aWR
.,

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201 5 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043
-.-o.
ate
W. Jaes L. McAneny
May 26, 2014
Page 12

W
se

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Grph 2D " Public School Employee' Retirement System -Hybrid Plan
cMember Rate -Employer DB Rte -Employer D Rte - Total
N
CRte -Exstng Law Rat
)mmm "^"""^""""""""""""
201 5 2017 2019 2021 2023 205 2027 2029 2031 2033 2035 2037 2039 201 203
We have included tables at te end ofs report showing te results in tabula fr fr compaative puoses.
CamenlujanmeZnugsuIreyuredhMu, /ucK undmimun
Hay prpared a aaysis of te cost ipact of te hybrid plan on SERS ad Buck provided a simila analysis fr PSERS. Millia also
provided a sila aaysis fr SERS ad PSERS. Cheion has reviewed Hay's cost note dated May 3, 2014, Buck's cost note dated
May 2, 2014 ad Millia' s cost note dated May 23, 2014.
The cost notes fom Hay and WU8bot showed cos savings under te hybrd pla fr SERS. For the period 201 5 trough 2044,
Mill' s results showed cumulative savings of $7.2 billion ad Hay's results showed cuulatve savings of$6.5 billion.
C te cos notes fom M a ad Buck bot showed cost savings uder te hybrid pla fr PSERS over te projecton perod,
ere Wmorc vaaton in te vg. D7 cgcrod 201 5 mogh 2044, Mu`s rest sb0WO UuaLNc v of $7.Z
billion wherea Buck' s results showed cumuatve savings of $3.5 billion. The results exclude te savngs fom te heatcae premium
+.-o.
. Jaes L. McAeny
May 26, 2014
Pae 13
assistce. Buck's alysis indicated tat tere would be additiona savngs of $2.0 billion fr te heatcae premum asistace. Tere
ae a couple of reasons that accout fr te diferece i te results. Buck's aalysis was based on the data used in te Jue 30, 2013
actua valuaion whereas Millia's aalysis was baed on te data used i te June 30, 2012 actal valuation. A compaison of
te data in te vauaton reports showed a reducton i te nuber ad compensation of actve members. Millima adjusted teir
prelina results fr 2013 baed on te December 1 0, 2013 PSERS Board presentation. Uadditon, Millima ad Buck used diferent
assumptions regadig fll-te ad pa-time employees. Millia kept te fl-time ad pa-te popuatons sepate whereas Buck
deterned servce accrs fr new entts as a whole based on te average fte servce accrals data feld shown on te valuaton
data fr new entts over a tree yea period.
Tese results ae estmates baed on te underlying assumption. Actua results wll be based on te vauations perfrmed each yea by
te System' actuaes. What is becomg icreasigly appaent aong public plas is te iabiit to respond to te rsk volatlit of
te uderlyig ivesents backg the beneft promses. Ths coupled wt te increaig number of members eligible to retire i te
nea fre have contibuted to te 80 on resouces. The projected cos savings tat do not emerge fr a mer of yeas ca be
impacted by te Systems' experence. These aaysis should be accompaed byprojections tat icororate steps to lower te overall
rsk profle of te Systems to better maage te potenta long ter expectatons of te hybrid pla.
It ca be antcipated tat tese new ters will aso chage reement paters a tey become a lager portion of te overll active
populaton. Therefre, when new tiers ae added fte experience studies should look at plan experence sepaately fr tese tiers ad
consider using diferent ternaton ad retirement assuptions if necessary.
Under exisg law ad te hybrid pla, it is te uded accrued liabilit tat is drivg te cost. Te noral cost (i.e., te vaue of te
cur ent beneft accrals) is low compason to te unded liabilit cost. Based on Hay's aysis, te nora cost fr SERS at te
end of te projecton perod is approximately 5.0% under te exisng law ad 3.0% uder te hybrid plan, including te DC
contibuion. D Buck's aysis, te nora cost fr PSERS at te end of te projection perod is approximately 3.25% under te
existig law ad 3.5% uder te hybrid plan, including te DC contbuion. U, in te case of PSERS, it is possible that in te long
ter te cost could be higer under the hybrd pla dependig on pla experence. Terefre, what udving te cost ad te reason
why contbuon ae hig ad reachg over 30% fr SERS ad PSERS, is te cost of payig fr te unfded liability. The unfnded
liabiit VUneed to be pad regadless of te pla desig
-...o.
W. Jaes L. McAeny
May 26, 2014
Page 14
LoHcuoHS
Over te projecton period stdied, te results show smal, but meauble, atcipated savings under te hybrid pla fr both Systems.
However alterative asupton show matrial diferences i te exected savigs a demontted betwee M a ad te
Systems' actaes. The tends of system to adopt asuptons below te 7.5% investent assumptons of both SERS ad PSERS to
reduce te overalrisks of the Systems, if applied here, would likely eliminate te savings.

For SER, te savngs over te 30 yea projection period rages fom $6.5 to $7.2 billion. For PSERS, te savings over the 30 ye
period rages fom $5.5 to $7.2 billion. When you compae the accuulated savngs of te hybrid pla over the 30 yea period to te
total estated employer contbutons uder te exstg law fr te 30 yea period, ten te savings would rage fom 1 1 % to 13% fr
SERS ad 2.5% to 5% fr PSERS. Therefre, te rage of savigs caculated by the vaous actuaries is not sigifcantly diferent. Te
acta savings wll depend upon actual pla experence.
Much of te itended savings potenta has not been measured m ters of te risk tnsfr fom the Systems to tese new classes of
membes due . to te limits on compensation under te DB pla. At te sae tme no quatfcaton of te reducton of retirement
secuit fr tese me whose icome replacement at retiement will bmakedly lower ha been estimated.
Tere is dowside investent risk ad longevit risk prtection as pat of te beneft is provided uder te DC pla. At te sae tie
te DC pla wil not deliver te benefts of te DB pla ad tere is no reduction i te long ter cost to pay dow the uded
liability wit te long ter discout rate of7.5% being ued ad subject to material volatility.
m S & tis hybrid pla proposa does provide fr fte cost savings as new employees pacipate uder te Systems because
teir retiement benefts wll be lower 8d less costly to te Commonwealth. The cost reductons ae both explicit ad slow to emerge
in ters of limits to te defed beneft provided ad iplicit as a sigcat poron of te new retement beneft scte will be
delivered a a defned contbuton pla tasfrring te cost of ivestent risk 8dretirement longevty risk to te pacipats.
For new employees te loss of retrement securit is geater ta te vaue of te cost savings fr te Commonweat. Tey not only
take on te investent ad longevit risk, but lose te value of risk poolig (shaed risks of lage groups aticipated under insuce
tpe U gements) tat is acheved uder bot te invesent D0Uopporites of lage Uvesus idividual accounts ad having
to maage tei defned contbuton plas over tei retirement lives.
Te fnacia resuts shown here ae iluatons of a nuber of likely scenarios of projected costs resultng fom te hybrid pla.
However, act fte costs will be determed by fture actaial vauation. Consideration should be given, not only to te shor
+.-o.
N.Jaes L.McAeny
May 26, 2014
Page 15
ter cost savgs, but aso to te long ter implicaions. U addition, given te long ter natue of SERS ad PSERS, it is imperatve
to consider tis aaysis usig conservatve assumptions to detere te potentia savings.
U preparg ou projection we were provided atcipated ftue beneft steas ad payroll projectons fr each covered goup of
employees to allow to isolate te implicatons uder te hybrid pla. We were not workg fom original census data ad relied on
generlly accepted actuaia techques in te development of te model to mae our projections. Reliance on our projected vaues
should be fr purposes of te natue of te long ter tends ad not te specifc values as te nate of ay projecton has an increasing
degee of ucert te fer ito te ftue a projecton is taen.
Ths aalysis wa prepaed exclusively fr te Public Employee Retiement Comssion. It is not intended to beneft ay tird pa
ad Cheiron assues no du or liabilit to ay such pa.
To te best of our knowledge, tis report ad its contents have been prepae in accordace wit generaly recognized and accepted
actuial principles ad practces whch ae consistent wit te Code of Profssional Conduct ad applicable Actuia Stadads of
Practice set out by te Actal Stadads Boad. Fuerore, as credentialed acties we meet te Quaifcation Stndads of te
America Academy of Actes to render te opinion contaned in ts report. Ths report does not addess any contactl or lega
issues. We ae not atoreys ad our does not provde ay lega services or advice.
Sincerely,
Cheiron, Inc.
Kenet A. Kent, FSA, FCA
Principal Consultng Act
UU Tony Pasi
-..-o.
Jaet Cra a, FSA, FCA
Pricipal Consuting Actuy
W.Jaes L. McAeny
May 26, 2014
Page 1 6
HybridPlan
SupplementalSmtisticsoIPro]ectedFinancialImpact
State Employees' Retrement Sysem
Projection of Fun.ded Rato
Fisal Eising Hybrid
Year Law Plan
2015 58.6% 55.5%
2016 58.5% 55.6%
2017 58.6% 56.0%
201 8 60.2% 57.7%
201 9 ' 61 .6% 59.2%
2020 63.0% 60.7%
2021 64.4% 62. 1%
2022 65.8% 63.6%
2023 67.2% 65.1%
2024 68.6% 66.6%
2025 69.9% 68.0%
2026 71.3% 69.6%
2027 72.7% 71 . 1%
2028 74.2/ 72.7%
2029 75.6% 744%
2030 77. 1% 76. 1%
2031 78.7% 77.9%
2032 80.3% 79.8%
2033 81.9% 81 .8%
2034 83.5% 83.9%
2035. 85.2% 86.2%
2036 87.0% 88.1 %
2037 88.7% 90.2.
2038 90.5% 92.4%
2039 92.4% 94.7%
2040 94.2/ 97. 1%
2041 96. 1% 99.7%
2042 ' 97.3% 1 01.7%
2043 98.2% 103. 1%
204 98.5% 1 04.0%
+..-o.
Stte Epl oyees' Retirement Sysem
Proj ection of Unfunded Liabilit
Fisal
Year
2015
2016
2017
2018
2019
2020
2021
202
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
203
2035
2036
2037
2038
2039
2040
2041
2042
204
204
(in bil l ions)
Eisi ng
Law
$ 18.276
$ 18.773
$ 19. 131
$ 18.814
$ 1 8.520
$ 1 8.207
$ 1 7.871
$ 1 7.51 1
$ 1 7. 129
$ 1 6.720
$ 1 6.282
$ 1 5.814
$ 1 5.31 3
$ 14.77
$ 14.203
$ 13.589
$ 12.930
$ 1 2.225
$ 1 1 .470
$ 1 0.660
$ 9.793
$ 8.86
$ 7.868
$ 6.800
$ 5.656
$ 4.429
$ 3. 113
$ 2. 1 94
$ 1 .577
1.359
Hybrid
Plan
$ 20.686
$ 21 .083
$ 21.325
$ 20.872
$ 20.472
$ 20.044
$ 19.584
$ 19.089
$ 1 8.560
$ 1 7.992
$ 1 7.382
$ 1 6.727
$ 1 6.024
$ 1 5.268
$ 14.457
$ 1 3.58
$ 1 2.647
$ 1 1.639
$ 10.556
$ 9.392
$ 8. 141
$ 7.041
$ 5.858
$ 4.587
$ 3.220
$ 1 .751
$ 0.171
$ (1 .035)
$ (1 .964)
$ (2.523)
. Jaes L. McAeny
May 26, 2014
Page
Stte Epl oyees' Retrement Sysem
Projection of Employer Contibutions (DB and DC)
Fisl Eisng Hybrid
Year Law Plan
2015 20.5% 20.5%
2016 25.0% 25.0%
2017 29.5% 29.5%
2018 30.4% 29.7%
2019 29.6% 28.9% .
2020 28.9% 28.1%
2021 28.2/ 27.3%
2022 27.5% 26.6%
2023 26.8% 25.8/o
2024 26.2% 25. 1%
2025 25.6% 2.5%
2026 25.0% 2.8/
2027 24.4% 2.2%
2028 23.8% 22.6%
2029 23.2/ 2.0%
2030 22.7% 21.4%
2031 22.2/ 20.9%
2032 21 .7% 20.4%
2033 21 .2% 19.9%
2034 20.7% 19.4%
2035 20.2/ 16.8%
2036 19.8% 1 6.4%
2037 19.3% 16.0%
2038 1 8.9% 15.7%
2039 1 8.5% 15.3%
2040 1 8.1% 15.0%
2041 14.2/ 1 1 . 1%
2042 11 .3% 8.3%
204 8.1% 5.2%
204 6.2% 3.3%
-.-o.
Stte Epl oyees' Reti rement Sysem
Projection of Eployer Contibutions (DB and D)
(i n billions)
Fisl Exising Hybrid
Year Law Plan lncJDec.
2015 $ 1 .254 $ 1.255 $ 0.000
2016 $ 1 .576 $ 1.57 $ 0.001
2017 $ 1.917 $ 1.920 $ 0.003
2018 $ 2.035 $ 1.991 $ (0.04)
2019 $ 2.045 $ 1.99 $ (0.051)
2020 $ 2.056 $ 1.998 $ (0.058)
2021 $ 2.066 $ 2.002 $ (0.065)
2022 $ 2.077 $ 2.006 $ (0.072)
2023 $ 2.089 $ 2.010 $ (0.079)
2024 $ 2.101 $ 2.015 $ (0.085)
2025 $ 2.1 13 $ 2.021 $ (0.092)
2026 $ 2.126 $ 2.027 $ (0.099}
2027 $ 2.139 $ 2.034 $ (0.105)
2028 $ 2.152 $ 2.041 $ (0. 111)
2029 $ 2.166 $ 2.049 $ (0. 1 17)
2030 $ 2.180 $ 2.05 $ (0.123)
2031 $ 2.195 $ 2.067 $ (0.128)
2032 $ 2.210 $ 2.076 $ (0. 133)
2033 $ 2.225 $ 2.087 $ (0.1 3)
2034 $ 2.241 $ 2.098 $ (0.143}
2035 $ 2.258 $ 1.873 $ (0.305)
2036 $ 2.275 $ 1 .886 $ (0.390)
2037 $ 2.293 $ 1 .898 $ (0.394)
2038 $ 2.31 1 $ 1 .912 $ (0.399)
2039 $ 2.329 $ 1 .926 $ (0.404)
2040 $ 2.349 $ 1 .940 $ (0.408)
2041 $ 1 .894 $ 1.42 $ (0.412)
2042 $ 1.559 $ 1. 146 $ (0.414)
2043 $ 1. 155 $ 0.739 $ (0.41 6)
204 0.902 $ 0.44 (0.419)
Totl $ (5.678)
. Jaes L. McAneny
May 26, 2014
Pae 1 8
Publ ic School Employees' Retrement Sysem
Projection of Funded Rato
Fisal Eisng Hybrid
Year Law Plan
2015 59.6% 59.6%
2016 58.4% 58.4%
2017 5.7 57.7%
2018 56.6% 56.6%
2019 56.2% 56.2%
2020 57.8% 57.7%
2021 59.3% 59.2/
2022 60.5% . 60.3%
2023 62.0% 61.S/
2024 63.7% 63.4%
2025 65.5% 65.2/
2026 67.5% 67.1%
2027 69.7% 69.2%
2028 72.0% 71 .4%
2029 74.4% 73.8%
2030 77.0% 76.3%
2031 79.7% 79.0%
2032 db 81 .9%
2033 85.7% 85.0%
2034 88.9% 88.3%
2035 92.4% 91.9%
2036 94. 1% 93.7%
2037 95.5% 95.1%
2038 96.7% 96.4%
2039 97.6% 97.3%
2040 98.2% 98.0%
2041 98.7% 98.6%
2042 99. 1% 99.0%
2043 99.4% 99.3%
204 99.5% 99.4%
_.-o.
Publ i c School Employees' Retrement Sysem
Projecton of Unfunded Liabilit
Fisl
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
204
(in billions)
Eisng
Law
$38.574 .
$40.906
$42.838
$5.228
$47.012
$.664
$46.326
$46.322
$45.789
$45.036
$43.989
$42.628
$40.937
$38.893
$36.484
$33.690
$30.474
$26.799
$22.629
$17.921
$12.629
$9.980
$7.850
$5.847
$4.475
$3.345
$2.422
$1.684
$1.237
$1.038
Hybrid
Plan
$38.574
$0.906
$2.838
$45.28
$7.012
$6.664
$46.326
$6.322
$5.789
$45.036
$43.989
$2.628
$0.937
$38.893
$36.484
$33.690
$30.474
$26.799
$22.629
$17.921
$12.629
$9.980
$7.850
$5.87
$.475
$3.35
$2.422
$1 .684
$1 .237
$1 .038
W.Jaes L. McAneny
May 26, 2014
Page 1 9
Publ i c School Employees' Retrement Sysm
Projecton of Employer Conti butons (DB and DC)
Fisal Eising Hybrid
Year Law Plan
2015 20.5% 20.5%
201 6 25.0% 25.0%
2017 29.3% 27.3%
2018 30.0% 27.8%
2019 30.9% 28.4%
2020 31.6% 29.2%
2021 31 .4% 29.9%
2022 31 .4% 29.7%
2023 31 .5% 2.6%
2024 31.5% 29.7%
2025 31.SA 29.7%
2026 31.5% 29.8%
2027 31.6% 29.8%
2028 31.6% 29.S/
2029 31.7% 29.9%
2030 31.8% 30.0%
2031 31 .9% 30.1 %
2032 32.0% 30.2%
2033 32.1% 30.3%
2034 32.3% 30.4%
2035 32.4% 30.5%
2036 18.9% 17.0%
2037 1 5.5/ 13.6%
2038 14.0% 12.0%
2039 10.6% 10.5%
2040 9.0% 9.2%
2041 7.7% 8.2%
2042 6.6% 7.2%
2043 5.3% 6.3%
204 4.7% 5.5%
-.-o.
Publ i c School Employees' Retirement Sysem
Projection of Employer Contributions (DB and DC)
Fisal
Year
2015
201 6
201 7
2018
201 9
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
204
Totl
(in bil l ions)
Eising Hybrid
Law Pl an
$2.812 $2.812
$3.520 $3.523
$.228 $4.234
$4.469 $4.4
$. 757 $4. 727
$5.022 $.974
$5.161 $5.095
$5.31 6 $5.230
$5.51 1 $5.406
$5.689 $5.56
$5.871
$5. 728
$6.052
$5.892
$6.236 $6.06
$6.420 $6.23
$6. 603 $6.409
$6.791 $6.591
$6.984 $6. 780
$7. 181 $6.974
$7.380 $7.173
$7.586 $7.382
$7.796 $7.596
$4. 735 $4.52
$3.998 $3.816
$3.689
$3.521
$2.888 $2. 736
$2.521 $2.385
$2.209 $2.097
$1.935 $1.84
$1.573 $1.520
$1.282 $1.37
l nc./Dec.
$0.000
$0.003
$0.006
($0.012)
($0.030)
($0.048)
($0.066)
($0.086)
($0.1 05)
($0.125)
($0.143)
($0. 1 60)
($0.173)
($0. 186)
($0.195)
($0.200)
($0.204)
($0.207)
($0.207)
($0.204)
($0.201 )
($0.193)
($0.182)
($0.1 68)
($0.153)
($0. 136)
($0.1 11 )
($0.086)
($0.054)
$0.096
($3.530)
0UCk CO05u|Id0I5
May 2, 201 4
Mr. Jefrey B. Cl ay
Executive Di rector
Pennsylvani a Publ i c School Empl oyees' Retirement System
5 Norh 5th Street
Harrisburg, PA 1 71 01
Re: AmendmenfNo.A069!7fo HousemNo. !353{Prinfer's No. 2!52)
Dear Jef:
AA0|OXLO|O0y
As requested, we have exami ned Amendment No. A0691 7 to House Bi l l No. 1 353, Printer's
Number 21 52 ( hereafer si mpl y referred to as House Bi l l No. 1 353) , whi ch would create a new class
T-G membershi p under the Pennsylvani a Publ i c School Employees' Reti rement System (PSERS)
for empl oyees hi red afer June 30, 201 5 and former active members of PSERS returni ng to active
serice on or after July 1 , 201 5. I n addi ti on, the bi l l woul d establ i sh a defned contri bution (DC) pl an
for class T-G members efective July 1 , 201 5 woul d revise certai n PSERS fundi ng provisions
efective July 1 , 201 5.
PSERS provisions apicable toClass T -G members
Compensation consi dered for benefit determi nation woul d be l i mited to the first $50, 000 of
pay each year. The $50, 000 pay l i mi t woul d be i ncreased/indexed by 1 % per year (rounded
to the nearest $1 00) . Compensation for both part-ti me service and pari al years of servi ce
wi l l be annualized for purposes of appl ication of the l i mit.

Members would contribute 6% of pay (l i mited as described above) each year in thei r first 25
years of servi ce.

Members woul d be subject to "shared-risk" contri buti ons if investment returns do not meet
cerai n thresholds. These are si mi l ar to the Act 201 0-1 20 "shared-risk" provi si ons, but the
total member contri bution rate for Cl ass T-G members woul d not be less than 6.0% or more
than 8. 0%. In maki ng the projecti ons shown on the attached Table 1 , Class T-G members
were assumed to have the same "shared-risk" obl igations as class T-E and T-F members.
The specific new risk-sharing provi si ons that would apply to Class T-G members under
House Bi l l No. 1 353 have not been reflected i n our projecti ons, but because the cost
savi ngs in these projections are based on a 7. 5% expected future rate of return on assets,
they are i mmaterial to these projecti ons.

The annual benefit at retirement woul d be 2% of the hi ghest fve-year average pay multi pl ied
by the number of years of service, which would be l i mited to 25 years.
bUU|' 020U||v0 b000u0u8,NJUUUb1 bJJ
ZU1 . UUZ.ZJUU ZU1 .UUZ.Z4bU0x
Mr. Jeffrey B. Cl ay
May 2, 201 4
Page 2

El i gi bi l i ty for unreduced retirement benefits woul d be reached upon attai nment of age 65
with three years of serice. The results shown in attached Tabl e 1 were based on an
el i gi bi l ity criterion of age 65 with no service requi rement, as was previousl y communi cated to
us on the basi s of an earl i er version of the l egi sl ati on in early Apri l . The addition of a
requi rement of three years of service has little or no efect on the cost savi ngs projected.
Si mi l arl y, we understand that the option for hi gher-education members to el ect TIAA-CREF
coverage wi l l be mai ntai ned under the fi nal version of the bi l l , and thi s wi l l al so have l ittle or
no efect on the projected cost savi ngs.

Members woul d vest after 1 0 years of service but would not be el i gi ble to appl y for an early
retirement beneft unl ess they have completed 25 years of service. Benefits of members
electi ng to commence payment pri or to age 65 woul d be reduced based on actuarial
equivalence factors.

Vested members woul d be i nel i gi ble to withdraw their contri butions with interest in l i eu of
recei vi ng a pensi on.

Members with five years of service woul d be el i gi bl e for di sabi l ity benefts.

Survivors of members with 1 0 years of service woul d be el i gi bl e to receive death benefits.

Members woul d not be el i gi bl e for the Health Care Premi um assistance program.
L Plan provisions

School empl oyees who begi n, or return to, school service on or afer July 1 , 201 5, woul d be
enrolled i n the DC pl an.

DC pl an mandatory pari ci pant contributions woul d be:


-
1 . 0% of the capped pay used to determi ne PSERS benefits for the first 25 years of
service, pl us
-
7. 0% of pay in excess of the capped pay used to determi ne PSERS benefits and/or for
service over 25 years.
Mandatory paricipant contributions are intended to be pre-tax "pickup" contri buti ons.

The DC pl an empl oyer contri bution would be:


-
0. 5% of the capped pay used to determi ne PSERS benefits for the first 25 years of
service, pl us
-
4. 0% of pay in excess of the capped pay used to determi ne PSERS benefits and/or for
serice over 25 years.

Parici pant contributions to the DC pl an would vest i mmedi ately. Employer contri buti ons
would vest afer completion of three years of service.
DUCK0D0SU|!BH!S
Mr. Jefrey B. Cl ay
May 2, 201 4
Page 3

Each DC pari ci pant wi l l have an i ndividual i nvestment account where al l parti ci pant and
empl oyer contributi ons are accumulated and i nvestment experience, fees and costs are
credited or charged.
The results repored i n this cost note are based on the assumption that the DC pl an wi l l cover onl y
employees hi red on or after July 1 , 201 5, and do not take i nto consideration former PSERS
members returni ng to active service. I n additi on, the empl oyer contri bution under the DC pl an does
not reflect an ofset for foreitures from paricipants who termi nate pri or to completing three years of
serice.
It should be noted that under House Bill No. 1 353, the portion of the benefts provided to class T-G
members by the DC plan i s subject to i nvestment risk that woul d be ful l y borne by participants.
Under PSERS, only Cl ass T-E, T-F and T-G members share responsi bi l ity for the fund' s i nvestment
risk through the Act 201 0-1 20 and House Bi l l No. 1 353 "shared-risk" additi onal member
contributions (as Class T-C and T-D members are not subject to the "shared-risk" contri buti ons).
Addi ti onal l y, participants woul d bear the ful l cost associ ated with "l ongevity risk" (i . e. , the chance of
runni ng out of money in retirement) for benefts provided by the DC pl an, whi l e under PSERS,
l ongevity ri sk i s assumed by the System.
PSERS funding provisions

The accrued l i abi l ity contribution rate woul d be computed as a level percentage of total
compensation of all active PSERS members and active DC parti cipants usi ng an
amortization period of 24 years.

The experience adjustment factor woul d be cal cul ated as a level percentage of the total
compensation of al l active PSERS members and active DC pari ci pants usi ng a 24-year
amorization peri od.
Changes in the accrued l i abi l ity of PSERS resul ti ng from legislation are to be funded as a
level percentage of the total compensation of al l active PSERS members and active DC
participants usi ng a 1 0-year amortization period.

DC pari ci pant empl oyers woul d be surcharged the PSERS accrued l i abi l ity contribution rate
in additi on to the empl oyer defined-contri buti on payments made to the DC pl an.

The normal contribution rate woul d be determi ned as a level percentage of total
compensation of active PSERS members.

The results of the 1 0-year asset-averagi ng method woul d be constrained to be withi n 30% of
the market val ue of assets.
The potenti al fi nanci al i mpact of House Bi l l No. 1 353 is presented in the attached Tables 1 and 2.
These results shoul d be consi dered estimates of the l ikely pattern of emergi ng costs and l i abi l ities
resul ting from the proposed changes but should not be viewed as a guarantee of actual costs.
Actual future fundi ng obl i gati ons will be determi ned on the basis of actuari al valuations made in
future years and will l ikely di fer from the estimates provided in these analyses.
DUCK0D0SU|!B0!S
Mr. Jefrey B. Clay
May 2, 201 4
Page 4
The attached Tabl e 1 i l l ustrates the potential expected savi ngs through the 2045 fiscal year. Table
1 compares projected empl oyer contribution obl igati ons under the current benefit and fundi ng
provisions of PSERS with those projected to arise under the provi si ons of House Bi l l No. 1 353. We
note that the PSERS normal contri buti on rate under House Bi l l No. 1 353 is to be determined as a
level percentage of total compensation of active PSERS members. However, to provide
consistency i n the comparison made, the results are shown as a percentage of total compensation
of al l active PSERS members and active DC pari ci pants. Si mi l arly, the pensi on contribution rate
col l ar is determi ned on the basi s of the resulting normal cost and unfunded accrued l i abi l ity
contribution rates determined on the basis of total compensation of al l active PSERS members and
active DC partici pants.
We note that Table 1 shows a trend to decreasi ng cost savi ngs towards the end of the examination
peri od: as more employees receive compensation exceedi ng the i ndexed $50, 000 cap, more
empl oyer contri buti ons are made to the DC pl an at the 4% rate. Consequently, the trend to
decreasi ng cost savi ngs would be expected to continue beyond 2045.
Tabl e 2 al l ocates the total projected cost/(savings) between pension and health care premi um
assistance.
The calculations presented here are based on the data, methods and assumpti ons used i n the June
30, 201 3 actuarial val uation of PSERS as wel l as the fol l owi ng assumpti ons for the projected
actuari al val uati ons:
The workforce si ze is assumed to remai n constant over the projecti on period; and
Future new employees are assumed to have si mi lar characteristics (age/gender/sal ary) to
new employees for the period Jul y 1 , 201 0 through June 30, 201 3.
One difficulty we must note i n the esti mation of the cost i mpact of benefit changes i s the potenti al
for changes i n retirement patterns when benefit entitlements are reduced. In general , decreasi ng
the benefits of future retirees may l ead afected members to reti re at later ages than do members
subject to current provi si ons, si nce the total pension payable may not be suficient to permit some
members to retire as early as they once mi ght have. The extent and nature of these efects cannot
be identified until members start to retire under the proposed beneft desi gns and a formal
experience study is prepared. The results presented here are based on the assumption that there
wi l l be no change in members' retirement patterns.
The estimates of the cost i mpact of the proposed l egi sl ati on presented here are based on an
assumed 7. 50% annual rate of return on System assets. It i s possi bl e that, under House Bill No.
1 353, l i qui dity considerations may arise due to the shi f i n l iabi l ity towards retirees. At such ti me, the
Board may change the asset al location pol icy to reduce the risk of the portfol io and reflect the need
to hold a growing proporion of its assets i n more l i qui d, less volati l e asset classes. In general ,
lowering the riskiness of the portfol i o may result i n a lower expected return and the use of a lower
di scount rate in the System' s actuarial val uations. Thi s woul d i ncrease the accrued l i abi l ities and
contribution requi rements of the System. We recommend that an analysi s be perormed by PSERS'
i nvestment consultant usi ng projected cash flows of the System based on the provisi ons of House
Bi l l No. 1 353 to determi ne whether such a reduction i n the future assumed l ong-term rate of return
DUCK 0D0SU|!B0!S
Mr. Jefrey B. Cl ay
May 2, 201 4
Page 5
on assets may be warranted. If so, the projections shown on the attachments shoul d be
recal cul ated accordi ngl y.
Future actuari al measurements may difer si gnificantly from the current measurement presented i n
thi s analysi s due to such factors as: pl an experience different from that anticipated by the economic
and demographi c assumpti ons; i ncreases or decreases expected as par of the natural operation of
the methodology used for these measurements; and changes in pl an provi si ons or appl i cabl e law.
An anal ysi s of the potential range of such future measurements i s beyond the scope of thi s study.
Accordi ngl y, the results contained i n this anal ysi s should only be vi ewed as an estimate of the
potential i mpact of the alternative benefit reform proposal s.
Al so attached are five benefit comparisons between the estimated current benefits provided under
PSERS and proposed benefits under House Bi l l 1 353 for hypothetical members who are el i gi ble for
i mmedi ate retirement. The DC Pl an pari ci pant account bal ances are based on a rate of return of
6% per annum. Conversi on of the DC Pl an member account bal ances to benefits is based on an
interest rate of 3% per annum and the proposed RP 201 4 White Col l ar mortal ity tabl e with ful l
generati onal mortal ity i mprovement usi ng the proposed scal e MP201 4. These comparisons are
summarized i n attached Table 3.
Care shoul d be exercised in communi cating any results to thi rd parties to ensure that the above
caveats and underlying basis of the esti mati ons are clearly communi cated to any possi ble
recipients.
I am a Fellow of the Society of Actuaries and a Member of the American Academy of Actuari es. I
meet the Qual ification Standards of the Academy to render the actuari al opi ni ons contained herei n.
Thi s anal ysis has been prepared i n accordance with al l appl i cabl e Actuarial Standards of Practice,
and I am avai labl e to answer questions concerni ng it.
Please let me know if you have any questi ons.
Very trul y yours,
Davi d L. Driscol l , FSA, MAAA, EA, FCA
Pri nci pal , Consul ti ng Actuary
Enc.
Pc: Bri an Carl , Frank Ryder
R:\TOBIN\01 4\pril\PSERS0502201 4DD TobashProposalHB 1 353.docx
DUCK0D0SU| !B0!S
HB1353 AcbJal Payrol forNew
Appropratlon Payrol Membrs/Participant> 6130/15 Empoyle Contributon
Itousands! ltousandsl HBlB
DB/DC Pao1 E1cessof
Flscal Bm$50, $50,000
` (lndend) and (Indexed) Flsal Year
O HB 1JSJ -Totl uou2Wm en/or amr2$ MartelRate
JU` Current DSOC B_m orCS VeauotCS of Retur Cumt H W-08
2012 $ 14, 112,000 $ 14,1 12,000 3 43 " 7 37 * 7,37 ^
2013 14,297,000 14,297,000 7 9 740 7,40
2014 13,720,000 13,720,000 7.50 7.43 7.43
2015 13,42,000 13,482,000 7 50 7.4 7.4
2016 13,641,530 13, 81,530 573,604 $ 0 7 50 7. 47 7.47
2017 14,214,669 14,214,689 1, 115,626 0 7,50 7 '8 7 ,8
2018 14,613,842 14,618,430 1 ,657,848 0 7, 50 7 48 7,42
2019 15,028,322 1 5,033,665 2,208,364 0 7 50 7 49 7 37
2020 15,465,597 15,478,585 2,766,160 0 7.50 7.49 7.32
2021 1 5,914,196 15,927,731 3,316,843 939 7. 50 7. 49 7 27
2022 16,378,425 16,392,723 3,871,214 10,383 7.50 7 so 7 22
2023 16,858,286 16,873,605 4,430,551 39,518 7. 50 7. 50 7 18
2024 17,349,167 17.363.237 4.992,702 97,486 7.50 7.50 7.1 3
2025 17,847,579 17,863,165 5,546,091 192,244 7. 50 7 50 7 08
2026 18,351,727 18,369.089 6,090,240 330,131 7. 50 7, 50 7 02
2027 18,853,322 18,872,605 6,619,441 515,650 7 so 7 50 6,94
2028 19,35,695 19,378,096 7,137,436 749,996 7 50 7 SO 6 86
2029 19,880,487 19,883,608 7.645,325 1,034, 110 750 7 51 6,76
2 20,368,735 20,394,198 8,138,399 1,374,767 7, 50 7 51 .R
2031 20,682,031 20,10,010 8,624,669 1,763,377 7 50 7 51 51
2032 21,401,0 21,"32,185 9,110,177 2, 197,99 7 50 7 51 8,37
2033 21,926,063 21,959,598 9,586.36 2,686,133 750 7,51 6,22
2034 2,458,878 22,495,398 1 0,041,2n 3,234,054 7 '0 7 51 6.06
2035 23,00,MS 23.046,538 1 0,490,459 3,844,256 7 50 7.51 5.89
2036 23,571,108 23,614,on 10,915,776 4,516,801 7. 50 7 51 5.71
2037 24,148,309 24,194,719 1 1,325,910 5,252,264 7 50 7.51 5. 51
2038 24,742,748 24,792,751 1 1 ,713,484 6,058,659 7 50 7 51 S,31
2039 25,356,078 25,409,623 12,07,905 6,940,298 7.50 7_51 S.10
2040 25,995,454 26,053,013 12,394,242 7,891,313 7 50 7 51 4 89
2041 26,666,591 26.728, 1 1 4 12,690,550 8,913,082 7.50 7.51 4.66
2042 27,375,382 27,440,91 1 12,955,04 10,006,618 7 50 7 51 4 44
20-3 28,128,239 28,197,866 13,145,539 1 1 ,216,483 7. 50 7. 51 4 21
2044 26,942,289 29,01', 1 1 8 1 3,275,68 15,354,242 7.50 7 51 3 98
2045 29 816 329 29 894 386 13 372 080 16448 341 7 so 7 51 3 75
Table 1
Public School Employees' Retirement System of Pennsylvania
Projection of Contribution Rates and Funded Ratios As of June 30, 2013
Current PSERS w. House Bill No. 1353 (Printe(s No. 2152)
Heal
Empoyer UnfUnded Prellmlnary Empoyer Care Total Empoyer
Nal C011Taw Llablll HBte Pension Rate ContrlbuUon Contributon Rate
HB 1353
HB 135l- HB 1353- HB135:- HB 1353-
Cvmt DB E curm 0B Connt 08 Current DB Currmt 08+ 0L
5_12 8 12 10.15 % 10 15 % 1 627 " 1 8 27 & 0_65 0.65 8.65 8,65 %
8 66 866 12,99 12.99 21 65 21,65 0 86 0,86 1 236 1 2,36
8.57 6.57 1 5.25 1 5 25 23 62 2362 0.93 0.93 1693 16.93
0.40 0.40 17.51 17.51 25.97 25.97 0.00 0,90 21.4 21.4
8.23 8.23 0.02 19.05 19 05 2728 2728 0.84 0.84 25. 84 25.88
8 03 8 03 0 04 20.41 2041 28.44 2844 0 83 0 83 2927 29 31
7,84 7.70 0.06 21.59 21.58 2943 2928 0 82 0 79 3025 30. 1 2
7 66 739 0 07 2283 2282 30.49 3021 0 79 0 73 31 26 31 01
7.49 7.09 0,09 23 81 2379 31.30 30.88 078 0.69 32.08 31,66
7 32 6 80 0 10 23 93 23 91 31 25 3071 0 77 0 66 3202 31, 47
7 15 6.51 0.12 24. 12 24. 10 31.27 30.61 0 74 0 81 3201 31 34
6 99 6.23 0 14 24 so 24 48 31 49 3071 0 73 0,56 3222 31 43
6.83 5.95 0.17 24.75 24.73 31 58 3068 0 72 0, 55 3<.30 31 39
667 5,68 0,20 25. 00 24 98 31. 67 3066 0 09 0, 50 3236 31 36
6. 50 5.40 0,24 25 24 2521 31,74 30.61 0 69 0, 48 3243 31.33
6-34 5,1 5 0.28 25 4 2546 31, 63 30.81 0. 69 0,46 32, 52 31,36
6.17 4, 88 0,34 25,74 2571 31 91 30,59 0 69 0,44 32,80 31,37
5.99 4,62 0, 40 2600 2597 31 99 30 5 0 69 0,42 32,68 31, 41
5.81 4,37 0, 47 2626 2623 3207 30, 80 069 0, 40 32, 31, 47
56 4,1 0, 54 26.53 2649 32,17 30.62 0.69 0.38 32.86 31.54
546 3.88 0.62 26 81 27 3227 3065 06 036 32.96 31.63
5,27 3.83 0.71 27.09 27.05 3236 30.66 0.69 0.3' 33.05 31,72
S 09 3,39 0,80 27. 39 2734 3248 30.73 069 0. 31 33,17 31,84
4.90 3, 14 0.89 2768 27 63 3258 30,77 0 69 0.29 33.27 31.
4 71 2.90 1.00 14,08 14 OJ 1 8 77 16,93 0 89 027 1 9,46 1 8,20
453 2 68 1. 10 10.70 10.67 15.23 1 3.35 0.69 0.25 1 5,92 14.70
4 34 2 45 1, 21 9, 23 9 21 13 57 1 1,66 0 69 0 22 14, 26 1 3, 10
4. 16 2_23 1.33 7.57 7 . 55 11 73 9,78 0 09 0 20 12, 42 1 1.31
3 98 2 01 1 45 5 9S 5 93 9 93 7 0 0 89 0 18 1 0,62 9.57
3.61 1 82 1 57 4 53 4 52 834 6 34 0 09 016 9 03 9 07
3 64 1 63 1.69 3 29 3 29 6 93 4 92 0 69 0 14 7 62 6 75
3 49 1 47 1 82 198 1 97 S 47 3 44 0 69 0 12 6 16 5, 38
3 36 1 ,33 2 35 0 95 0 9S 4 31 2 28 0 09 0 10 s oo 4 72
3 24 1,22 2 42 0 w 42 220 0-69 0 08 4 91 4,1
Funded vnnAccmUWq
1ml EolveContrln (tiousnds) Ratio lmUllonsl
Cost(Savngs)
Pe\ue
HB 1J53- DB Cesh H asofJlD, HB 1353
Cm 0C 8s 201' Cwt 0B C m HS !1 - 0f
66 4 A 664 A 5 29,5330 29,533.0
3.8 63,0 32,598.6 32,580.0
2,322.796 $ 2,322,79 $ 0 0 61,6 61 6 35,6352 35,6352
2,005,148 2,885,148 0 0 59,8 59 8 38,338 9 38,3389
3,578,851 3,579,520 2,869 2,483 58, 5 58 5 40,695 3 40,695.3
4, 180,639 4,168,218 5,578 4,490 57,3 57 3 43,145 8 43,1458
4,420,687 4,402,796 (17,692) (13,397) 566 566 45,055 8 45,055 8
4,700,859 4,662,040 (38,819) (27,040) 57 9 57 8 44,92 5 44,962 5
4,961,364 4,899,879 (61,485) (39,840) 59 2 S9 1 44,764 7 44,76. 7
5,095,726 5,012,453 (83,273) (50,193) 60 2 60 1 44,895 2 44,89:.2
5,242,734 5,136,936 (105,798) (59,321) 61 6 61 4 44,575 0 44,57: 0
5,431,740 5,302,790 (128,950) (67,258) 83 1 82 8 44,039 1 44,039 1
5,603,787 5,450,876 (152,91 1 ) (74,192) 6', 8 64 4 43,239 2 43,239 2
5,775,477 5,602,338 (173,139) (78,145) 0.5 66 2 42,187.1 42,187 1
5,951 ,465 5,755,360 (196,105) (82,335) 68,5 68 0 40,841 8 40,84 1 8
6,131,100 5,918,173 (212,928) (83,161) 70.6 70. 0 39,186.3 39,18" 3
6,310,283 6,079,365 (230,917) (63,895) 12 0 72 2 37,2084 37,203 4
6,490,407 6,246,034 (244,374) (82,590) 75.1 74 5 34,892 1 34,892 1
6,872,798 6,418,237 (254.561) (80.031) 77.8 77.0 32,2058 32,205 8
6,861.835 6,595,099 (265.907) (77.789) 80.3 796 29,11 5 7 29, 1 1 57
7,053, 950 6,779.321 (274.629) (74,713) 83,1 824 25,5892 25,583 2
7,248,570 6,96,528 (280,043) (70,870) 80.1 85. 4 21,568.6 21,58!.6
7,449,610 7,163,172 (286,438) (67,431) 89 3 88 6 17,0734 17,073 4
7,654,384 7,364,945 (289,439) {63,384) 928 02 1 1 1,999 2 1 1 ,9992
4,586,938 4,296,752 (290,188) (59, 114) 92 9J . 9,595 5 9,595 5
J,844,41 1 3.556,449 (287,92) (54,566) 954 95 1 7,7-0 0 7,7-:O
3,528,316 J,247,354 (280,92} (49,527) 9. 5 9. 2 6,042 6 6,042 6
3,149,225 2,874,291 (274,933) (45,083) 97' 97. 1 4,580 8 4,580 6
2,760,717 2,492,996 (267,719) (40,8381 98 1 97 9 3,382 0 3,382 0
2,407,993 2,156,732 (251,261) (35,6531 987 98 S 2,431.0 2,431 0
2,066,004 1, 852,730 (233,274) (30,791) 99 1 99 0 1,713 s 1,713. 5
1,732,700 1,517,446 (215,253) (26,430) 99 3 99 2 1 ,287 8 1,287 8
1,447, 114 1,370,748 (76,367)
'
99A 99.3 1 , 1 1 0.7 1, 110. 7
1, 463 082 , 4D01 _: t80) 99.R 00J 003,S 00
1mcurwcmW@ $ (5 524.335 (1 525 415
Table 2
Public School Employees' Retirement System of Pennsylvania
Cost(Savings) Al location of Table 1 - Total Potential Projected Cost(Savings)
Due to House Bill No. 1353 (Pri nter's No. 2152)
(Amounts in mil lions)
Present Value as of
Cash Flow Basis June 30. 2014
Benefit Reforms (3, 349) ( 1 ,055)
Health Care premium assistance (2, 1 75)
(
470
)
Total House Bill No. 1353 Cost(Savings) (5,524) ( 1 ,525)
mC0'
Tabl e
Publ i c School Empl oyees' Reti rement System of Pennsylvania
Comparison of Benefits under Act J Z (Class T-E members)
And House Bi l l No. 1 353 (Class T-G members)
Employee A B L L
AQe at Hi re 30 30 30 30
Age at Termi nati on 65 65 65 65
Retirement Age 65 65 65 65
Salar at Termi nation $31 , 1 1 1 $51 , 852 $72, 592 $93, 333
Act 1 20 3-Year Fi nal Average Sal ary $30, 000 $50, 000 $70, 000 $90, 000
HB 1 353 5-Year Fi nal AveraQe Sal ary $28, 942 $47, 771 $49, 000 $49, 000
Act 1 20 benefit $21 , 000 $35, 000 $49, 000 $63, 000
HB 1 353 benefit $1 7, 777 $29, 395 $32, 344 $35, 762
Benefit ratio Act 1 20 | HB 1 353 1 1 8% 1 1 9% 1 51 % 1 76%
Notes:
( 1) For the above benefit under HB 1 353,the DC balances are assumed to grow based on an
annual 6.0%return on assets and the balances have been convered to a benefit based on
an annual 3.0%interest rate.
(2)The above benefit comparisons have been based on current compensation levels and
assuming the member was employed 25or alternatively, 35years in the past. The $50,000
pay cap was discounted back by 1 .0%per year and the current pay levels were discounted
back by the salar increase assumption used for the June 30, 201 3 PSERS actuarial valaution.
(3)If the benefit comparisons were assumed to be 25 or alternatively, 35years into the future
the diferences in benefts would generally be greater due to future salar increases being
greater than the annual 1 .0% indexing of the $50,000pay cap, and thus the ratios of the Act
1 20benefits to the HB 1 353benefits would be higher than those shown above.
E
40
65
65
$51 , 852
$50, 000
$47, 771
$25, 000
$25, 408
98%
OUCKCOGBU|!d|!S
PSERS - BUCK Cal cul ati on of prospecti ve Ful l-Ti me_Part-Ti me Empl oyees Under Stacked-Hybri d Pl an
Buck's method of projecti ng future System members does not separately repl ace
current ful l-ti me and part-ti me members with correspondi ng ful l-ti me and part-ti me
members. Our approach for the advisory note i s as fol l ows:
a. Summari ze the System's new member data for the 3-year peri od J uly 1, 2010 to June
30, 2013.
b. Group the data by gender and fifth-age. For each representative gender-based age
group, compensati on and expected future service val ues are determi ned by averagi ng
the data reported for the group duri ng the covered peri od. Each gender-based age
group i s assumed to repl ace a proporti onal share (over the total new member
popul ati on) of exiti ng members. For exampl e, the age 27 femal e cohort has an average
actual sal ary of $31, 161 with an average expected future service of . 910 per year and is
13. 6% of the new member popul ati on enteri ng the System duri ng the first year.
c. In subsequent years' cohorts, the actual sal ary i s i ncreased by 3. 5% from the previ ous
year's actual sal ary assumpti on.
Our methodology does not di sti ngui sh between ful l-ti me and part-ti me members after
the June 30, 2013 base year. Based on the System's val uati on assumpti ons, there wi l l be
a remai ni ng porti on of the current base year ful l-ti me and part-ti me members who wi l l
sti l l be i n active status duri ng the 30-year exami nati on period. Each current base-year
member who i s assumed to have exited the System i s assumed to be repl aced by a
composite of the vari ous new member cohorts, l eadi ng to further averagi ng of the
expected future service used for crediti ng accrual s. Wi thout i nformati on on PSERS'
future hi ri ng patterns, thi s approach is a prudent method to assure that results
devel oped are consi stent with recent experi ence. In additi on, this method i s consistent
with al l other analyses Buck has provi ded PSERS to measure the potenti al cost/(savings)
effect of proposed benefit and/or fundi ng reform studies, i ncl udi ng the studi es
prepared in connecti on with the consi derati on and eventual enactment of Act 2010-
120.
F5bKb
A refund is a return of contri buti ons pl us any interest earned on thi s money. A refund is the only
option if a member termi nates al l Pennsylvani a publ i c school employment and:
( i n the case of Class T-C and Class T-D)
the member is under age 62 and has fewer than five years of credited serice, or
the member is at l east age 62 wi th less than one year of credited service at the ti me of
termi nati on of service.
( i n the case of Class T-E a nd Cl ass T-F)
the member i s under age 65 and has fewer than ten years of credited serice, or
the member is at least age 65 with fewer than three years of credited service at the ti me
of termi nati on of service.
In each val uation, the System' s l i abi lity for refunds due to non-vested termi nati ons is
determi ned on the basi s of expected rates of withdrawal among members who have not yet
met the requi rements for vesting. As requi red under Section 8502(j) of the Reti rement Code,
experience studies are performed ever five years. The J une 30, 2013, actuarial val uation was
prepared on the basis of demographi c a nd economic assumptions recommended on the basis of
an experi ence study coveri ng the period from J uly 1, 2005, through J une 30, 2010, a nd adopted
by the Board of Trustees on March 11, 2011. As mandated by the Retirement Code, these
assumpti ons will remai n in effect for val uation purposes unti l such time the Board of Trustees
adopts other assumpti ons.
Our projected cost/(savings) analyses related to HB 1353 are based on the data and actuari al
assumpti ons that were used i n the J une 30, 2013 val uation, whi ch i ncl udes a 7. 50% assumed
future i nvestment rate of return and the following assumpti ons for the projected actuarial
val uati ons:
NVWDL Assumpti on
Age Mal e Femal e
25 12.50% 13.00%
30 10. 50 13.00
35 11.00 13.00
40 13.00 10.90
45 13.00 10.90
5U 13.00 10.90
55 11. 00 10. 90
60 10.50 10.90
The workforce size is assumed to remai n constant over the projecti on period.
Future new employees are assumed to have si mi l ar characteristics (age/gender/salar) to
those of new empl oyees hi red i n the period J uly 1, 2010 through June 30, 2013.
Under the current pl an, al l prospective new members after J une 30, 2015, are assumed to be
Cl ass T-E members. Under the proposed new pl an, al l prospective new members afer J une 30,
2015, a re assumed to be Class T-G members, as requi red by the legislati on.
We note that estimates of the potential cost of the proposal woul d change i f i t were possi bl e to
anti ci pate specific changes i n reti rement patterns that may arise as a result of reductions i n
benefit entitlements. I n general , decreases i n retirement benefits may l ead members to
postpone reti rements si nce the benefits may not be adequate to provide for members' fi nancial
needs at the ages at whi ch they woul d have retired if there were no change ii benefits.
However, the extent and nature of such changes wi l l not be identifi abl e until members start to
retire under the new benefit design and a formal experience study is prepared. Therefore, we
have not assumed that there wi l l be any i mmedi ate change in members' reti rement patterns.
Actuarial Cost Note -
Projected Impact of Legislation Related to a
SERS Hybrid Defned Beneft (DB)/Defned Contribution (DC) Plan Design
Proposed by Representative Tobash
As requested in connection with the draf legislative language provided to us as proposed
"Amendments to House Bill No. 1 353'', keyed to LR control number HB1 353A06757 and
dated "04/25/1 4" that sets frth a hybrid defned beneft (DB)/defined contribution (DC) plan
design proposed by Representative Mike Tobash (hereafer, the Tobash proposal), we have
perfrmed cost projections to approximate the impact on the fture SERS fnding assuming
that most employees who join SERS on or afer Janua 1 , 201 5 would no longer be covered by
SERS' current benefts, but rather would be covered by a plan design including key features as
described below.
For certain groups of employees, the hybrid plan start date would not be January 1 , 201 5 :

For Park Rangers and Capitol Police, the hybrid plan start date would be July 1 , 201 5

For Pennsylvania State Police, the hybrid plan start date would be July 1 , 201 7
The Tobash proposal would mandate that all employees hired or rehired afer the hybrid plan
start date become participants in a new SERS hybrid DC plan, which would be separate fom
the SERS DB system. Each hybrid DC participant would have established fr him/er a
individual investment account within the SERS hybrid DC trust fnd, which would be separate
fom the SERS DB fnd.
Certain Educational Employees
Although the legislative language upon which this cost note is based (as refrenced above) calls
fr the discontinuace of the right of certain educational employees to elect between SERS,
PSERS, and other specifed retirement program options currently available to new hires, we
have been advised that such language will be deleted and should be ignored.
Therefre, we understand that the availability of this option to certain educational employees
would, in fct, continue if the Tobash proposal were enacted. Absent infrmation that would
indicate otherwise, Hay Group has perfrmed our cost analysis of the Tobash proposal
assuming that fture (post-Tobash) hires will opt to join SERS at approximately the same rate
(i. e. , with about the same likelihood) as past (pre-Tobash) hires.
Impact on Current SERS Members
The Tobash proposal would not change beneft provisions applicable to current SERS members
or to members who join SERS prior to the hybrid plan start date, so long as such members
remain continuously employed.
ww. haygroup.com
.#=
Such SERS members would not have an option to leave their existing classes of service and
join the hybrid plan.
In general, current SERS members who have a break in service and retur to employment afer
the hybrid plan start date would be enrolled in the hybrid plan upon their retu.
New SERS Defned Beneft (DB) Class
The Tobash proposal would create "Class A-5," a new class of DB membership applicable to
all SERS employees who are hired or rehired afer the hybrid plan start date.
Class A-5 would be a new tier within the existent SERS DB system; the new structure would
not be a separate plan and would not have a separate fnd. Under this proposal, SERS would
not be closed to new members; SERS would remain open to Class A-5 members into the ftue.
Although most existing SERS fding provisions would continue to apply, the Tobash proposal
would enact legislation-related fnding approaches that deviate fom curent State Employees'
Retirement Code (SERC) rules.
As you know, the draf language provided to us was not yet complete as related to employer
contribution rate collars. To try to anticipate your needs, this note refects the impact of this
proposal' s legislation-related fnding provisions combined with two diferent approaches to
fture rate collars, which are outlined briefy starting on page 5.
Proposed Hybrid DB/DC Design
This sU arizes our understanding of key fatures of this proposed hybrid DB/DC design:
ZlT T
1 . Formula fr Single Lif Annuit at Superannuation fr Class A-5 members:
2% X 5-Year Final Average Salary X Total Credited Service, not > 25 years
No "buy-up" to 2. 5% accrual rate would be available, as it has been under Act 1 20.
The Final Average Salary (FAS) would generally be calculated by averaging the
fve highest calendar years of compensation, not to exceed the "Class A-5 Annual
Compensation Limit" as defned below.
2. Class A-5 Anual Compensation Limit CACL): All employees who are hired or
rehired afer the hybrid plan start date would become members of the hybrid DB
system and participants of the hybrid DC plan.
As such, they would be subject to beneft provisions that are, in part, defned by this
new term introduced under the Tobash proposal, which plays a signifcant role in the
coordination of the proposed hybrid DB and DC components.
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T T
a. The Tobash proposal would defne ACL in the SERC as fllows: "For
calendar year 201 5, the amount of $50,000. For each subsequent calendar
yea, the Class A-5 annual compensation limit will be I % greater than the
previous year' s amount, rounded to the nearest hundred dollars."
b. With respect to the hybrid DB component, the ACL:
i. Limits the amount of compensation each calendar year that would be
used to determine a member's fve-year FAS, and
1. Limits the amount of compensation upon which employee and
employer contributions would be based fr each calendar year during
the member' s first 25 years of service.
c. With respect to the hybrid DC component, the ACL would serve as the
"breakpoint" fr purposes of determining employee/employer contribution
rates applicable each calendar year during the participant' s frst 25 years of
service.
3. Class A-5 Service Limit: A second new limit which would play a signifcant role in
coordination of the proposed hybrid DB and DC components is a maximum of 25
years of service credit (or attainment of 25 eligibility points, to use SERC
terminology) fr purposes of hybrid DB plan participation. That is, when
determining paticipation and annuity benefts payable under the hybrid DB system,
credited service fr Class A-5 members would be limited to 25 years.
a. With respect to the hybrid DB component, reaching the 25-year service limit
would mark the point at which employee/employer contributions to fnd the
hybrid DB beneft cease.
b. With respect to the hybrid DC component, reaching the 25-year service limit
would mark the point at which employee/employer contribution rates
relative to salary below the ACL increase.
4. Potential Increase in Hvbrid DB Annuitv Afer Reaching Service Limit: A Class A-
5 member who reaches the 25-year service limit and continues active employment
thereafer could experience an increase in his/her accrued beneft as a result of
increases in the fve-year FAS which occur afer reaching the service limit, as
fllows:
a. Annual compensation, subject to the ACL, eared afer reaching the 25-year
service limit would be included among the calendar years of compensation
eligible fr inclusion in the FAS determination, and
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b. Anual indexing of 1 % per calendar year in the ACL could result in higher
salaries being fctored into the FAS determination.
5. Contribution Rates under Proposed Hybrid Plan Design: See table that fllows.
Proposed Hybrid Defned Beneft (DB)/Defned Contribution (DC) Plan
Contribution Rates
First 25 Years of Service Afer 25 Yeas of Service
Salary Up To Salay Over Salary Up To Salary Over
Class A-5 ACL Class A-5 ACL Class A-5 ACL Class A-5 ACL
Defned Beneft (DB)
Employee, Applicable to All 6% Not Applicable Not Applicable Not Applicable
Employer, Applicable to All Actuarially Not Applicable Not Applicable Not Applicable
Determined
Defned Contribution (DC)
Employee, Applicable to All 1 % 7% 7% 7%
Employer, Applicable to:

Majorit of Employees
0. 5% 4% 4% 4%
Employees Not Covered by
6. 5% 1 0% 1 0% 1 0%
Social Securit
4T T
6. Hybrid DB Superannuation (i.e., Normal Retirement Age): Majority of Employees -
Age 65, with at least three years of credited service. State Police - Age 60, with at
least three yeas of credited service. No superannuation fr anyone as a result of 35
years of service or Rule of 92.
7. Hybrid DB Early Retirement: If 25 years of service, eligible fr early retirement,
actuarially reduced fom normal retirement age.
8. Hybrid DB Vesting: 1 0-year clif. Refnd of accumulated deductions (member
contributions + 4% statutory interest) would be available, upon non-vested
termination. No refnd would be available upon vested termination or retirement;
rather, annuity would be required. Members would be guaanteed to receive
payments at least equal to their accumulated deductions.
9. Hybrid DB Disabilit and Death Benefts: Eligibility and benefts would generally
be consistent with Act 1 20, adjusted fr Class A-5 limits.
1 0. Hvbrid DB Shared Risk Provision: If DB fnd investment rets are low relative to
actuarial assumptions, Class A-5 members could be subject to higher employee
contribution rates. The initial determination period would be 201 7 through 201 9.
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Projections attached to this note ae based on an assumption that the target
investment rets ae eaed in all fture years; therefre, fr purposes of this cost
note, this provision would not impact fture SERS costs.
1 1 . Hybrid DC Vesting: Immediate vesting fr employee contributions and related
earngs/losses; 3-year clif fr employer contributions and related eags/losses.
1 2. Hybrid DC Disabilit and Death Benefts: Vested account balances would generally
be available.
Proposed Changes to Current SERS Funding Provisions
As noted previously, most existing fnding provisions would continue to apply; however, the
Tobash proposal does iclude new legislation-related fnding provisions (described in Item 1
below) that deviate fom current SERC fnding. Also, the Tobash proposal would fnd the
unded accrued liability (UA) over total (DB + DC) payroll (as described in Item 2 below)
and could possibly lower existing employer contribution rate collars [a described in Item 3
below).
O/T T
1 . Funding of Liabilities Arising fom Legislation: With respect to changes in SERS'
UA that would arise fom this legislation:
a. the change in liability would be fnded using a 20-year, level-dollar
aortization, and
b. the cost of such amortization would be included in the SERS employer cost
determination prior to, not afer, applying the contribution rate collars.
2. Funding the Existing UA and Future Gains/Losses: Current SERS amortization
methods would continue to apply; however, the UAL contribution rate would be
based upon total payroll, i. e. , DB + DC payroll. More specifcally, it would be the
sum of total DB payroll (existing classes of service + Class A-5) plus the hybrid
DC-only payroll, which includes all active pay under the combined DB system and
DC pla.
3. Lowering Employer Contribution Rate Collars: As indicated on page 2, the draf
language provided to us was not yet complete as related to employer contribution
rate collars. Per your instructions, this note reflects employer contribution collar
reductions that would mirror those outlined in the Goveror' s executive budget
proposal as fllows:
a. Starting with FY 201 4/201 5, the collar would be revised downward fom the
current 4. 5% to 2.25%.
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b. For subsequent fscal years, the rate would increase by 0. 5% each year (i.e.,
to 2. 75%, 3.25%, etc.) until, as under current law, the actuarially determined
contribution rate is below the collared contribution rate. Note: Changes in
the UA that would arise fom legislated changes to the current collars
would be handled as actuarial gains/losses i each of the fscal years
impacted, including level-dollar aortization over 30 years.
Hybrid DB Plan - Employer Normal Cost and
Hybrid DB Plan Employer Normal Cost
Based on the employer normal cost calculation mandated by the SERC, Hay Group has
determined that the net employer noral cost fr the hybrid DB tier expected to join SERS in
201 5 (all Class A-5 new entrants other than State Police) would be approximately 0. 9 percent
of payroll below the ACL.
This hybrid DB normal cost is signifcantly lower than the current normal cost of 5. 01 percent
of payroll primarily due to the fllowing key diferences in the proposed hybrid DB design
versus the current SERS design:

The hybrid DB design would limit pensionable compensation to the ACL ($50,000
indexed) and credited service to 25 years (fr beneft accrual and member contribution
purposes), whereas no such limts currently apply. It should be noted that these limits
result in a net decrease in employer costs resulting fom lower fture beneft accruals
which reduce employer costs and lower fture member contributions to the hybrid DB
system which increase employer costs.

The hybrid DB design would base all Class A-5 beneft accruals on (i) a 2 percent
annual accrual rate (no change fr about 80 percent of active SERS members but lower
than the current average fr the other 20 percent) and (ii) a fve-year FAS (a longer, less
generous averaging period than currently applicable).

The hybrid DB design would increase superannuation requirements as compared to


current classes of service that have an age 55 requirement (about 20 percent of active
members) (i) to age 60 fr State Police and (ii) to age 65 fr all others (including
hazardous duty members other than State Police, judges, district justices ad
legislators). The hybrid DB design would also eliminate superannuation eligibility fr
both 35 years of credited service and the "Rule of 92."
Afer the initial employer normal cost rate determination (which would occur as a part of the
December 3 1 , 201 3 actuarial valuation according to the proposal), the normal cost would be
redetermined with each subsequent annual actuarial valuation, and would refect changes that
occur fom year to year in (i) the demographic characteristics of each year's new entrant
population, (ii) the ACL and (iii) the applicable actuarial assumptions.
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It is our expectation that, over time, the rate of increase in the average salay (up to the ACL)
fr the annual new entrat cohort would be about 3. 05 percent per year, consistent with annual
salary schedule increases assumed in our valuations. Because the ACL would be scheduled to
increase by 1 percent per yea, over time, the actuarial present value of fture oeae,/s fr the
new entrant cohort would not increase as rapidly as the actuaial present value of fture
coo,easa/|oa fr the new entrant cohort. Thus, spreading the normal cost over a relatively
lager payroll base would translate into a gradual decline in the hybrid DB total normal cost rate
as a percentage of covered payroll.
In order to properly allocate ftue employer fnding of the SERS DB system between the
employer normal cost and the UAL, we have projected fture normal cost levels to estimate the
impact of this gradual chage. Based upon our hybrid plan fding projections, the employer
normal cost rate (shown in the "Floor Contribution" column of the attached projections) starts
at about 0. 9 percent of payroll in fscal 201 4/201 5 ad decreases by about 0. 01 575 percent of
payroll per year to reach a level of about 0. 32 percent of payroll in fscal 205 1 /2052, the end of
our projection period.
Hybrid DB Pla UAL
If the Tobash proposal would become law, efective in fscal 201 4/201 5, the SERS employer
normal cost rate would decrease fom the current 5. 01 percent of payroll based upon Class A-3
new entrants to about 0. 9 percent of payroll based on Class A-5 new entrats. At the same time,
approximately $2.4 billion in liabilities that were previously scheduled to be funded via fture
employer normal cost payments would be added to SERS' UAL, thereby increasing the amount
of annual fding required to amortize the UAL ad causing SERS' fded status to decrease
by about 3 percent.
Due to expected decreases in the employer normal cost rate (fom about 0. 9 percent of payroll
initially to about 0.32 percent in fscal 205 1 /2052, as discussed above), the gradual shifing
fom fture employer normal costs to UAL amortization would continue over the projection
period. With each passing year, the amount of liability shifed would be deemed to be a liability
loss (ad an increment to the projected UAL), which would be fnded like other projected
actuarial gains and losses, using 30-year, level-dollar amortization. This aspect, though a
relatively minor refnement, is included in the hybrid DB plan fnding projections attached.
Projection of Future Costs fr the Tobash Proposal
Based upon census data, asset data and actuarial assumptions underlying the SERS December
3 1 , 201 2 actuarial valuation (including an assumed investment ret of 7. 5 percent per year,
compounded annually) and incorporating the proposed new hybrid plan design outlined above
ad refecting fnding provision chages as described, Hay Group has projected the fture
employer contributions required under the Tobash proposal.
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For puroses of these projections-which include three sepaate, distinct, and mutually
exclusive fture payroll streams to which employer fnding rates will be applied-we have
segmented the aggregate expected fture SERS payroll into three projected sub-payrolls:

Legacy DB Payroll: This is the projected fture payroll attributable to current SERS
members and members who join SERS prior to the hybrid plan start date. Future
employer cost rates to be spread over (applied to) this fture payroll stream would be:
C Hybrid DB employer normal cost, and
C UA amortization.

Hybrid DB/DC Payroll: This is the projected fture payroll attributable to Class A-5
members, with the ACL and 25-year service limit applied. Future employer cost rates to
be spread over (applied to) this fture payroll stream would be:
C Hybrid DB employer normal cost,
C UAL amortization, and
C Hybrid DC employer contributions on DB/DC payroll (based on the "below
limit" rates of 0. 5% of pay fr the majority of employees and 6. 5% of pay fr
employees not covered by Social Security).

Hybrid DC-Only Payroll: This is the projected fture payroll attributable to Class A-5
participants recognizing (i) only pay in excess of the ACL during the frst 25 years of
credited service and (ii) all pay afer 25 years of credited service. Future employer cost
rates to be spread over (applied to) this fture payroll stream would be:
C UAL amortization, and
C Hybrid DC employer contributions on DC-only payroll (based on the "above
limit" rates of 4% of pay fr the majority of employees and 1 0% of pay fr
employees not covered by Social Security).
Based upon these projected payroll streams and the employer cost rates described above, the
hybrid plan schedules attached project the fllowing fture employer costs/contributions by
fscal year:
lT T

Expected Fiscal Year DB Contribution =


[(Hybrid DB Employer Normal Cost Rate) X (Legacy DB Payroll + Hybrid DB/DC
Payroll)] + [(UAL Amortization Rate) X (Legacy DB Payroll + Hybrid DB/DC Payroll
+ Hybrid DC-Only Payroll)]

Expected Fiscal Year DC Contribution =


[(Hybrid DC Employer "Below Limit" Contribution Rates) X (Hybrid DB/DC Payroll)]
+ [(Hybrid DC Employer "Above Limit" Contribution Rates) X (Hybrid DC-Only
Payroll)]
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Schedules Attached to This Cost Note
We have attached to this note the results of our fnding projections, as fllows:

Tobash #1 Hybrid DB/DC Plan Design - No Change in Rate Collars: Hybrid Plan
For Post-20 1 4 New Entants; Current SERS Benefit Provisions for Pre-201 5 Hires:
Continuing Cunent SERS Funding Provisions, Except as Stated | n Items 3d 2 on
page 5; No Change to Current Employer Contribution Rate Collars: This table presents
our projection of fture SERS fnding through fscal year 205 1 /2052 and refects the
impact of (i) the proposed change to a hybrid plan design (as outlined in pages 1 -4) fr
new entrants on or afer January 1 , 201 5 and (ii) revisions, though limited, to current
SERS fnding provisions (as described in Items 1 and 2 on page 5).

Tobash #2 - Hybrid DB/DC Plan Design - Including Lower Rate Collars: Hybrid
Plan For Post-201 4 New Entrants; Current SERS Beneft Provisions fr Pre-201 5
Hires; Continuing Current SER Funding Provisions, Except as Stated in Items and 2
on page 5: Chage to Current Employer Contribution Rate Collars, as Stated in Item 3
on page 5: This table presents our projection of fture SERS fnding through fscal
year 2051 12052 and refects the changes described in the "Tobash #1 " description along
with lower employer contribution rate collars (as stated in Item 3 on page 5).

Baseline Projection: This table presents, fr purposes of comparison, the results of our
December 3 1 , 201 2 actuarial valuation and our projection of fture fnding though
fscal year 205 1 /2052, assuming no changes to any of the current SERS beneft
provisions or fnding methodologies.
Results in Brief
As a result of a hybrid DB + DC plan design that provides less fvorable overall retirement
benefts than provided under curent law, if the Tobash proposal would be enacted it would
result in signifcant cumulative savings in fture SERS fnding. Specifcally, the projections
show estimated cumulative savings relative to the current SERS baseline through fscal year
205 1 /2052, as fllows:

Tobash #1 - Hybrid DB/DC Plan Design - No Change in Rate Collars, cumulative


savings through fscal year 205 1 /2052 of approximately $1 1 billion.

Tobash #2 - Hybrid DB/DC Plan Design - Including Lower Rate Collars,


cumulative savings through fscal year 205 1 /2052 of approximately $9 .3 billion.
In addition to the cumulative savings described above, it is important to note the eventual
"trasfr of risk" that would occur if the Tobash proposal were to become law. That is, the
conversion of SERS from the pure DB system that it is today to a hybrid design with an ever
growing DC component, including participant-directed investments, would result in a gradual
9/1 1 ww. haygroup. com
transfr of investment risk fom SERS' employers to SERS' members (employees). By the end
of the projection period (fscal 2052), this DB/DC design would result in a substantial reduction
of investment risk being bore by SERS employers, relative to the level of risk they currently
bear.
Important Notes
Please note the fllowing regarding our handling of the attached fnding projections:
1 . Hay Group' s past convention of showing results fr employer cost projections such as these
as percentages of payroll to two decimal places may be somewhat misleading. This level of
precision is not really possible fr estimates of this nature.
2. All of these projections are based upon the expectation that (i) fr all years afer 201 2, the
actual economic and demographic experience of SERS will be consistent with the
underlying actuarial valuation assumptions and (ii) all employer contibution amounts shown
in the "Expected FY Contribution" columns will, in fct, be contributed.
3. The attached projection schedules include a particularly important column of infrmation
that may warrant frther explanation: "Cumulative (Savings) / Cost Relative to Baseline"
shows the projected cumulative cost or savings in employer contributions (in millions of
dollas) that would result under the Tobash hybrid DB/DC plan design proposal versus under
the current law (Baseline)
Basis fr Above Cost Estimates
The cost estimates included herein were based upon our December 3 1 , 201 2 actuarial valuation
results, including the underlying census data, assets and actuarial assumptions. For fture new
entrant costs and payroll, Hay Group used the December 3 1 , 201 3 census data.
The results shown in this cost note ae reasonable actuarial results. However, a diferent set of
results could also be considered reasonable actuarial results. The reason fr this is that actuarial
standards of practice describe a "best-estimate range" fr each assumption, rather than a single
best-estimate value. Thus, reasonable results difering fom those presented here could have
been developed by selecting diferent points within the best-estimate ranges fr various
assumptions.
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^
The actuaies certifing to this valuation are members of the Society of Actuaries or other
profssional actuarial organizations, and meet the General Qualifcation Standards of the
American Academy of Actuaries fr purposes of issuing Statements of Actuarial Opinion.
Respectflly submitted,
Hay Group, Inc.
By:
Brent M. Mowery, F. S.A.
Member American Academy of Actuaries
Enrolled Actuary No. 1 4-3885
May 2, 2014
1 1/1 1
By:
Craig R. Graby
Member American Academy of Actuaries
Enrolled Actuary No. 1 4-73 1 9
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Year
201 1
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Investment
Retur
2.70%
1 2.00%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
Fiscal
Year
2012/201 3
2013/2014
2014/2015
201 5/2016
201 6/2017
2017/201 8
201 8/2019
2019/2020
2020/2021
2021 /2022
2022/2023
2023/2024
2024/2025
2025/2026
2026/2027
2027/2028
2028/2029
2029/2030
2030/2031
2031 /2032
2032/2033
2033/2034
2034/2035
2035/2036
2036/2037
2037/2038
2038/2039
2039/2040
2040/2041
2041 /2042
2042/2043
2043/2044
2044/2045
2045/2046
2046/2047
2047/2048
2048/2049
2049/2050
2050/2051
2051 /2052
Floor
Contribution
(i.e., NC%)
5.10%
5.01%
0, 90%
0.88%
0.87%
0.85%
0.84%
0.82%
0.81%
0.79%
0.77%
0.76%
0.74%
0.73%
0.71%
0.70%
0.68%
0.66%
0.65%
0.63%
0.62%
0.60%
0.59%
0.57%
0.55%
0.54%
0.52%
0.51%
0.49%
0.47%
0.46%
0.4%
0.43%
0.41%
0.40%
0.38%
0.36%
0.35%
0.33%
0.32%
Projected
DB Percent
Contribution
1 1 .50
1 6.00
20.50
25.00
29.50
30.75
29.95
29.09
28.24
27.42
26.63
25.86
25.1 1
24.38
23.68
22.99
22.32
21 .68
21 .05
20.4
1 9.84
1 9.27
1 6.49
1 6.01
1 5.54
1 5.09
14.65
14.22
10. 19
7.27
4.01
1 .99
1 .63
1 .1 0
0.65
0.56
0.50
0.48
0.46
0.4
Legacy DB
Payroll
($ in millions)
5,890.7
5,836.4
5,951 .0
6,058.5
5,981.7
5,889.8
5,780.9
5,677.8
5,564.4
5.446.5
5,321.6
5,1 8.8
5,041 .9
4,891.1
4,735.6
4,577.7
4,408.5
4,231.3
4,047.3
3,858.0
3,660.3
3,456.5
3,257.8
3,056.9
2,858.1
2,656.3
2,452.7
2,250.2
2,059.0
1 ,874.7
1 ,695.6
1 ,522.0
1 ,356.8
1 ,200.7
1 ,054.9
923.7
809.6
710.2
573.6
463.4
Hybrid DB/DC Hybrid DC-
Payroll Only Payroll
($ in millions) ($ in millions)
63.5
133.1 6.3
376.2 29.0
631.8
899.5
1 ,1 57.0
1 ,419.7
1 ,681 .1
1 ,942.4
2,207.2
2,469.1
2,728.4
2,981.4
3,225.5
3,467.9
3,705.3
3,936.3
4,1 60.0
4,381 .1
4,598.0
4,801.5
4,998.8
5, 187.4
5,372.6
5,553.8
5,723.5
5,839.4
5,884.8
5,923.7
5,960.3
6,000.4
6,039.7
6,080.6
6,1 1 9.7
6, 154.3
6,188.3
6,254.8
6,315.2
60.1
102.0
15.5
218.4
294.6
384.4
489.8
61 1 .2
750.4
908.2
1 ,085.1
1 ,283.0
1 ,502.1
1 ,743.1
2,005.3
2,287.6
2,589.6
2,909.4
3,247.5
3,602.4
3,974.3
4,362.7
4,772.8
5,236.9
5,776.5
6,329.5
6,891.9
7,455.4
8,024.0
8,594.5
9,1 66.4
9,740.3
10, 315.1
10, 910.3
1 1 ,501 . 1
SERS Projected Employer Contributions
(Based Upon Final December 31, 2012 Valuation)
Tobash #1 " M rid DB/DC Plan Desi D" No Chan E In Rate Coflars
Total Payroll
($ in millions)
5,890.7
5,836.4
6,014.4
6, 197.9
6,386.9
6,581.7
6,782.4
6,989.3
7,202.5
7,422.1
7,648.5
7,881.8
8,1 22.2
8,369.9
8,625.2
8,888.3
9,1 59.4
9,438.7
9,726.6
1 0,023.3
1 0,329.0
1 0,644.0
10, 968.6
1 1 ,303.2
1 1 ,647.9
1 2,003.2
12,369.3
12,746.6
1 3, 135.3
1 3,536.0
1 3,948.8
14,374.2
14,812.7
1 5,264.4
1 5,730.0
1 6,209.8
1 6,704.2
17,213.7
1 7,738.7
1 8,279.7
Expected FY Expected FY 0V1 DB+DC
DB DC Total DB+DC Contribution
Contrbution Contrbution Contrbution
($ in millions) ($ in millions) ($ in millions)
677.4 677.4
933.8
1 ,233.0
1 ,549.4
1 ,883.9
2,023.3
2,030.6
2,031 ,6
2,032.4
2,033.0
2,033.7
2,034.4
2,03.9
2,035.4
2,035.7
2,035.9
2,036.0
2,036.0
2,035.9
2,035.7
2,035.4
2,035.0
1 ,791.6
1 ,791.1
1 ,790.5
1 ,790.0
1 ,789.3
1 ,788.7
1 ,313.4
956.9
530.9
255.1
209.2
1 34.7
68.8
56.2
48.5
47.1
45.9
44.8
0.3
0.9
3.0
6.8
1 1 .7
16.4
21. 9
27.7
33.9
41. 1
48.8
57.4
66.8
76.9
88.0
1 00.0
1 1 2.9
1 26.8
141 .8
1 58.0
1 74.5
191.7
209.4
227.9
247.2
267.3
288.8
312.8
337.2
361.9
386.7
41 1 .6
436.7
461.8
486.9
512.2
538.4
564.5
933.8
1 ,233.3
1 ,550.3
1 ,886.9
2,030.1
2,042.3
2,048.0
2,05.3
2,060.7
2,067.6
2,075.5
2,083.7
2,092.8
2,102.5
2,1 1 2.8
2,1 24.0
2, 136.0
2, 148.8
2,162.5
2,177.2
2, 1 93.0
1 ,966.1
1 ,982.8
1 ,999.9
2,017.9
2,036.5
2,056.0
1 ,602.2
1 ,269.7
868.1
617.0
595.9
546.3
505.5
518.0
535.4
559.3
584.3
609.3
as a % of
DB+DC Pay
1 1 .50
16.00
20.51
25.01
29.54
30.85
30. 1 1
29.30
28.52
27.76
27.03
26.33
25.65
25.00
24.38
23.77
23.19
22.63
22.09
21 .57
21 .08
20.60
17.92
1 7.54
17. 17
1 6.81
1 6.46
16. 13
12.20
9.38
6.22
4.29
4.02
3.58
3.21
3.20
3.21
3.25
3.29
3.33
PHhuB! U0U0lv0
(Savings) (Savings) Cost Funded UAL
($ in Cost Relative Relative to Ratio
to Baseline Baseline (AV%) billions)
14.66
17.75
20.56
21. 16
21 .62
0.3
0.8
2.8
(38.8)
(48.3)
(57.8)
(67.0)
(76.6)
(86.3)
(95.6)
(105.1)
( 11 4.3)
(1 23.4)
(1 32.6)
(141 .4)
(150.1)
(1 58.6)
(1 66.9)
(174.9)
(1 82.5)
(433.5)
(441 .7)
(450.3)
(458.7)
(467.4)
(476.1)
(484.6)
(491 .7)
(499.3)
(507.5)
(513.7)
(520.2)
(527.3)
(534.2)
(542.3)
(552.0)
(561 .6)
(572.5)
0.3
1 .1
4.0
(34.8)
(83.1)
(140.9)
(207.9)
(284.6)
(370.8)
(466.4)
(571 .5)
(685.7)
(809. 1)
(941 .8)
(1 ,083.2)
(1 ,233.2)
(1 ,391.8)
(1 ,558.8)
(1 ,733.7)
(1, 91 6.2)
(2,349.7)
(2,791 .4)
(3,241.6)
(3,700.3)
(4,167.8)
(4,643.9)
(5,128.4)
(5,620. 1 )
(6, 1 1 9.5)
(6,627.0)
(7,140.7)
(7,660.9)
(8,1 88.2)
(8,722.4)
(9,264.7)
(9,81 6.7)
(10,378.3)
(10, 950.9)
65.3
58.8
55.5
55.1
54.9
56.0 21 .43
57.2 21. 15
58.5 20.77
59.8 20.36
61. 1 1 9.92
62.3 1 9.45
63.5 1 8.94
64.7 1 8.39
66.0 17.80
67.2 17. 16
68.5 1 6.48
69.8 1 5.74
71. 2 1 4.95
72.6 14. 10
74.2 1 3. 18
75.8 12. 19
77.6 1 1 . 1 3
79.6 9.99
81.3 9.00
83.1 7.94
85.2 6.80
87.5 5.57
90.2 4.25
93.2 2.83
95.6 1 .77
97.4 0.99
98.4 0.58
98.8 0.41
99.2 0.27
99.4 0.19
99.4 0. 17
99.4 0.1 6
99.3 0.1 6
99.3 0.1 6
99.2 0.1 5
Funded
Ratio
(MV%)
57.6
59.0
55.3
55.0
55.2
56.1
57.3
58.6
59.8
61. 1
62.3
63.5
64.7
66.0
67.2
68.5
69.8
71. 2
72.6
74.2
75.8
77.6
79.6
81.3
83.1
85.2
87.5
90.2
93.2
95.6
97.4
98.4
98.8
99.2
99.4
99.4
99.4
99.3
99.3
99.2
5/2/2014
Baseline
Baseline Baseline
Percent ($ in million
1 1 .50 677.
16.00 933.
20.50 1 ,233.
25.00 1 ,549.
29.50 1 ,884.
31 .43
30.82
30.13
29.45
28.80
28.16
27.55
26.95
26.37
25.81
25.26
24.73
24.22
23.72
23.24
22.77
22.32
21 .88
21 .45
21 .04
20.63
20.24
1 9.86
15.89
13.01
9.80
7.82
7.49
6.99
6.57
6.49
6.45
6.46
6.46
b.
2,068.
2,090.
2, 105.
2,1 21 .
2, 137.
2, 1 53.
2, 171.
2, 1 88.
2,207.
2,225.
2,245.
2,265.
2,286.
2,307.
2,329.
2,352.
2,375.
2,399.
2,424.
2,450.
2,476.
2,503.
2,532.
2,086.
1 .761.
1 ,367.
1 , 1 24.
1 , 1 09.
1 ,066.
1 ,032.
1 ,052.
1 ,077.
1 , 1 1 1 .
1 , 145.
1 ,181 .
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
204
2045
2046
2047
2048
2049
2050
Investment
Retum
2.70%
1 2.00%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
Fiscl
Year
2012/201 3
2013/2014
2014/2015
201 512016
201 6/2017
201 7/2018
201 8/2019
2019/2020
202012021
202112022
20222023
202312024
2024/2025
2025/2026
2026/2027
2027/2028
2028/2029
2029/2030
2030/2031
2031/2032
2032/2033
2033/2034
203/2035
2035/2036
2036/2037
203712038
203812039
203912040
2040/2041
2041 /2042
2042/2043
2043/204
204412045
204512046
204612047
2047/2048
204812049
20491050
205012051
2051/205
Floor
Contribution
(i.e., NC%)
5.10%
5.01%
0.90%
0.88%
0.87%
0.85%
0.84%
0.82%
0.81%
0.79%
0.77%
0.76%
0.74%
0.73%
0.71%
0.70%
0.68%
0.66%
0.65%
0.63%
0.62%
0.60%
0.59%
0.57%
0.55%
0.54%
0.52%
0.51%
0.49%
0.47%
0.46%
0.44%
0.43%
0.41 %
0.40%
0.38%
0.36%
0.35%
0.33%
0.32%
Proected
DB Percent
Contribution
1 1 .50
1 6.00
18.25
21.00
24.25
28.00
31 .08
30.33
29.45
28.59
27.76
26.96
26.18
25.42
24.68
23.97
23.27
22.59
21 .94
21 .30
20.68
20.08
1 7.28
1 6.78
16.29
1 5.81
1 5.35
14.90
1 0.85
7.91
4.64
2.59
2.21
1 .63
1 .06
0.79
0.57
0.48
0.46
0.4
Legacy DB
Payroll
($ in millions)
5,890.7
5,836.4
5,951.0
6.058.5
5.981.7
5,889.8
5,780.9
5,677.8
5,564.4
5,446.5
5.321 .6
5,1 84.8
5,041 .9
4,891.1
4,735.6
4,577.7
4,408.5
4,231.3
4,047.3
3,858.0
3,660.3
3,456.5
3,257.8
3,056.9
2,858.1
2,656.3
2,452.7
2,250.2
2,059.0
1 ,874.7
1 ,695.6
1 ,522.0
1 ,356.8
1 ,200.7
1 ,054.9
923.7
809.6
710.2
573.6
463.4
Hybrid DB/DC Hybrid DC-
Payroll Only Payroll
($ in millions) ($ in millions)
63.5
1 33.1 6.3
376.2 29.0
631.8 60.1
899.5 1 02.0
1 ,1 57.0 1 54.5
1 ,419.7 218.4
1 ,681 . 1 294.6
1 ,92.4
2,207.2
2,469.1
2,728.4
2,981.4
3,225.5
3,467.9
3,705.3
3,936.3
4,160.0
4,381 .1
4,598.0
4,801.5
4,998.8
5, 187.4
5,372.6
5,553.8
5,723.5
5,839.4
5,884.8
5,923.7
5,960.3
6,000.4
6,039.7
6,080.6
6,1 1 9.7
6, 154.3
6,188.3
6,254.8
6,31 5.2
384.4
489.8
61 1 .2
750.4
908.2
1 ,085.1
1 ,283.0
1 ,502.1
1 ,743.1
2,005.3
2,287.6
2,589.6
2,909.4
3,247.5
3,602.4
3,974.3
4,362.7
4,772.8
5,236.9
5,776.5
6,329.5
6,891.9
7,455.4
8,024.0
8,594.5
9, 166.4
9,740.3
1 0,315.1
10,910.3
1 1 ,501.1
SERS Projected Employer Contributions
(Based Upon Final December 31, 2012 Valuation)
Tobash #2 " 4H DBJC Plan Desi n - lndudin Lowr Rate-Collar
Total Payroll
($ in millions)
5,890.7
5,836.4
6,014.4
6, 197.9
6,386.9
6,581.7
6,782.4
6,989.3
7,202.5
7,422.1
7,648.5
7,881.8
8,1 22.2
8,369.9
8,625.2
8,888.3
9,1 59.4
9,438.7
9,726.6
1 0,023.3
1 0,329.0
1 0,644.0
1 0,968.6
1 1 ,303.2
1 1 ,647.9
12,003.2
12,369.3
1 2,746.6
13, 135.3
1 3,536.0
1 3,98.8
14,374.2
14,812.7
1 5,26.4
1 5,730.0
1 6,209.8
1 6,704.2
17, 213.7
17,738.7
1 8,279.7
Expected FY Expected FY Total DB+DC
DB DC Total DB+DC Contribution
Contribution Contribution
($ in millions) ($ in millions)
677.4
933.8
1 ,097.6 0.3
1 ,301.5 0.9
1 ,548.6 3.0
1 ,842.4
2,1 06.9
2,1 1 8.3
2, 119. 1
2, 1 1 9.7
2, 120.4
2, 121 .1
2, 121.6
2, 122.0
2, 122.4
2, 122.6
2, 122.7
2, 122.6
2, 122.6
2, 122.4
2, 122.1
2, 121.7
1 ,878.3
1 ,877.8
1,877.2
1 ,876.7
1 ,876.0
1 ,875.4
1 ,400.1
1 ,043.6
617.6
341 .8
295.9
215.5
1 32.5
92.8
58.9
47.1
45.9
4.8
6.8
1 1 .7
16.4
21 .9
27.7
33.9
41 .1
48.8
57.4
66.8
76.9
88.0
1 00.0
1 1 2.9
1 26.8
141.8
1 58.0
1 74.5
191.7
209.4
227.9
247.2
267.3
288.8
312.8
337.2
361.9
386.7
41 1 .6
436.7
461.8
486.9
512.2
538.4
564.5
Contribution
($ in millions)
677.4
933.8
1 ,097.9
1 ,302.4
1 ,551 .6
1 ,89.2
2,1 1 8.6
2,13.7
2,141.0
2, 147.4
2, 154.3
2,162.2
2, 1 70.4
2, 1 79.4
2, 1 89.2
2, 1 99.5
2,210.7
2,222.6
2,235.5
2,249.2
2,263.9
2,279.7
2,052.8
2,09.5
2, 086.6
2,1 04.6
2, 123.2
2,142.7
1 ,688.9
1 ,356.4
954.8
703.7
682.6
627.1
569.2
55.6
545.8
559.3
584.3
609.3
as a % of
DB+DC Pay
1 1 .50
16.00
18.25
21 .01
24.29
28.10
31 .24
30.54
29.73
28.93
28.17
27.43
26.72
26.04
25.38
24.75
24.14
23.55
22.98
22.44
21 .92
21 .42
1 8.71
1 8.31
1 7.91
17.53
17. 16
16.81
12.86
1 0.02
6.84
4.90
4.61
4. 11
3.62
3.42
3.27
3.25
3.29
3.33
P0DUBl Cumulative
(Savings) (Savings) Cost Funded UAL
($ in Cost Relative Relative to Ratio
to Baseline Baseline (AV%) billions)
14.66
17.75
20.56
21 .23
21 .89
(135.1)
(247.1)
(332.5)
(219.7)
28.0
28.9
1 9.7
1 0. 1
0.4
(8.9)
(18.4)
(27.7)
(36.7)
(45.9)
(54.7)
(63.5)
(71 .9)
(80.2)
(88.2)
(95.8)
(36.8)
(355.0)
(363.6)
(372.0)
(380.7)
(389.4)
(397.9)
(405.0)
(412.6)
(420.8)
(427.0)
(439.4)
(463.6)
(497.6)
(531.9)
(552.0)
(561.6)
(572.5)
65.3
58.8
(135.1) 55.5
(382.2) 55.0
(714.6) 54.4
(934.3) 54.8 22.02
22.04
21 .78
21 .35
20.90
(906.3) 55.4
(877.4) 56.5
(857.7) 57.8
(847.7) 59.1
(87.2)
(856.1)
(874.5)
(902. 1)
(938.8)
(984.8)
(1, 039.5)
( 1, 102.9)
( 1, 174.8)
(1 ,255.1)
(1 ,343.3)
(1 ,439.1)
(1 ,785.9)
(2,140.9)
(2,50.4)
(2,876.4)
(3,257.2)
(3,646.6)
(4,044.4)
(4,49.4)
(4,862. 1)
(5,282.9)
(5,709.9)
(6,149.3)
(6,61 2.9)
(7, 1 1 0.5)
(7,642.4)
(8,19.4)
(8,756.0)
(9,328.6)
60.4 20.41
61.6 1 9.89
62.9 19.33
64.2 18.72
65.4 18.07
66.8 1 7.36
68.1 16.61
69.5 1 5.79
71. 0 1 4.92
72.6 1 3.98
74.3 1 2.96
76.1 1 1 .87
78.1 1 0.70
79.9 9.68
81 .8 8.58
83.9 7.40
86.3 6.13
89.0 4.76
92.1 3.30
94.6 2. 19
96.5 1 .35
97.6 0.88
98.2 0.65
98.7 0.44
99.1 0.29
99.2 0.22
99.3 0.17
99.3 0.16
99.3 0.16
99.2 0. 15
Funded
Ratio
(MV%)
57.6
59.0
55.3
54.9
54.7
54.8
55.4
56.5
57.8
59.1
60.4
61. 6
62.9
64.2
65.4
66.8
68.1
69.5
71.0
72.6
74.3
76.1
78.1
79.9
81.8
83.9
86.3
89.0
92.1
94.6
96.5
97.6
98.2
98.7
99.1
99.2
99.3
99.3
99.3
99.2
5/2/2014
Baseline
Baseline
Percent
1 1 .50
16.00
20.50
25.00
29.50
31 .43
30.82
30.13
29.45
28.80
28.16
27.55
26.95
26.37
25.81
25.26
24.73
24.22
23.72
23.24
22.77
22.32
21 .88
21 .45
21 .04
20.63
20.24
1 9.86
1 5.89
13.01
9.80
7.82
7.49
6.99
6.57
6.49
6.45
6.46
6.46
6.46
Baseline
($ in million
677.
933.
1 ,233.
1 ,59.
1 ,884.
2,068.
2,090.
2,105.
2, 1 21 .
2, 1 37.
2,1 53.
2, 171 .
2, 188.
2,207.
2,225.
2,245.
2,265.
2,286.
2,307.
2,329.
2,352.
2,375.
2,399.
2.424.
2,450.
2,476.
2,503.
2,532.
2,086.
1 ,761 .
1 ,367.
1 ,1 24.
1 , 1 09.
1 ,066.
1 ,032.
1 ,052.
1 ,077.
1 ,1 1 1 .
1 ,145.
1 , 181.
SERS Projected Employer Contributions 5/2/201 4
(Based Upon Final December 31, 201 2 Valuation)
Current Entry Age Funding Method; Level Dollar Amorizati on; 5-Year Smoothing of Assets; 4.50% FY 1 4 Collar;
4.50% FY 1 5 Collar; 4.50% FY 16 Collar; 4.50% FY 1 7 Collar; 4.50% FY 1 8 Collar; 4.50% FY 1 9 Collar; 4.50% FY 20
Collar; 4. 50% FY 21+ Collar; No Asset Fresh Star; Act 1 20 Benefit Provisions; 7.50% Liability Interest Rate
Assumetion; No Liabili! Fresh Star
Projected Expected FY Expected FY (Savings) |Cost GASB Compliant Funded UAL Funded
I nvestment Fiscal Ceiling Floor Percent Payroll Contribution Relative to Current (Fiscal Year Ratio ($ in Ratio
Year Return Year Contribution Contribution Contribution ($ in millions) ($ in millions) Law Contribution Contribution) (AV%) billions) (MV%)
2008 approx -30% 2009/201 0 NA 4.00% 4.00 5,660.3 226.4 N 89.0 3.80 66.2
2009 approx 9% 201 0/201 1 NA 4.00% 5.00 5,936.0 296.8 N 84.4 5.59 68.9
201 0 approx 1 2% 201 1 /201 2 NA 4.08% 8.00 5, 851 .7 468.1 N 75. 1 9.76 66.0
201 1 2.70% 201 2/201 3 NA 5. 1 0% 1 1 .50 5, 890.7 677.4 N 65.3 1 4.69 57.6
201 2 1 2.00% 201 3/201 4 NA 5. 01 % 1 6.00 5,836.4 933.8 N 58.7 1 7.78 58.9
201 3 7.50% 201 4/201 5 NA 5.01 % 20.50 6, 014. 4 1 ,233.0 N 58.6 1 8. 1 5 58.4
201 4 7.50% 201 5/201 6 NA 5.01 % 25.00 6, 1 97.9 1 , 549.5 Y 58.0 1 8.84 57.9
201 5 7.50% 201 6/201 7 NA 5.01 % 29.50 6,386.9 1 , 884. 1 Y 57.6 1 9.41 57.9
201 6 7.50% 201 7/201 8 NA 5. 01 % 31 .43 6, 581 .7 2,068.9 Y 58.6 1 9.34 58.6
2017 7.50% 201 8/201 9 NA 5. 01 % 30.82 6,782.4 2,090.6 Y 59.7 1 9. 1 9 59.7
201 8 7.50% 201 9/2020 NA 5. 01 % 30. 1 3 6, 989.3 2, 1 05.8 Y 61 .0 1 8.93 61 .0
201 9 7.50% 2020/2021 NA 5. 01 % 29.45 7,202.5 2, 1 21 .3 Y 62.2 1 8.66 62.2
2020 7.50% 2021 /2022 NA 5.01 % 28.80 7,422.1 2, 1 37.3 Y 63.4 1 8.35 63.4
2021 7.50% 2022/2023 NA 5.01 % 28. 1 6 7,648.5 2, 1 53.9 Y 64.7 1 8.03 64.7
2022 7.50% 2023/2024 NA 5.01 % 27.55 7, 881 .8 2, 1 71 . 1 Y 65.9 1 7.67 65.9
2023 7.50% 2024/2025 NA 5. 01 % 26.95 8, 1 22. 2 2, 1 88.8 Y 67. 1 1 7.29 67. 1
2024 7.50% 2025/2026 NA 5.01 % 26.37 8,369.9 2,207.1 Y 68.3 1 6.87 68.3
2025 7.50% 2026/2027 NA 5. 01 % 25. 81 8,625.2 2,225.9 Y 69.5 1 6.42 69. 5
2026 7.50% 2027/2028 NA 5. 01 % 25.26 8,888.3 2,245.4 Y 70.8 1 5.93 70.8
2027 7.50% 2028/2029 NA 5.01 % 24.73 9, 1 59.4 2,265.4 Y 72. 1 1 5.41 72. 1
2028 7.50% 2029/2030 NA 5.01 % 24.22 9,438.7 2, 286. 1 Y 73.4 1 4.83 73.4
2029 7.50% 2030/2031 NA 5.01 % 23.72 9,726.6 2, 307.4 Y 74.7 1 4. 21 74.7
2030 7.50% 2031 /2032 NA 5. 01 % 23.24 1 0,023.3 2,329.4 Y 76.2 1 3.54 76.2
2031 7.50% 2032/2033 NA 5. 01 % 22.77 1 0,329.0 2, 352. 1 Y 77.6 1 2.82 77.6
2032 7.50% 2033/2034 NA 5. 01 % 22.32 1 0,644.0 2,375.5 Y 79.2 1 2.04 79.2
2033 7.50% 2034/2035 NA 5. 01 % 21 .88 1 0,968.6 2,399.6 Y 80.8 1 1 . 1 9 80.8
2034 7.50% 2035/2036 NA 5. 01 % 21 .45 1 1 ,303.2 2,424.5 Y 82.5 1 0.28 82.5
2035 7.50% 2036/2037 NA 5. 01 % 21 .04 1 1 ,647.9 2,450.2 Y 84.3 9.29 84.3
2036 7.50% 2037/2038 NA 5. 01 % 20.63 1 2,003.2 2,476.6 Y 86. 1 8.22 86. 1
2037 7.50% 2038/2039 NA 5.01 % 20.24 1 2,369.3 2, 503.9 Y 88. 1 7.07 88. 1
2038 7.50% 2039/2040 NA 5.01 % 1 9.86 1 2,746.6 2, 532. 1 Y 90.3 5.82 90.3
2039 7.50% 2040/2041 NA 5.01 % 1 5.89 1 3, 1 35.3 2,086.8 Y 92.5 4.48 92.5
2040 7.50% 2041 /2042 NA 5.01 % 1 3.01 1 3,536.0 1 , 761 .4 Y 94.2 3.50 94.2
2041 7.50% 2042/2043 NA 5.01 % 9.80 1 3,948.8 1 , 367.4 Y 95.4 2.80 95.4
2042 7.50% 2043/2044 NA 5.01 % 7.82 1 4,374.2 1 , 1 24.5 Y 96.0 2.47 96.0
2043 7.50% 2044/2045 NA 5.01 % 7.49 1 4, 81 2.7 1 , 1 09.6 Y 96.1 2.38 96.1
2044 7.50% 2045/2046 NA 5. 01 % 6.99 1 5,264.4 1 , 066.5 Y 96.2 2.32 96.2
2045 7.50% 2046/2047 NA 5. 01 % 6.57 1 5, 730.0 1 , 032.8 Y 96.2 2.33 96.2
2046 7.50% 2047/2048 NA 5. 01 % 6.49 1 6,209.8 1 , 052.2 Y 96.0 2.40 96.0
2047 7.50% 2048/2049 NA 5.01 % 6.45 1 6,704.2 1 , 077.7 Y 95.9 2.49 95.9
2048 7.50% 2049/2050 NA 5.01 % 6.46 1 7, 21 3.7 1 , 1 1 1 . 3 Y 95.7 2.58 95. 7
2049 7.50% 2050/2051 NA 5. 01 % 6.46 1 7,738.7 1 , 1 45.9 Y 95.5 2.68 95.5
2050 7.50% 2051 /2052 NA 5. 01 % 6.46 1 8,279.7 1 , 1 81 .8 Y 95.2 2.79 95.2
These projections are estimates for the exclusive use of SFPSand have not been certified by Hay Group
Actuarial Cost Note -
Projected Impact of Legislation Related to a
SERS Hybrid Defned Beneft (DB)IDefned Contribution (DC) Plan Design
Proposed by Representative Tobash - Amended to Exempt State Police
Hay Group has prepared this cost note in connection with the draf legislative language
provided to us as proposed "Amendments to House Bill No. 1 353'', keyed to LR control
number HB1 353A06757 and dated "04/25/1 4" that sets frth a hybrid defmed beneft
(DB)/ defned contribution (DC) plan design proposed by Representative Mike To bash (the
Tobash proposal). Under the Tobash proposal, most employees who join SERS on or afer
January 1 , 201 5 would no longer be covered by SERS' current benefts, but rather would be
covered by a hybrid DB/DC plan design including key fatures as described below.
Exemption fr Pennsylvania State Police
A variation of the Tobash proposal has been put frth (and appropriate amendments to the
above-refrenced legislative language are being drafed) to exempt the Pennsylvania State
Police fom the proposed new plan design. That is, under this variation (hereafer, "the
amended To bash proposal"), the Pennsylvania State Police would continue their SERS benefts
as-is. Refrences hereafer in ths note to "all employees hired or rehired afer the hybrid plan
start date" being subject to the proposed new Tobash DB/DC plan provisions should be
understood, if not specifcally excepted, to exclude Pennsylvaia State Police.
Hay Group previously perfrmed cost projections to approximate the impact on the fture
SERS fnding ifthe original Tobash proposal were to become law. In this cost note and the
attached schedules, we are now approximating the impact on the fture SERS fnding if "the
amended Tobash proposal" were enacted.
More on the Amended Tobash Proposal
Most, but not all, non-State Police employees who join SERS on or afer Jauary 1 , 201 5,
would be covered by the proposed new hybrid DB/DC plan. For certain groups of employees,
however, naely fr Park Rangers and Capitol Police, the hybrid plan start date would be July
1 , 201 5, not January 1 , 201 5 .
The aended Tobash proposal would mandate that, with limited exceptions noted herein, all
employees hired or rehired afer the hybrid plan start date become participants in a new SERS
hybrid DC plan, which would be separate fom the SERS DB system. Each hybrid DC
participant would have established fr him/her an individual investment account within the
SERS hybrid DC trust fnd, which would be separate fom the SERS DB fnd.
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Certain Educational Employees
Although the legislative language upon which this cost note is based (as refrenced above) calls
fr the discontinuace of the right of certain educational employees to elect between SERS,
PSERS, and other specifed retirement program options curently available to new hires, we
have been advised that such language will be deleted and should be ignored.
Therefre, we understand that the availability of this option to certain educational employees
would, in fct, continue ifthe amended Tobash proposal were enacted. Absent inormation that
would indicate otherwise, Hay Group has performed our cost analysis of the amended Tobash
proposal assuming that fture (post-To bash) hires will opt to join SERS at approximately the
same rate (i.e. , with about the same likelihood) as past (pre-Tobash) hires.
Impact on Current SERS Members
The amended Tobash proposal would not change beneft provisions applicable to current SERS
members or to members who join SERS prior to the hybrid plan sta date, so long as such
members remain continuously employed.
Such SERS members would not have an option to leave their existing classes of service and
join the hybrid plan.
In general, current SERS members who have a break in service and ret to employment afer
the hybrid plan sta date would be enrolled in the hybrid plan upon their ret.
New SERS Defned Beneft (DB) Class
The aended Tobash proposal would create "Class A-5," a new class of DB membership
applicable to all SERS employees who ae hired or rehired afer the hybrid pla sta date.
Class A-5 would be a new tier within the existent SERS DB system; the new structure would
not be a separate plan and would not have a separate fnd. Under this proposal, SERS would
not be closed to new members; SERS would remain open to Class A-5 members into the fture.
Although most existing SERS fnding provisions would continue to apply, the amended
To bash proposal would enact legislation-related fnding approaches that deviate fom current
State Employees' Retirement Code (SERC) rules.
We understand that the legislative language provided to us may be subject to change as related
to employer contribution rate collars. To try to anticipate your needs, this note refects the
impact of this proposal ' s legislation-related fnding provisions combined with two diferent
approaches to fture rate collars, which ae outlined briefy staing on page 5.
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Proposed Hybrid DB/DC Design


This summarizes our understading of key fatures of this proposed hybrid DB/DC design:
IT T
1 . Formula fr Single Lif Annuit at Superannuation fr Class A-5 members:
2% X 5-Year Final Average Salary X Total Credited Service, not > 25 years
No "buy-up" to 2. 5% accrual rate would be available, as it has been under Act 1 20.
The Final Average Salary (FAS) would generally be calculated by averaging the
fve highest calendar years of compensation, not to exceed the "Class A-5 Annual
Compensation Limit" as defned below.
2. Class A-5 Annual Compensation Limit (ACL): All employees who are hired or
rehired afer the hybrid plan start date would become members of the hybrid DB
system and participants of the hybrid DC plan.
As such, they would be subject to beneft provisions that are, in part, defned by this
new term introduced under the amended To bash proposal, which plays a signifcat
role in the coordination of the proposed hybrid DB and DC components.
a. The amended Tobash proposal would defne ACL in the SERC as fllows:
"For calendar yea 201 5, the amount of $50,000. For each subsequent
calendar year, the Class A-5 annual compensation limit will be 1 % greater
than the previous year' s amount, rounded to the neaest hundred dollas."
b. With respect to the hybrid DB component, the ACL:
. Limits the amount of compensation each calendar year that would be
used to determine a member' s fve-year FAS, and
. Limits the amount of compensation upon which employee and
employer contributions would be based fr each calendar yea during
the member' s frst 25 years of service.
c. With respect to the hybrid DC component, the ACL would serve as the
"breakpoint" fr purposes of determining employee/employer contribution
rates applicable each calenda year during the paticipant' s frst 25 years of
service.
3. Class A-5 Service Limit: A second new limit which would play a signifcant role in
coordination of the proposed hybrid DB and DC components is a maximum of 25
years of service credit (or attainent of 25 eligibility points, to use SERC
terminology) fr purposes of hybrid DB plan participation. That is, when
determining participation and annuity benefts payable under the hybrid DB system,
credited service fr Class A-5 members would be limited to 25 years.
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a. With respect to the hybrid DB component, reaching the 25-year service limit
would mark the point at whch employee/employer contributions to fnd the
hybrid DB beneft cease.
b. With respect to the hybrid DC component, reaching the 25-year service limit
would mark the point at whch employee/employer contribution rates
relative to salary below the ACL increase.
4. Potential I ncrease lLHybrid Annui_AcrRcachin_SCfiLC Li mit: A Class A-
5 member who reaches the 25-year service limit and continues active employment
thereafer could experience an increase in his/her accrued beneft as a result of
increases in the fve-year FAS which occur afer reaching the service limit, as
fllows:
a. Annual compensation, subject to the ACL, eared afer reaching the 25-year
service limit would be included among the calendar years of compensation
eligible fr inclusion in the FAS determination, and
b. Annual indexing of 1 % per calenda year in the ACL could result in higher
salaries being fctored into the FAS determination.
5. Contribution Rates under Proposed Hybrid Plan Design: See table that fllows.
Proposed Hybrid Defned Beneft (DB)/Defned Contribution (DC) Plan
Contribution Rates
First 25 Years of Service Afer 25 Years of Service
Salary Up To Salary Over Salary Up To Salary Over
Class A-5 ACL Class A-5 ACL Class A-5 ACL Class A-5 ACL
Defned Beneft IDB)
Employee, Applicable to All 6% Not Applicable Not Applicable Not Applicable
Employer, Applicable to All Actuarially Not Applicable Not Applicable Not Applicable
Determined
Defned Contribution (DC)
Employee, Applicable to All 1 % 7% 7% 7%
Employer, Applicable to All 0. 5% 4% 4% 4%
6. Hybrid DB Superannuation (i. e., Normal Retirement Age): Age 65, with at least
three years of credited service. No superannuation fr anyone as a result of 35 years
of service or Rule of 92.
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7. Hybrid DB Early Retirement: If 25 years of service, eligible for early retirement,
actuaially reduced fom normal retirement age.
8. Hybrid DB Vesting: 1 0-year clif Refnd of accumulated deductions (member
contributions + 4% statutory interest) would be available, upon non-vested
termination. No refnd would be available upon vested termination or retirement;
rather, annuity would be required. Members would be guaanteed to receive
payments at least equal to their accumulated deductions.
9. Hvbrid DB Disabilit and Death Benefts: Eligibility and benefts would generally
be consistent with Act 1 20, adjusted fr Class A-5 limts.
1 0. Hybrid DB Shared Rsk Provision: If DB fnd investment returs are low relative to
actuaial assumptions, Class A-5 members could be subject to higher employee
contribution rates. The initial determination period would be 201 7 through 201 9.
Projections attached to this note are based on an assumption that the target
investment returs are eared in all fture years; therefre, fr purposes of this cost
note, this provision would not impact fture SERS costs.
1 1 . Hybrid DC Vesting: Imediate vesting fr employee contributions and related
earngs/losses; 3-year clif fr employer contributions and related eags/losses.
1 2. Hybrid DC Disabilit and Death Benefits: Vested account balances would generally
be available.
Proposed Changes to Current SERS Funding Provisions
As noted previously, most existing fnding provisions would continue to apply; however, the
aended Tobash proposal does include new legislation-related fnding provisions (described in
Item 1 below) that deviate fom current SERC fnding. Also, the amended Tobash proposal
would fnd the unfnded accrued liability (UAL) over total (DB + DC) payroll (as described in
Item 2 below) and could possibly lower existing employer contribution rate collars (as
described in Item 3 below).
OT T
1 . Funding of Liabilities Arising fom Legi slation: With respect to changes in SERS'
UAL that would arise fom this legislation:
a. the change in liability would be fnded using a 20-year, level-dollar
amortization, and
b. the cost of such amortization would be included i n the SERS employer cost
determination prior to, not afer, applying the contribution rate collars.
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2. Funding the Existing UA ad Future Gains/Losses: Current SERS amortization
methods would continue to apply; however, the UA contribution rate would be
based upon total payroll, i. e. , DB + DC payroll. More specifcally, it would be the
sum of total DB payroll (existing classes of service + Class A-5) plus the hybrid
DC-only payroll, which includes all active pay under the combined DB system and
DC plan.
3. Lowering Employer Contribution Rate Collars: As indicated on page 2, the
legislative language provided to us may be subject to change as related to employer
contribution rate collars. Per your instructions, this note refects employer
contribution collar reductions that would mirror those outlined in the Goveror' s
executive budget proposal as fllows:
a. Starting with FY 201 4/201 5, the collar would be revised downward fom the
current 4. 5% to 2. 25%.
b. For subsequent fscal years, the rate would increase by 0. 5% each year (i.e. ,
to 2. 75%, 3.25%, etc.) until, as under current law, the actuarially determined
contribution rate is below the collared contribution rate. Note: Changes in
the UA that would arise fom legislated changes to the current collars
would be handled as actuarial gains/losses in each of the fscal years
impacted, including level-dollar amortization over 30 years.
Hybrid DB Plan - Employer Normal Cost and
Hybrid DB Plan Employer Noral Cost
Based on the employer normal cost calculation mandated by the SERC, Hay Group has
determined that the net employer normal cost fr the hybrid DB tier expected to join SERS in
201 5 (all Class A-5 new entrants) would be approximately 0. 9 percent of payroll below the
ACL.
This hybrid DB normal cost is signifcantly lower than the current normal cost of 5. 01 percent
of payroll primarily due to the fllowing key diferences in the proposed hybrid DB design
versus the current SERS design:

The hybrid DB design would limit pensionable compensation to the ACL ($50,000
indexed) and credited service to 25 years (fr beneft accrual and member contribution
purposes), whereas no such limits currently apply. It should be noted that these limits
result in a net decrease in employer costs resulting fom lower fture beneft accruals
which reduce employer costs and lower fture member contributions to the hybrid DB
system which increase employer costs.
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The hybrid DB design would base all Class A-5 beneft accruals on (i) a 2 percent
annual accrual rate (no change fr about 85 percent of the active SERS members who
will be impacted but lower than the current average fr the other 1 5 percent) and (ii) a
fve-year FAS (a longer, less generous averaging period tha currently applicable).

The hybrid DB design would increase superanuaion requirements applicable to


current classes of service that have a age 55 requirement (including about 1 5 percent of
the active SERS members who will be impacted) to age 65 (with at least three years of
credited service). The hybrid DB design would also eliminate superannuation eligibility
fr both 35 years of credited service and the "Rule of 92. "
Afer the initial employer normal cost rate determination (which would occur as a part of the
December 3 1 , 201 3 actuarial valuation according to the proposal), the normal cost would be
redetermined with each subsequent anual actuarial valuation, and would reflect changes that
occur fom year to year in (i) the demographic characteristics of each year' s new entrant
population, (ii) the ACL and (iii) the applicable actuaial assumptions.
It is our expectation that, over time, the rate of increase in the average salary (up to the ACL)
fr the anual new entrant cohort would be about 3 .05 percent per year, consistent with anual
salary schedule increases assumed in our valuations. Because the ACL would be scheduled to
increase by 1 percent per year, over time, the actuaial present value of fture oeae,/sfr the
new entrant cohort would not increase as rapidly as the actuaial present value of fture
coo,easa/|oafr the new entrant cohort. Thus, spreading the normal cost over a relatively
lager payroll base Would translate into a gradual decline in the hybrid DB total normal cost rate
as a percentage of covered payroll.
In order to properly allocate fture employer fnding of the SERS DB system between the
employer normal cost and the UAL, we have projected fture normal cost levels to estimate the
impact of this gradual change. Based upon our hybrid plan funding projections, the employer
normal cost rate (shown in the "Floor Contribution" column of the attached projections) starts
at about 0. 9 percent of payroll in fiscal 201 4/201 5 and decreases by about 0. 01 575 percent of
payroll per yea to reach a level of about 0. 32 percent of payroll in fscal 205 1 /2052, the end of
our projection period.
Hybrid DB Plan UAL
If the amended Tobash proposal would become law, efective in fscal 201 4/201 5, the SERS
employer normal cost rate would decrease fom the current 5. 01 percent of payroll based upon
Class A-3 new entrants to about 0. 9 percent of payroll based on Class A-5 new entrants. At the
sae time, approximately $2. 4 billion in liabilities that were previously scheduled to be fnded
via fture employer norma cost payments would be added to SERS' UAL, thereby increasing
the amount of anual fnding required to amortize the UAL and causing SERS' fnded status
to decrease by about 3 percent.
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Due to expected decreases in the employer noral cost rate (fom about 0. 9 percent of payroll
initially to about 0. 32 percent in fscal 205 1 /2052, as discussed above), the gradual shifing
fom ftue employer normal costs to UA amortization would continue over the projection
period. With each passing year, the aout of liability shifed would be deemed to be a liability
loss (and an increment to the projected UA), which would be fnded lie other projected
actuarial gains and losses, using 30-year, level-dolla amortization. This aspect, though a
relatively minor refnement, is included in the hybrid DB plan fding projections attached.
Projection of Future Costs fr the Amended To bash Proposal
Based upon census data, asset data and actuarial assumptions underlying the SERS December
3 1 , 201 2 actuarial valuation (including an assumed investment retur of 7. 5 percent per year,
compounded annually) and incorporating the proposed new hybrid plan design outlined above
and refecting fnding provision changes as described, Hay Group has projected the fture
employer contributions required uder the amended To bash proposal.
For purposes of these projections-which include three separate, distinct, and mutually
exclusive ftue payroll streams to which employer fnding rates will be applied-we have
segmented the aggregate expected fture SERS payroll into three projected sub-payrolls:
dT T

Legacv DB Pavroll: This is the projected fture payroll attributable to current SERS
members, members who join SERS prior to the hybrid plan start date and Pennsylvania
State Police hired afer the hybrid plan start date, since the State Police will retain their
current SERS beneft design. Future employer cost rates to be spread over (applied to)
this fture payroll stream would be:
C Hybrid DB employer normal cost, and
C UA amortization.

Hybrid DB/DC Payroll: This is the projected fture payroll attributable to Class A-5
members, with the ACL and 25-year service limit applied. Future employer cost rates to
be spread over (applied to) this fture payroll stream would be:
C Hybrid DB employer normal cost,
C UA amortization, and
C Hybrid DC employer contributions on DB/DC payroll (based on the "below
limit" rate of 0. 5% of pay).

Hybrid DC-Only Payroll : This is the projected fture payroll attributable to Class A-5
participants recognizing (i) only pay in excess of the ACL during the frst 25 years of
credited service and (ii) all pay afer 25 years of credited service. Future employer cost
rates to be spread over (applied to) this fture payroll stream would be:
C UAL amortization, and
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C Hybrid DC employer contributions on DC-only payroll (based on the "above
limit" rate of 4% of pay).
Based upon these projected payroll streams and the employer cost rates described above, the
hybrid plan schedules attached project the fllowing fture employer costs/contributions by
fscal year:

Expected Fiscal Yea DB Contribution =


[(Hybrid DB Employer Normal Cost Rate) X (Legacy DB Payroll + Hybrid DB/DC
Payroll)] + [(UAL Amortization Rate) X (Legacy DB Payroll + Hybrid DB/DC Payroll
+ Hybrid DC-Only Payroll)]

Expected Fiscal Year DC Contribution


[(Hybrid DC Employer "Below Limit" Contribution Rate) X (Hybrid DB/DC Payroll)]
+ [(Hybrid DC Employer "Above Limit" Contribution Rate) X (Hybrid DC-Only
Payroll)]
Schedules Attached to This Cost Note
We have attached to this note the results of our fndig projections, as fllows:
IT T

Amended Tobash #1 - Hybrid DB/DC Plan Design - No Change in Rate Collars:


Hybrid Plan For Post-201 4 Pew Entrants. Other than State Police; Current SERS
Beneft Provisions fr Pre-201 5 Hires; Continuing Current SERS Funding Provisions.
Except aStated in Items 1 and 2 on page 5: No Change to Curent Employer
Contribution Rate Collars: This table presents our projection of fture SERS fnding
through fiscal year 205 1 /2052 and refects the impact of (i) the proposed change to a
hybrd plan design (as outlined in pages 1 -4) fr new entrants, other tha State Police,
on or afer January 1 , 201 5 and (ii) revisions, though limited, to current SERS funding
provisions (as described in Items 1 and 2 on page 5).

Amended Tobash #2 - Hybrid DB/DC Plan Design - Including Lower Rate Collars:
Hybrid Pla For Post-201 4 New Entrants. Other than State Police: Current SERS
Beneft Provisions for Pre-201 5 Hi res: Continuing Current SERS Funding Provisi ons,
Except as Stated in I tems l and 2 on page 5; Change to Current Employer Contribution
Rate Collars, as Stated in Item 3 on page 5: This table presents our projection of fture
SERS fnding through fscal year 205 1 /2052 and refects the chages described in the
"Amended Tobash #1 " description along with lower employer contribution rate collars
(as stated in Item 3 on page 5).

Baseline Projection: This table presents, fr purposes of comparison, the results of our
December 3 1 , 201 2 actuarial valuation and our projection of fture fnding through
fscal year 205 1 /2052, assuming no chages to any of the current SERS beneft
provisions or fnding methodologies.
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Results m Brief
As a result of a hybrid DB + DC plan design that provides less fvorable overall retirement
benefts than provided under current law, ifthe amended Tobash proposal would be enacted it
would result in signifcant cumulative savings in fture SERS fnding. Specifcally, the
projections show estimated cumulative savings relative to the current SERS baseline through
fscal year 205 1 /2052, as fllows:

Amended Tobash #1 - Hybrid DB/DC Plan Design - No Change in Rate Collars,


cumulative savings through fscal year 205 1 /2052 of approximately $1 0. 7 billion.

Amended Tobash #2 - Hybrid DB/DC Plan Design - Including Lower Rate


Collars, cumulative savings through fscal year 205 1 /2052 of approximately
$9. 1 billion.
The two cumulative savings results shown above ($1 0. 7 billion and 9. 1 billion) are only slightly
lower (by about 2 percent) than the cumulative savings that resulted fom our projections under
the original Tobash proposal ($1 1 billion and $9. 3 billion) wherein the Pennsylvania State
Police would not be exempt, but would be included in the Tobash hybrid DB/DC plan design.
We were not surprised to see these two savings results in the same range. This result somewhat
confrms our understanding that the additional 6 percent of salary employer contribution rate
applicable to State Police under the Tobash hybrid DC pla was determined as the incremental
employer contribution that would bring the value (annual employer cost) of the overall State
Police beneft (DB + DC) into the range of the value (annual employer cost) of their current
SERS DB beneft.
In addition to the cumulative savings described above, it is important to note the eventual
"transfr of risk" that would occur ifthe amended Tobash proposal were to become law. That
is, the conversion of SERS fom the pure DB system that it is today to a hybrid design with an
ever-growing DC component, including participant-directed investments, would result in a
gradual transfr of investment risk fom SERS' employers to SERS' members (employees). By
the end of the projection period (fscal 2052), this DB/DC design would result in a substantial
reduction of investment risk being bore by SERS employers, relative to the level of risk they
currently bear.
Important Notes
Please note the fllowing regarding our handling of the attached fnding projections:
1 . Hay Group' s past convention of showing results fr employer cost projections such as these
as percentages of payroll to two decimal places may be somewhat misleading. This level of
precision is not really possible fr estimates of this nature.
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2. All of these projections are based upon the expectation that (i) fr all years afer 2012, the
actual economic and demographic experience of SERS will be consistent with the
underlying actuarial valuation assumptions and (ii) all employer contribution amounts shown
in the "Expected FY Contribution" columns will, in fct, be contributed.
3. The attached projection schedules include a particularly important column of information
that may warrant frther explanation: "Cumulative (Savings) / Cost Relative to Baseline"
shows the projected cumulative cost or savings in employer contributions (in millions of
dollars) that would result under the amended Tobash hybrid DB/DC plan design proposal
versus under the current law (Baseline).
Basis fr Above Cost Estimates
The cost estimates included herein were based upon our December 3 1 , 201 2 actuarial valuation
results, including the underlying census data, assets and actuarial assumptions. For fture new
entrant costs and payroll, Hay Group used the December 3 1 , 201 3 census data.
The results shown in this cost note are reasonable actuarial results. However, a diferent set of
results could also be considered reasonable actuarial results. The reason fr this is that actuarial
standards of practice describe a "best-estimate range" fr each assumption, rather than a single
best-estimate value. Thus, reasonable results difering fom those presented here could have
been developed by selecting diferent points within the best-estimate ranges fr various
assumptions.
The actuaries certifing to this valuation are members of the Society of Actuaries or other
profssional actuaial organizations, and meet the General Qualifcation Stadards of the
American Academy of Actuaries fr purposes of issuing Statements of Actuarial Opinion.
Respectflly submitted,
Hay Group, Inc.
By:
Brent M. Mowery, F. S.A.
Member American Academy of Actuaries
Emolled Actuary No. 1 4-3885
May 3, 201 4
T T lT T
By:

/

- g

Craig R. Graby
Member American Academy of Actuaries
Emolled Actuary No. 1 4-73 1 9
w. haygroup.com
Year
201 1
2012
2013
2014
2015
2016
2017
201B
2019
2020
2021
2022
2023
2024
2025
2026
2027
202B
2029
2030
2031
2032
2033
2034
2035
2036
2037
203B
2039
2040
2041
2042
2043
2044
2045
2046
2047
2046
2049
2050
Investment
Retum
2.70%
1 2.00%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
Fiscal
Year
20121201 3
201312014
20141201 5
201512016
201612017
20171201B
201Bl2019
201 912020
202012021
202112022
202212023
202312024
202412025
202512026
202612027
20271202B
202Bl2029
202912030
203012031
203112032
203212033
203312034
203412035
203512036
203612037
203712038
203612039
203912040
204012041
204112042
20422043
20431204
20412045
204512046
204612047
204712046
204Bl2049
20491050
205012051
205112052
Floor
Contribution
(i.e., NC%)
5.10%
5.01%
0.90%
O.BB%
O.B7%
O.B5%
0.64%
O.B2%
O.B1%
0.79%
0.77%
0.76%
0.74%
0.73%
0.71%
0.70%
0.6B%
0.66%
0.65%
0.63%
0.62%
0.60%
0.59%
0.57%
0.55%
0.5%
0.52%
0.51%
0.49%
0.47%
0.46%
0.4%
0.43%
0.41%
0.40%
0.38%
0.36%
0.35%
0.33%
0.32%
Projected
DB Percent
Contribution
1 1 .50
1 6.00
20.50
25.00
29.50
30.76
29.99
29.15
2B.34
27.55
26.78
26.04
25.32
24.62
23.94
23.27
22.63
22.01
21 .40
20.B1
20.24
1 9.69
1 6.93
16.47
1 6.03
1 5.59
1 5. 17
1 4.76
1 0.75
7.65
4.61
2.60
2.25
1 .74
1 .32
1 .24
1. 19
1 .1 8
1 . 1 6
1 . 1 5
Legacy DB
Payroll
($ in millions)
5,890.7
5,836.4
5,951.0
6,05B.5
5,9B1 .7
5,91 1 .0
5,832.6
5,751.B
5.664.9
5,571.2
5,469.0
5,360.0
5,242.7
5,1 20.6
4,995.3
4,866.3
4,730.4
4,588.6
4,438.7
4,287.3
4,1 3.0
3,980.2
3,825.7
3,671.1
3,514.6
3,357.3
3,200.9
3,046.6
2,895.1
2,746.3
2,601 .9
2,462.5
2,331 .1
2,208.6
2,096.5
1 ,998.9
1 ,91 8.7
1 ,853.6
1 ,752.0
1 ,677.9
Hybrid DB/C Hybrid DC-
Payroll Only Payroll
($ in millions) ($ in millions)
63.5
1 33.1 6.3
376.2 29.0
61 1 .5
850.3
1 ,087.4
1 ,326.8
1 ,568.4
1 ,812.3
2,056.3
2,301.3
2,542.7
2,778.1
3,007.5
3,233.1
3,453.5
3,670.4
3,878.4
4,080.2
4,275.1
4,463.B
4,646.3
4,825.0
5,000.1
5,1 70.5
5,330.0
5,443.5
5,500.3
5,566.6
5,631 .7
5,695.7
5,757.9
5,817.B
5,874.5
5,925.3
5,972.1
6,047.1
6,1 09.9
59.2
99.5
150.1
21 0.8
282.6
367.2
465.5
578.2
706.7
851.8
1 ,014.4
1 , 1 95.9
1 ,396.6
1 ,617.5
1 ,857.5
2, 1 14.7
2, 38B.7
2,679.2
2,985.8
3,308.2
3,645.9
3,997.9
4,370.0
4,796.7
5,289.4
5,780.3
6,280.1
6,785.8
7,29B.O
7,815.7
8,336.3
8,860.2
9,387.9
9,939.6
10,491.9
SERS Projected Employer Contributions
(Based Upon Final December 31 , 2012 Valuation)
PBD00Tobash #1 - H brld DB/C Plan BS! n No Chan B in Rate Collars
Total Payroll
($ in millions)
5, 690.7
5,636.4
6,014.4
6, 197.9
6,386.9
6,581.7
6,782.4
6,989.3
7,202.5
7,422.1
7,68.5
7,881 .8
8,1 22.2
8,369.9
8,625.2
8,88B.3
9,1 59.4
9,438.7
9,726.6
1 0,023.3
1 0,329.0
10, 6.0
10,968.6
1 1 ,303.2
1 1 ,67.9
12,003.2
1 2,369.3
1 2,746.6
13, 135.3
1 3,536.0
13,948.8
14,374.2
14,812.7
15,264.4
1 5,730.0
16,209.8
1 6,704.2
17,21 3.7
17,738.7
1 8,279.7
Epected FY Expected Total DB+DC
DB DC Total DB+DC Contribution
Contribution Contribution Contribution as a % of
($ in millions) ($ in millions) ($ in millions) DB+DC Pay
677.4 677.4 1 1 .50
933.6
1 ,233.0
1 ,549.4
1 ,683.9
2,024.1
2,033.0
2,036.3
2,039.4
2,042.4
2,05.7
2,048.9
2,052.1
2,055.3
2,056.5
2,061.7
2,064.B
2,067.9
2,071.2
2,074.5
2,077.9
2,081.2
1 ,841 .6
1 ,845.1
1 ,64B.6
1 ,652.2
1 ,655.9
1 ,659.6
1 ,368.9
1 ,037.2
616.0
345.2
304.5
236.1
1 76.5
1 69.4
1 66.8
1 69.9
1 73.3
176.9
0.3
0.9
3.0
5.4
8.2
1 1 .4
15. 1
19.1
23.7
28.9
34.6
41.0
46.0
55.6
64.0
73.1
B3.1
93.7
1 05.0
1 1 6.9
129.5
1 42.7
156.5
1 70.8
1 85.6
201.5
219.1
239.1
259.0
279.4
299.9
320.7
341.7
362.6
364.0
405.4
427.8
450.2
933.8
1 ,233.3
1 ,550.3
1 ,866.9
2,029.5
2,041 .2
2,047.7
2,054.5
2,01.5
2,069.4
2,077.6
2,066.7
2,096.3
2, 1 06.5
2, 1 17.3
2,1 28.8
2, 141.0
2, 154.3
2, 1 68.2
2,182.9
2,198.1
1 ,971 .1
1 ,967.8
2,005.1
2,023.0
2,041 .7
2,061 .1
1 ,606.0
1 ,276.3
875.0
624.6
60.4
556.8
516. 2
532.2
550.8
575.3
601.1
627.1
1 6.00
20.51
25.01
29.5
30.84
30.10
29.30
28.52
27.78
27.06
26.36
25.69
25.05
24.42
23.82
23.24
22.68
22.15
21 .63
21. 13
20.65
1 7.97
1 7.59
17.21
1 6.85
1 6.51
16. 17
1 2.24
9.43
6.27
4.35
4.08
3.65
3.29
3.2B
3.30
3.34
3.39
3.43
Annual Cumulative
(Savings) (Savings) Cost Funded UAL
($ in Cost Relative Relative to Ratio
to Baseline Baseline (AV%) billions)
1 4.66
1 7.75
20.56
21. 16
21 .62
0.3
0.8
2.8
(39.4)
(49.4)
(58. 1)
(66.8)
(75.8)
(84.5)
(93.3)
(102.1)
(1 1 0.8)
( 11 9.4)
(128.1)
(136.6)
(145.1)
(153.1)
(161 .2)
(1 69.2)
(1 77.4)
(428.5)
(436.7)
(45. 1 )
(453.6)
(462.2)
(471 .0)
(478.8)
(485.1)
(492.4)
(499.9)
(505.2)
(509.7)
(514.6)
(520.0)
(526.9)
(536.0)
(544.8)
(554.7)
0.3
1 .1
4.0
(35.4)
(84.8)
(142.8)
(209.7)
(285.4)
(369.9)
(463.2)
(565.2)
(676.0)
(795.5)
(923.6)
(1 ,060.2)
(1 ,205.2)
(1 ,358.4)
(1 ,51 9.6)
(1 ,688.8)
(1 ,866.2)
(2,294.7)
(2,731.4)
(3,176.6)
(3,630.1)
(4,092.4)
(4,563.4)
(5,042.2)
(5,527.4)
(6,019.7)
(6,519.6)
(7,024.8)
(7,534.5)
(B,049. 1)
(8,569. 1 )
(9,096.0)
(9,632.0)
(10, 176.8)
(10, 731 .4)
65.3
58.8
55.5
55.1
54.9
56.0 21 .44
57.2 21. 1B
5B.5 20.83
59.7 20.44
60.9 20.03
62.1 1 9.58
63.3 1 9. 10
64.5 1 8.58
65.7 1 8.02
66.9 1 7.41
68.2 16.76
69.5 16.06
70.8 1 5.29
72.2 14.47
73.7 1 3.59
75.3 1 2.63
77.1 1 1 .60
79.0 1 0.49
80.6 9.5
82.4 8.51
84.4 7.40
B6.6 6.20
89.1 4.91
91.9 3.52
94.1 2.50
95.7 1 .75
96.6 1 .36
96.8 1 .22
96.9 1 . 1 1
96.9 1 .05
96.7 1 .06
96.5 1 .07
96.2 1 .08
95.8 1 .
95.4 1 . 1 0
Funded
Ratio
(MV%)
57.6
59.0
55.3
55.0
55.2
56.0
57.2
5B.5
59.7
61. 0
62.1
63.3
64.5
65.7
66.9
68.2
69.5
70.8
72.2
73.7
75.3
77.1
79.0
80.6
82.4
6.4
86.6
89.1
91.9
94.1
95.7
96.6
96.8
96.9
96.9
96.7
96.5
96.2
95.8
95.4
51312014
Baseline
Baseline Baseline
Percent ($ in million
1 1 .50 677.
16.00 933.
20.50 1 ,233.
25.00 1 ,549.
29.50 1 ,884.
31 .43
30.82
30.13
29.45
28.80
28. 1 6
27.55
26.95
26.37
25.81
25.26
24.73
24.22
23.72
23.24
22.77
22.32
21 .88
21 .45
21 .04
20.63
20.24
1 9.86
1 5.89
13.01
9.80
7.82
7.49
6.99
6.57
6.49
6.45
6.46
6.46
6.46
2,068.
2,090.
2,1 05.
2,1 21 .
2, 137.
2, 153.
2, 171 .
2, 188.
2,207.
2,225.
2,245.
2,265.
2, 286.
2,307.
2,329.
2,352.
2,375.
2,399.
2,424.
2,450.
2,476.
2,503.
2,532.
2,086.
1 ,761 .
1 ,367.
1 , 1 24.
1 , 1 09.
1 ,066.
1 ,032.
1 ,052.
1 ,077.
1 ,1 1 1 .
1 .145.
1. 181.
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
204
2045
2046
2047
2048
2049
2050
Investment
Return
2.70%
1 2.00%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
7.50%
Fiscl
Year
201 2/201 3
201 3/2014
201 4/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
2020/2021
2021/2022
202212023
2023/2024
2024/2025
2025/2026
2026/2027
2027/2028
2028/2029
2029/2030
2030/2031
2031/2032
2032/2033
2033/2034
2034/2035
2035/2036
2036/2037
2037/2038
2038/2039
2039/2040
2040/2041
2041/2042
20422043
2043/2044
204/2045
2045/2046
2046/2047
2047/2048
2048/2049
2049/2050
2050/2051
2051/2052
Floor
Contribution
(i.e., NC%)
5.10%
5.01%
0.90%
0.88%
0.87%
0.85%
0.84%
0.82%
0.81%
0.79%
0.77%
0.76%
0.74%
0.73%
0.71%
0.70%
0.68%
0.66%
0.65%
0.63%
0.62%
0.60%
0.59%
0.57%
0.55%
0.54%
0.52%
0.51%
0.49%
0.47%
0.46%
0.44%
0.43%
0.41%
0.40%
0.38%
0.36%
0.35%
0.33%
0.32%
Projected
DB Percent
Contribution
1 1 .50
16.00
1 8.25
21 .00
24.25
28.00
31. 11
30.39
29.54
28.72
27.92
27.14
26.39
25.65
24.94
24.25
23.58
22.93
22.29
21 .68
21 .08
20.50
17.72
17.24
16.77
1 6.32
1 5.87
1 5.44
1 1 .41
8.49
5.23
3.20
2.84
2.27
1 .72
1 .47
1 .25
1 . 1 8
1 .1 6
1 . 15
Legacy DB
Payroll
($ in millions)
5,890.7
5,836.4
5,951 .0
6,058.5
5,981.7
5,91 1 .0
5,832.6
5,751.8
5,66.9
5,571 .2
5,469.0
5,360.0
5,242.7
5,1 20.6
4,995.3
4,866.3
4,730.4
4,588.6
4,438.7
4,287.3
4, 134.0
3,980.2
3,825.7
3,671. 1
3,514.6
3,357.3
3,200.9
3,046.6
2,895.1
2,746.3
2,601.9
2,462.5
2,331 .1
2,208.6
2,096.5
1 ,998.9
1 ,918.7
1 ,853.6
1 ,752.0
1 ,677.9
Hybrid DB/DC Hybrid DC-
Payroll Only Payroll
($ in millions) ($ in millions)
63.5
133.1
376.2
61 1 .5
850.3
1 ,087.4
1 ,326.8
1 ,568.4
1 ,812.3
2,056.3
2,301.3
2,52.7
2,778.1
3,007.5
3,233.1
3,453.5
3,670.4
3,878.4
4,080.2
4,275.1
4,463.8
4,646.3
4,825.0
5,000.1
5,170.5
5,330.0
5,443.5
5,500.3
5,566.6
5,631.7
5,695.7
5,757.9
5,817.8
5,874.5
5,925.3
5,972.1
6,047.1
6, 109.9
6.3
29.0
59.2
99.5
150.1
210.8
282.6
367.2
465.5
578.2
706.7
851.8
1 ,014.4
1 , 1 95.9
1 ,396.6
1 ,617.5
1 ,857.5
2, 1 14.7
2,388.7
2,679.2
2,985.8
3,308.2
3,645.9
3,997.9
4,370.0
4,796.7
5,289.4
5,780.3
6,280.1
6,785.8
7,296.0
7,615.7
6,336.3
6,660.2
9,387.9
9,939.6
1 0,491 .9
SERS Projected Employer Contributions
(Based Upon Final December31, 2012 Valuation)
Amended Tash #2 " M'brid DBIC Plan Desi n - lndudin Lowr Rate Collars
Total Payroll
($ in millions)
5,890.7
5,636.4
6,014.4
6, 197.9
6,386.9
6,581.7
6,782.4
6,969.3
7,202.5
7,422.1
7,648.5
7,881.8
8,122.2
8,369.9
8,625.2
8,688.3
9, 159.4
9,436.7
9,726.6
1 0,023.3
1 0,329.0
1 0,644.0
1 0,968.6
1 1 ,303.2
11 ,647.9
1 2,003.2
1 2,369.3
1 2,746.6
1 3, 135.3
1 3,536.0
13,948.8
14,374.2
14,612.7
1 5,264.4
1 5,730.0
1 6,209.8
16,70.2
1 7,213.7
1 7,738.7
18,279.7
LectedFY Expected FY Tolal OB+OC
DB DC Total OB+DC Contribution
Contribution
($ in millions)
677.4
933.6
1 ,097.6
1 ,301.5
1 ,546.6
1 ,842.4
2, 109.3
2, 123.0
2, 126.2
2, 1 29.2
2,132.4
2,1 35.7
2, 1 38.9
2, 142.1
2, 145.3
2, 148.4
2, 151 .6
2, 154.7
2, 158.0
2, 161. 3
2, 164.6
2, 168.0
1 ,926.4
1 ,931.6
1 ,935.3
1 ,938.9
1 ,942.6
1 ,946.4
1 ,475.7
1 ,1 23.9
702.8
432.0
391.3
317.0
240.2
206.1
1 77.2
169.9
1 73.3
1 76.9
Contribution Contribution as a % of
($ in millions) ($ in millions) DB+DC Pay
0.3
0.9
3.0
5.4
8.2
1 1 .4
1 5.1
19.1
23.7
28.9
34.6
41.0
48.0
55.6
64.0
73.1
83.1
93.7
1 05.0
1 1 6.9
129.5
142.7
1 56.5
1 70.8
1 85.8
201.5
219.1
239.1
259.0
279.4
299.9
320.7
341.7
362.8
384.0
405.4
427.8
450.2
677.4 1 1 .50
933.8
1 ,097.9
1 ,302.4
1 ,551.6
1 ,87.6
2, 1 1 7.5
2, 134.4
2, 141. 3
2, 148.3
2,156.1
2,16.6
2,173.5
2, 183.1
2, 193.3
2,204.0
2,21 5.6
2,227.6
2,241. 1
2,255.0
2,269.6
2,284.9
2,057.9
2,074.5
2,091.8
2,109.7
2,1 28.4
2, 147.9
1 ,69.8
1 ,363.0
961.8
71 1 .4
691.2
637.7
581.9
568.9
561.2
575.3
601 . 1
627.1
1 6.00
1 8.25
21.01
24.29
28.06
31.22
30.54
29.73
28.95
26.19
27.46
26.76
26.08
25.43
24.80
24.19
23.60
23.04
22.50
21 .97
21 .47
1 6.76
16.35
17.96
17.58
17.21
1 6.65
1 2.90
1 0.07
6.90
4.95
4.67
4.16
3.70
3.51
3.36
3.34
3.39
3.43
Annual Cumulative
(Savings) (Savings) Cost Funded UAL
Cost Relative Relative to Ratio ($ in
to Baseline Baseline (AV%) billions)
(135. 1)
(247. 1)
(332.5)
(221 . 1)
26.9
26.6
20.0
1 1 .0
2.2
(6.5)
(1 5.3)
(24.0)
(32.6)
(41 .4)
(49.8)
(58.3)
(66.3)
(74.4)
(62.5)
(90.6)
(341 .7)
(350.0)
(358.4)
(366.9)
(375.5)
(384.2)
(392.0)
(398.4)
(405.6)
(41 3.1)
(41 8.4)
(428.8)
(450.9)
(483.3)
(516.5)
(536.0)
(544.8)
(554.7)
(135.1)
(362.2)
(714.6)
(935.7)
(908.8)
(880.1)
(660.2)
(849. 1)
(846.9)
(853.4)
(868.6)
(892.6)
(925.3)
(966.7)
(1,016.5)
(1 ,074.7)
(1, 141. 1)
(1 ,21 5.5)
(1 ,298.0)
(1 ,388.6)
(1 ,730.3)
(2,080.3)
(2,438.8)
(2,805.6)
(3,181.2)
(3,565.4)
(3,957.4)
(4,355.9)
65.3 14.66
58.8
55.5
55.0
54.4
54.6
55.4
56.5
57.7
59.0
17.75
20.56
21 .23
21 .89
22.03
22.07
21 .63
21 .44
21. 01
60.2 20.55
61. 5 20.06
62.7 1 9.52
63.9 18.9
65.2 18.32
66.5 17.65
67.8 1 6.92
69.2 16. 14
70.6 15.30
72.2 1 4.39
73.8 1 3.40
75.6 12.34
77.6 1 1 .20
79.2 1 0.22
61 .1 9. 15
83.1 8.00
65.3 6.76
87.9 5.43
90.8 3.99
93.1 2.91
(4,761 .4) 94.9 2. 1 1
1 .66
1 .46
1 .27
1 . 1 5
(5, 1 74.5) 95.8
(5,592.9) 96.2
(6,021 .7) 96.5
(6,472.6) 96. 7
(6,955.9) 96.6
(7,472.4) 96.5
(8,008.4) 96.2
(8,553.2) 95,8
(9,107.8) 95.4
1 . 1 0
1 .06
1 .06
1 .09
1 . 1 0
Funded
Ratio
(MV%)
57.6
59.0
55.3
54.9
54.7
54.8
55.4
56.5
57.7
59.0
60.2
61. 5
62.7
63.9
65.2
66.5
67.8
69.2
70.6
72.2
73.8
75.6
77.6
79.2
61 .1
63.1
85.3
87.9
90.8
93.1
94.9
95.6
96.2
96.5
96.7
96.6
96.5
96.2
95.8
95.4
5/3/2014
Baseline
Baseline
Percent
1 1 .50
1 6.00
20.50
25.00
29.50
31 .43
30.82
30.13
29.45
28.60
28.16
27.55
26.95
26.37
25.81
25.26
24.73
24.22
23.72
23.24
22.77
22.32
21 .88
21 .45
21 .04
20.63
20.24
1 9.66
1 5.89
13.01
9.80
7.82
7.49
6.99
6.57
6.49
6.45
6.46
6.46
6.46
Baseline
($ in million
677.
933.
1 ,233.
1 ,549.
1 ,864.
2.068.
2,090.
2, 105.
2, 121 .
2, 137.
2, 153.
2, 171 .
2, 188.
2,207.
2,225.
2, 245.
2,265.
2,286.
2,307.
2,329.
2,352.
2,375.
2,399.
2,424.
2,450.
2,476.
2,503.
2,532.
2,086.
1 ,761 .
1 ,367.
1 , 1 24.
1 ,1 09.
1 ,066.
1 ,032.
1 ,052.
1 ,077.
1 ,1 1 1 .
1 .145.
1 ,1 81 .
SERS Projected Employer Contributions 5/3/2014
(Based Upon Final December 31, 2012 Valuation)
Current Entr Age Funding Method; Level Dollar Amortization; 5-Year Smoothing of Assets; 4.50% FY 1 4 Collar;
4.50% FY 1 5 Collar; 4.50% FY 16 Collar; 4.50% FY 1 7 Collar; 4.50% FY 1 8 Collar; 4.50% FY 1 9 Collar; 4.50% FY 20
Collar; 4.50% FY 21 + Collar; No Asset Fresh Star; Act 1 20 Benefit Provisions; 7.50% Liability Interest Rate
Assum1tion; No Liabili!Fresh Star
Projected Expected FY Expected FY (Savings) |Cost GASB Compliant Funded UAL Funded
Investment Fiscal Ceiling Floor Percent Payroll Contribution Relative to Current (Fiscal Year Ratio ($ i n Ratio
Year Return Year Contribution Contribution Contribution ($ i n millions) ($ in millions) Law Contribution Contribution) (AV%) billions) (MV%)
2008 approx -30% 2009/201 0 NA 4.00% 4.00 5, 660.3 226.4 N 89.0 3.80 66.2
2009 approx 9% 201 0/201 1 NA 4.00% 5.00 5,936.0 296.8 N 84.4 5.59 68.9
201 0 approx 1 2% 201 1 /201 2 NA 4.08% 8.00 5, 851 . 7 468. 1 N 75.1 9.76 66.0
201 1 2.70% 201 2/201 3 NA 5. 1 0% 1 1 .50 5,890.7 677.4 N 65.3 1 4.69 57.6
201 2 1 2.00% 201 3/201 4 NA 5.01 % 1 6.00 5, 836.4 933.8 N 58.7 1 7.78 58.9
201 3 7.50% 201 4/201 5 NA 5. 01 % 20.50 6, 01 4.4 1 , 233.0 N 58.6 1 8. 1 5 58.4
201 4 7.50% 201 5/201 6 NA 5.01 % 25.00 6, 1 97.9 1 , 549.5 Y 58.0 1 8.84 57.9
201 5 7.50% 201 6/201 7 NA 5.01 % 29.50 6, 386.9 1 , 884. 1 Y 57.6 1 9. 41 57.9
201 6 7.50% 201 7/201 8 NA 5. 01 % 31 .43 6, 581 .7 2,068.9 Y 58.6 1 9. 34 58.6
2017 7.50% 201 8/201 9 NA 5. 01 % 30.82 6,782.4 2,090.6 Y 59.7 1 9. 1 9 59.7
201 8 7.50% 201 9/2020 NA 5.01 % 30. 1 3 6,989.3 2, 1 05.8 Y 61 .0 1 8.93 61 . 0
201 9 7.50% 2020/2021 NA 5.01 % 29.45 7,202.5 2, 1 21 . 3 Y 62.2 1 8.66 62.2
2020 7.50% 2021 /2022 NA 5. 01 % 28.80 7, 422. 1 2, 1 37.3 Y 63.4 1 8.35 63.4
2021 7.50% 2022/2023 NA 5. 01 % 28. 1 6 7,648.5 2, 1 53.9 Y 64.7 18.03 64.7
2022 7.50% 2023/2024 NA 5.01 % 27.55 7, 881 . 8 2, 1 71 . 1 Y 65. 9 1 7.67 65.9
2023 7.50% 2024/2025 NA 5.01 % 26.95 8, 1 22.2 2, 1 88.8 Y 67. 1 1 7.29 67. 1
2024 7.50% 2025/2026 NA 5. 01 % 26.37 8,369.9 2,207.1 Y 68.3 1 6.87 68.3
2025 7.50% 2026/2027 NA 5. 01 % 25. 81 8,625.2 2,225.9 Y 69.5 1 6.42 69.5
2026 7.50% 2027/2028 NA 5. 01 % 25.26 8,888.3 2, 245.4 Y 70.8 1 5.93 70.8
2027 7.50% 2028/2029 NA 5.01 % 24.73 9, 1 59.4 2,265.4 Y 72. 1 1 5. 41 72. 1
2028 7.50% 2029/2030 NA 5. 01 % 24.22 9,438.7 2,286.1 Y 73.4 1 4.83 73.4
2029 7.50% 2030/2031 NA 5. 01 % 23.72 9,726.6 2,307.4 Y 74.7 1 4.21 74.7
2030 7.50% 2031 /2032 NA 5. 01 % 23.24 1 0,023.3 2, 329.4 Y 76.2 1 3.54 76.2
2031 7.50% 2032/2033 NA 5. 01 % 22.77 1 0, 329.0 2, 352.1 Y 77.6 1 2.82 77.6
2032 7.50% 2033/2034 NA 5. 01 % 22.32 1 0,644.0 2, 375.5 Y 79.2 1 2.04 79.2
2033 7.50% 2034/2035 NA 5.01 % 21 .88 1 0,968.6 2,399.6 Y 80.8 1 1 . 1 9 80.8
2034 7.50% 2035/2036 NA 5.01 % 21 .45 1 1 ,303.2 2,424.5 Y 82.5 1 0.28 82.5
2035 7.50% 2036/2037 NA 5. 01 % 21 .04 1 1 ,647.9 2,450.2 Y 84.3 9.29 84.3
2036 7.50% 2037/2038 NA 5. 01 % 20.63 1 2,003.2 2,476.6 Y 86.1 8.22 86. 1
2037 7.50% 2038/2039 NA 5. 01 % 20.24 1 2,369.3 2, 503. 9 Y 88. 1 7.07 88. 1
2038 7.50% 2039/2040 NA 5.01 % 1 9.86 1 2,746.6 2,532. 1 Y 90. 3 5.82 90.3
2039 7.50% 2040/2041 NA 5. 01 % 1 5.89 1 3, 1 35.3 2,086.8 Y 92.5 4.48 92.5
2040 7.50% 2041 /2042 NA 5. 01 % 1 3. 01 1 3,536.0 1 , 761 .4 Y 94.2 3.50 94.2
2041 7.50% 2042/2043 NA 5. 01 % 9.80 1 3,948.8 1 , 367.4 Y 95.4 2.80 95.4
2042 7.50% 2043/2044 NA 5. 01 % 7.82 1 4,374.2 1 , 1 24.5 Y 96.0 2.47 96.0
2043 7.50% 2044/2045 NA 5. 01 % 7.49 14, 81 2. 7 1 , 1 09.6 Y 96. 1 2. 38 96. 1
2044 7.50% 2045/2046 NA 5.01 % 6.99 1 5,264.4 1 , 066.5 Y 96.2 2.32 96.2
2045 7.50% 2046/2047 NA 5.01 % 6.57 1 5,730.0 1 , 032.8 Y 96.2 2.33 96.2
2046 7.50% 2047/2048 NA 5.01 % 6.49 1 6,209.8 1 , 052.2 Y 96.0 2.40 96.0
2047 7.50% 2048/2049 NA 5. 01 % 6.45 1 6,704.2 1 , 077.7 Y 95.9 2.49 95.9
2048 7.50% 2049/2050 NA 5. 01 % 6.46 1 7,21 3.7 1 , 1 1 1 . 3 Y 95.7 2.58 95.7
2049 7.50% 2050/2051 NA 5. 01 % 6.46 1 7,738.7 1 , 1 45.9 Y 95.5 2.68 95.5
2050 7.50% 2051 /2052 NA 5. 01 % 6.46 1 8,279.7 1 , 1 81 .8 Y 95.2 2.79 95.2
These projections are estimates for the exclusive use of S|RSand have not been cerified by Hay Group
M| | | | mD
Memorandum
Date: May 23, 201 4
Regardi ng: Actuari al Cost Note on HS 1 353 A0691 7, PN 21 52
From: Scott Porter, FSA and Glenn Bowen, FSA
I ntroducti on
3libery Ridge Drve
Suite Z
Wayne, P 1 1-14
e| +1 610 687.5644
F +1 610.687.4236
W .0ll08D.C0m
Thi s memorandum descri bes the desi gn changes contai ned i n House Bi l l 1 353,
Pri nter's Number 21 52 for the Hybrid Pl an proposal for the two Pennsylvani a statewi de
reti rement systems (the Publ i c School Employees' Retirement System "PSERS" and the
State Empl oyees' Reti rement System "SERS") and the actuarial model i ng procedures
used by Mi l l i man to val ue the i mpact of these changes. Al so i ncl uded i n thi s anal ysi s
are possi ble amendments to HB 1 353 that woul d excl ude State Pol ice ofcers or State
Pol i ce Oficers and other personnel cl assified as hazardous duty in the SERS actuari al
val uati on. The purpose of these projecti ons is to assist deci si on makers i n
understandi ng the i mpact on l ong-term projected costs of the pensi on systems of
modi fi ng the pl an desi gn for future empl oyees, i ncl udi ng changes to the contri buti on
col l ars. For PSERS, the projected costs exclude the cost of the heal thcare premi um
assi stance.
These projecti ons are based on Mi l l i man' s repl ication val uati on of the 201 2 actuari al
val uati on for each system. The repl i cati on val uati ons reflect partici pant data provi ded to
us from the system actuari es, and our i ndependent programmi ng of the provi si ons and
actuari al assumpti ons from the 201 2 val uati ons usi ng Mi l l i man' s val uati on softare.
Based on the PSERS Board . Presentati on dated December 1 0, 201 3 contai ni ng
prel i mi nary 201 3 val uati on resul ts, we have modified the projected PSERS val uati on
results for the 201 3 and l ater val uati on years. We bel ieve these projecti ons provi de a
reasonabl e basi s for determi ni ng the estimated effect of potenti al pl an desi gn and
fundi ng pol icy changes. The actual i mpact of any pl an desi gn changes on l i abi l ities and
on empl oyer contri buti on rates wi l l be estimated by the actuaries for each system, and
these esti mates may change over ti me as future val uati ons are conducted and actual
experience emerges.
The resul ts of our model i ng can be used to understand the pattern of emergi ng costs
and l i abi l ities due to the proposed changes, but shoul d not be rel ied upon as a
guarantee of actual costs to be i ncurred by the Commonwealth and other employers.
Future fundi ng and accounti ng obl i gati ons wi l l be determi ned by an actuari al val uati on
of the systems as of each future val uati on date. Actual pl an costs wi l l ul ti mately be
determi ned by the benefits provi ded by the systems and not by the actuari al
cal cul ati ons provi ded i n thi s model .
Thi s work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropri ate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi lity to other parties who receive this work.
Actuari al Projecti ons of Governor's Proposal
May 23, 201 4
Page 2
Thi s anal ysi s was prepared excl usi vel y for the Pennsylvani a Ofice of the Budget as
wel l as the Pennsylvani a Publ i c Empl oyee Retirement Commi ssi on for a specific and
l i mited purpose. I t i s a compl ex, techni cal anal ysi s that assumes a hi gh level of
knowl edge concerni ng PSERS and SERS operati ons, and uses PSERS and SERS
data, whi ch Mi l l i man has not audited. It is not for the use or benefit of any thi rd party for
any purpose. Any thi rd party reci pient of Mi l l i man' s work product who desi res
professi onal gui dance should not rely upon Mi l l i man' s work product, but should engage
qual ified professi onal s for advi ce appropriate to its own specific needs.
The consultants who worked on thi s assi gnment are pensi on actuari es. We have not
expl ored any l egal issues with respect to the proposed plan changes. We are not
attorneys and cannot give l egal advi ce on such issues. We suggest that you review any
reti rement plan desi gn proposal with counsel .
I n additi on to the pri mary actuari al cost note, Appendi x I provi des some i nformati on on
esti mated repl acement ratios of the proposed hybri d plan.
Commentary on Projection Methodology and I mpact on Projected Savi ngs
Attached to thi s memorandum are charts and graphs projecti ng contri buti ons and
funded status each year of the 30-year projecti on peri od begi nni ng wi th fiscal year 201 5
or the 201 3 actuari al val uati ons for each of the Systems.
Leadi ng up to thi s memorandum, there has been much discussi on regardi ng the level of
savi ngs produced by the proposed hybrid pl an. Actuaries use a variety of assumpti ons
and techni ques i n projecti ng costs of pensi on pl ans. Consi deri ng that the hybrid pl an
wi l l appl y to future empl oyees, the demographi c characteristics of the future empl oyees
used in the model i ng wi l l have an i mpact on the level of savi ngs estimated. The actual
amount of savi ngs wi l l be dependent on the actual number of new empl oyees enteri ng
the system, the demographics of those empl oyees and the experi ence of those
empl oyees. I f fewer employees are hi red i n future years, fewer savi ngs woul d be
generated. If more part-ti me employees are hi red relative to ful l-time empl oyees, fewer
savi ngs would be generated.
Our approach is to mai ntai n a stabl e popul ati on of each active membershi p group that
has di sti ngui shi ng characteristics. For SERS thi s entai l s mai ntai ni ng a stabl e number of
general empl oyees, hazardous duty members, state pol i ce oficers, j udges, l egi sl ators
and park rangers/capital pol ice offi cers. For PSERS thi s entai l s mai ntai ni ng a stabl e
number of ful l-time and part-ti me empl oyees. We bel ieve i t i s prudent i n projecti ng the
costs of the current system or any proposed desi gn that ful l -ti me empl oyees are
repl aced by ful l -ti me empl oyees and part-time empl oyees are replaced by par-time
empl oyees. In recent years, the number of ful l -ti me employees has decl i ned and the
Thi s work product was prepared solely for P Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 3
number of part-ti me empl oyees has i ncreased, however we bel i eve thi s shif is not
expected to conti nue i ndefi nitel y. Thi s change i n demographics in PSERS may resul t i n
an average cost that i s l ess than ori gi nal l y projected under Act 1 20, but i t does not
change the cost for the ful l-ti me employee. Regardl ess of the number of part-ti me
empl oyees i ncl uded or the average service expected for those part-ti me empl oyees, the
cost for the ful l-ti me empl oyee woul d be unchanged.
The proposed hybri d pl an results i n l arger savi ngs for ful l -ti me empl oyees than part-ti me
employees as the appl i cati on of the compensati on cap and 25-year service l i mit woul d
have a l arger i mpact on ful l-ti me employees versus part-time empl oyees. The actual
savi ngs real ized i n future years wi l l depend on the number ful l -ti me empl oyees hi red
and part-time empl oyees hi red each year in the future.
The proposed hybrid pl an is desi gned to reduce costs for each of these groups.
Diferent demographi c projecti on assumpti ons and methods wi l l produce a range of the
esti mated savi ngs, although the range woul d not necessari ly i ncl ude the mi ni mum and
maxi mum amounts. The diference i n the amount of savi ngs projected by each of the
firms i s a smal l percentage of the amount of total nomi nal contri buti ons expected to be
made to each of the Systems over the 30-year projecti on peri od.
Regardl ess of the level of savi ngs esti mated, the key characteristics of thi s pensi on
reform i s to 1 ) reduce costs on an ongoi ng basi s, 2) to use the savi ngs generated to
make requi red contri butions in a ti mel y fashi on over the projecti on period to ensure
proper fundi ng of the systems over the l ong-term and 3) decrease the level of ri sk to the
Commonwealth and empl oyers that contributi on requi rements i n future years wi l l be
hi gher than projected.
Ri sk Reducti on of Proposed Hybri d Pl an
Pensi on reform i mpacti ng only future empl oyees wi l l take several years to generate
si gnificant savi ngs and to modi f the ri sk profi l e of the Systems. Empl oyer contri buti ons
i n the near-term wi l l be i nfl uenced by the current funded status of the Systems and the
contri buti on col l ars; reforms to future empl oyees wi l l not have a si gnificant i mpact on
these contri buti ons level s. But by the end of the projecti on period, these pensi on
reforms wi l l have a materi al i mpact on the contri buti on requi rements of the Systems as
wel l as the ri sk profi l e of the pensi on plans.
Ri sk i s an item that i s di ficul t to quantify usi ng determi ni sti c projecti ons. Expected
val uati on costs are based on a risk-based i nvestment return assumpti on and projected
costs are determi ned assumi ng that the i nvestment return assumpti on i s real i zed each
year i n the future. Determi nistic projections are al so based on the assumpti on that l ife
expectancies remai n constant throughout the projecti on peri od. Although changes i n
Thi s work product was prepared sol el y for PA Budget Ofice for the purposes descri bed herein and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Actuari al Projecti ons of Governor's Proposal
May 23, 201 4
Page 4
these items are not reflected di rectly i n thi s analysi s, it is i mportant for deci si on makers
to understand the potenti al i mpact of modificati ons on these items.
Under the proposed hybri d pl an, approxi mately 50% of the total compensati on at the
end of the projection period i s expected to be DC payrol l ( i . e. over the compensati on
cap or after a member' s first 25 years of service) for each System and the percentage i s
expected to conti nue grow beyond the projecti on peri od as sal ary i ncreases conti nue to
outpace i ncreases in the compensati on cap. The total l i abi l ities (present val ue of
projected benefits) projected under the DB pl an are expected to decrease by
approxi mately 40% for SERS and 31 % for PSERS from basel i ne projecti ons at the end
of the projection period. These percentages are expected to decrease even further
beyond the projection peri od. Thus, the size of the DB pl an is expected to be much less
under the proposed hybrid pl an than basel i ne projecti ons. I n fact, the l i abi l iti es under
the DB pl an are expected to conti nual l y decrease after the projecti on period under the
proposed hybrid pl an whereas the l i abi l iti es are expected to conti nue to i ncrease under
basel i ne projecti ons.
A smal ler DB pl an would resul t i n l ess ri sk assumed by the Commonweal th and
empl oyers. Conversely, more ri sk is then assumed by members. For i nstance, if
changes i n actuari al assumpti ons such as a decrease i n the i nvestment return
assumpti on and/or i ncreases in l ife expectancy result in a 1 0% i ncrease in l i abi l iti es, the
i mpact on the Commonwealth and employers wi l l be l ess under the proposed hybrid
pl an versus the current pl an. For exampl e at the end of the 30-year projecti on period, a
1 0% i ncrease in l i abi l ities is esti mated to be $6 bi l l i on and $4 bi l l ion l ess under the
proposed hybrid pl an versus baseline projecti ons for PSERS and SERS, respectivel y.
Beyond the projection peri od, the di fference i n l i abi l iti es woul d conti nue to grow as the
diference i n the proposed hybri d pl an l i abi l ities and basel i ne projecti ons wi dens.
Thi s i s a si gnificant reducti on i n employer ri sk as the i mpact on projected l i abi l ities and
contri buti on requi rements for the Commonwealth and empl oyers i s l ess. The reducti on
i n empl oyer ri sk is transferred to members i n the form of hi gher ri sk and/or lower
benefits.
Furthermore, the size of the Systems wi l l decrease as a percentage of the
Commonwealth' s budget under the proposed hybrid pl an versus basel i ne projecti ons.
One of the key ri sk el ements of a pensi on pl an is the abi l ity of the pl an sponsor to pay
the contri buti ons requi red and to adapt to the volati l ity in the contributi on requi rements.
Si nce the 201 0 actuari al val uati ons, contri buti on col l ars have appl ied resulti ng i n a lower
contri buti on rate than the actuari al l y determi ned contri buti on rate. For several years
pri or to appl ication of col l ars, the statutory contri buti ons were based on a 1 0-year
amortizati on of gai ns realized through 2000 and a 30-year amortizati on of subsequent
actuari al losses. Thi s approach resulted i n l ower contri buti ons over the 1 0-year peri od
and did not appropriately reflect the funded status of the Systems duri ng this period.
Because the size of the pensi on Systems wi l l be reduced si gnificantly by the end of the
proj ection peri od under the proposed hybri d pl an, the level of contri buti ons requi red and
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not be appropri ate to use fr other purposes. Mi l l i man does not intend to benefit and assumes no duty or
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Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 5
the i mpact of adverse experi ence wi l l be smal l er. Of course, adverse experi ence in the
near term woul d have a si gnifi cant i mpact on the current contri buti on level s under
basel i ne projecti ons as wel l as the proposed hybri d pl an projecti ons.
Proposed Hybri d Pl an for Future Empl oyees
The proposed hybri d pl an for future employees i s efective Januar 1 , 201 5 for SERS
and Jul y 1 , 201 5 fr PSERS. I f State Pol ice of SERS is i ncl uded i n the pl an, the
efective date i s July 1 , 201 7 and for Park Rangers/Capitol Pol ice of SERS, the efective
date i s July 1 , 201 5. Thi s wi l l result i n two addi ti onal classes of membershi p: T-G in
PSERS and A-5 in SERS. Members with pri or seri ce and re-hi red afer the effective
date wi l l become T-G/A-5 members for prospective serice. Pri or service wi l l not be
counted towards el i gi bi l ity for benefits or in the amount of benefits for T-G/A-5 members
and future service as a T-G/A-5 member wi l l not count towards el i gi bi l ity or amount of
benefits in any pri or membershi p ti er. If State Pol ice and/or hazardous duty members
are not i ncl uded i n the hybri d pl an, there are no proposed changes to the benefits of
these membershi p groups.
I n additi on, members of the Department of Educati on as wel l as members of other
hi gher educati on l earni ng faci l ities such as community col l eges, state-owned
educational i nstituti ons and the Pennsyl vani a State University, wi l l conti nue to be
al l owed to choose an i ndependent retirement program. For purposes of thi s analysi s,
any change to the number of empl oyees el ecti ng the i ndependent reti rement program i s
expected to be de mi ni mis.
The Hybri d Pl an contai ns both defined benefit (DB) and defined contri buti on (DC)
features. The defined benefit pl an wi l l appl y for the fi rst 25 years of service onl y, and
wi l l only reflect compensati on up to a specified compensati on cap. The defi ned
contri buti on pl an wi l l apply in al l years on compensation i n excess of the cap, and on al l
compensati on after 25 years of service. I n addi ti on, there wi l l al so be contri buti ons
made by both the empl oyee and the employer to the defined contri buti on pl an duri ng
the first 25 years of service up to the compensati on cap. The fol l owi ng tabl e di splays
the appl icabl e contri buti on rates for both employees and employers al l ocated to four
quadrants.
a
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not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
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Actuari al Projecti ons of Governor's Proposal
May 23, 201 4
Page 6
Below DB
Pl an Cap
Above DB
Pl an Cap
H brid Pl an - Members Parici
" ZOYears of Seri ce
Quadrant 1
EE DB Rate = O. UU
EE DC Rate = 1 . UU
Total EE Rate = . UU
ER DB NC Rate = Actuari al l y Determi ned
ER DC Rate = U. OU
Total EE+ER DC Rate = 1 . OU
Quadrant 3
EE DB Rate = U. UU
EE DC Rate = . UU
Total EE Rate = . UU
ER DB NC Rate = None
ER DC Rate = 4. UU
Total EE+ER DC Rate = T 1 . UU
i n Social Securit
>= ZOYears of Seri ce
Quadrant Z
EE DB Rate = U. UU
EE DC Rate = . UU
Total EE Rate = . UU
ER DB NC Rate = None
ER DC Rate = 4. UU
Total EE+ER DC Rate = 1 1 . UU
Quadrant 4
EE DB Rate = U. UU
EE DC Rate = . UU
Total EE Rate = . UU
ER DB NC Rate = None
ER DC Rate = 4. UU
Total EE+ER DC Rate = 1 1 . UU
For members who do not parti ci pate in Social Security (i f State Pol i ce oficers are
i ncl uded), there wi l l be an addi ti onal employer contri buti on of 6% made to the defi ned
contri buti on pl an on all service and al l pay. The fol lowi ng tabl e displays the appl i cabl e
contri buti on rates for both employees and employers al located to the four quadrants.
Hybrid Plan - Members NOT Participatini in Social Securit
ZOYears of Seri ce >= ZO Years of Seri ce
Quadrant 1 Quadrant Z
EE DB Rate = O. UU EE DB Rate = U. UU
EE DC Rate = 1 . UU EE DC Rate = . UU
Below DB
Total EE Rate = . UU Total EE Rate = . UU
Pl an Cap
ER DB NC Rate = Actuari ally Determi ned ER DB NC Rate = None
ER DC Rate = O. OU ER DC Rate = 1 U. UU
Total EE+ER DC Rate = . OU Total EE+ER DC Rate = 1 . UU
Quadrant 3 Quadrant 4
EE DB Rate = U. UU EE DB Rate = U. UU
EE DC Rate = . UU EE DC Rate = . UU
Above DB
Total EE Rate = . UU Total EE Rate = . UU
Pl an Cap
ER DB NC Rate = None ER DB NC Rate = None
ER DC Rate = 1 U. UU ER DC Rate = 1 U. UU
Total EE+ER DC Rate = 1 . UU Total EE+ER DC Rate = 1 . UU
Thi s work product was prepared sol ely for PA Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive this work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 7
Defined Benefit Plan Features
Al l el i gi bl e members ( PSERS members, SERS general empl oyees, hazardous duty
empl oyees, j udges, legi slators, park rangers, capitol pol i ce and state pol ice) woul d
pari ci pate i n the hybri d pl an. The features of the defi ned benefit porti on are as fol l ows:

Compensati on Cap - Defi ned as the Annual Compensati on Li mit for SERS or the
Defi ned Benefit Compensati on Li mit for PSERS, a cap wi l l appl y to the earni ngs
used i n the devel opment of the fi nal average earni ngs and contri buti ons to the
defined benefit plan. The cap i s $50, 000 i n 201 5 and wi l l be i ncreased 1 % every
year, rounded to the nearest $1 00.

Employee Contri buti ons - The empl oyee contributi on rate i s 6% of defi ned
benefit pay. Defi ned benefit pay is defined as compensati on up to the Cap unti l
the member has completed 25 years of credited service. No empl oyee
contri buti ons wi l l be made to the defi ned benefit pl an once a member has
compl eted 25 years or on compensati on i n excess of the Cap. Par-time or other
members who do not earn a ful l year of serice each year of empl oyment may
contri bute for more than 25 pl an years unti l 25 years of credited service i s
atai ned.
C T-G and A-5 members wi l l be subject to the Ri sk Shari ng prov1 s1 ons
i ncl uded i n Act 1 20. The l ook-back period for determi ni ng i f the
i nvestment return has met the assumpti on is sl i ghtly diferent for T-G/A-5
empl oyees versus T-E/A-3 employees. For thi s analysis, we assumed
any risk-shari ng contri buti ons made by empl oyees woul d have a de
mi ni mi s efect on the results of a determi nisti c projecti on, i n whi ch
i nvestment returns are not varied from year to year.

Fi nal Average Earni ngs - 5-year average of capped compensati on determi ned
as of the date of termi nati on (which could refl ect compensation occurri ng after
compl eti on of 25 years of service) . Part-time or other members who do not earn
a ful l year of seri ce wi l l have thei r capped compensati on annual ized si mi l ar to
current procedures (whi ch reflect annual ized rate of pay and actual fracti onal
year of service) . Note that thi s may result i n annual ized fi nal average earni ngs
that exceed the Cap fr purposes of determi ni ng the DB benefit; however the
al locati on of employee contri buti ons to the DB and DC portions of the hybri d pl an
wi l l be based on the actual dol l ar amount of sal ary pai d.

Benefit Formul a - 2% of Fi nal Average Earni ngs multi pl ied by years of credited
service up to 25 years.

Retirement Ages - Normal Retirement is age 65 (at least 3 years of service are
requi red for PSERS) with early reti rement permitted at 25 years of credited
This work product was prepared solely for PA Budget Office for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi l ity to other paries who receive this work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 8
servi ce. Early reti rement reducti ons wi l l be based on Actuari al Equival ent
factors. We assumed there woul d be no change to the current actuari al
equival ent early reti rement factors.
C For members who do not parti ci pate in Soci al Security (State Pol ice) ,
Normal Retirement is age 60.

Vesting - 1 0 years of credited servi ce.

Contri buti on Refunds - refunds wi l l be avai l abl e to members who termi nate pri or
to becomi ng vested. Refunds wi l l i ncl ude contri buti ons and accumulated
i nterest. Once a member becomes vested, no refunds woul d be al l owed. Upon
reti rement, the member woul d be guaranteed to receive payments at least equal
to the accumul ated member contri buti on bal ance. Thi s i s referred to as the
Modified Cash Refund opti on.

Di sabi l ity Benefits - woul d be determi ned in a si mi l ar fashi on as current methods,


except Fi nal Average Earni ngs woul d be defned as stated above and the 25-
year service l i mit would be refl ected.

I n-Service Death Benefits - woul d conti nue to equal the present val ue of the
reti rement benefit.

Other Features - HB 1 353 el i mi nated certai n addi ti onal features in SERS for A-5
members, i ncl udi ng 1 ) State Polic
e
Arbitration Award, 2) 40-year service
supplement, 3) age 70 actuari al equi val ent adjustments and 4) soci al security
i ntegrati on benefits for j udges who make additi onal contri buti ons.
Defined Contribution Plan Features

Defi ned Contri buti on Pay - DC pay is defi ned as compensati on that is not
cl assified as defi ned benefit pay, i . e. compensati on i n excess of the
Compensation Cap and al l compensati on once a member attai ns 25 years of
credited service.

Employee Contri buti ons - The empl oyee contri buti on rate is 7% of defined
contri buti on pay.
C An employee contri buti on rate of 1 % to the DC pl an wi l l al so be requi red
on DB pay. Therefore, the total empl oyee contri buti on rate wi l l equal 7%
on al l pay, al located between the DB and DC pl ans dependi ng on the
quadrant the member i s i n as shown i n the charts above.

Empl oyer Contri buti ons - The employer contri buti on i s 4% of defi ned contri buti on
pay.
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not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive this work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 9
C An employer contri buti on rate of 0. 5% to the DC pl an wi l l al so be made on
DB pay.
C For members who do not parti ci pate i n Soci al Security (i f State Pol i ce
oficers are i ncl uded) , there i s an additional 6% empl oyer contri buti on to
the DC pl an on al l pay, whi ch results i n a total empl oyer contri buti on to the
DC account that i s comprised of a 6. 5% contri buti on on DB pay and a
1 0% contri buti on on DC pay.

Retirement Ages - empl oyee bal ances may be taken upon termi nati on, al though
there may be tax consequences to the member for cash distri buti ons pri or to age
59%.

Vesti ng 3 years on empl oyer contri buti ons, i mmediate on employee


contri buti ons.

Anci l l ar Benefits - Bal ances wi l l be avai l abl e upon i n-service death or disabi l ity.
Hybri d DB Plan Fi nanci ng
Contribution Collars
HB 1 353 does not i ncl ude any adjustments to the contri buti on col l ars. The col l ar
i ncrement i s 4. 5% of pay.
Contributions as Percent of Payrll
Currentl y, PSERS and SERS are funded through payrol l contri buti ons. The actuari al
val uati ons determi ne the contri buti on rates, whi ch are then l i mited by the appl i cabl e
col l ars. Thi s fi nal contri buti on rate i s then appl ied to the payrol l of parti ci pati ng
employers and the resul ti ng amounts are contri buted to the systems' assets.
The following summarizes our understanding of the prvisions of HB 7ODO regarding the
determination of the employer contribution rates, the impact of the contribution collars
on the calculated rates, and the application of those rates to compensation for payment
of employer contributions to the Systems. We are uncerain if the HB 7ODO language is
consistent with our understanding and request that the HB 7ODO language be reviewed
by each of the systems to verif its application in practice if HB 7ODO is enacted. To the
extent that our understanding is not consistent with HB 7ODO, our cost prjections of HB
7ODO may need to be modified.
For SERS, empl oyer normal contri buti ons and benefits compl eti on pl an contri buti ons
are based on payrol l up to the Annual Compensation Li mit for the fi rst 25 years of
Thi s work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
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Actuari al Projecti ons of Governor's Proposal
May 23, 201 4
Page 1 0
service of A-5 members and total payrol l for other active members. The UAL
contri buti on rate i s based on total payrol l , i . e. DB pl us DC payrol l . Empl oyers woul d
contri bute the UAL rate based on total compensati on of A-5 members. Please note that
it i s our understandi ng that any reducti on to the fi nal contri buti on rate due to the
contri buti on col l ars woul d reduce the UAL rate appl i ed to DC payrol l i n excess of the
Annual Compensati on Li mit.
For PSERS, the employer normal rate i s determi ned on payrol l up to the Defi ned
Benefit Compensati on Li mit for the first 25 years of service for Cl ass T-G members.
Thi s rate i s then adj usted to be based on total compensation, i . e. DB pl us DC payrol l .
The UAL contri buti on rate i s al so based on total payrol l , i . e. DB pl us DC payrol l , and i s
added to the adj usted normal rate for purposes of determi ni ng the appl i cati on of the
contri buti on col l ars. The fi nal rate, reflecti ng the contributi on col l ars, coul d then be
payabl e by employers on total compensati on (i . e. DB Plus L payrol l ). Please note that
we bel ieve the l anguage in HB 1 353 coul d be i nterpreted such that the fi nal rate i s
appl ied to DB payrol l onl y and the UAL rate (without modification by the experience
adjustment factor or reflection of any contri buti on col l ars) is appl ied to DC payrol l .
The Premi um Assistance Contri bution Rate for PSERS i s determi ned on payrol l up to
the Defi ned Benefit Compensati on Li mi t for the first 25 years of service for Cl ass T-G
members. I f the pensi on contri buti on i s

based on total compensati on, consi derati on


could be gi ven to usi ng total compensation for determi ni ng the Premi um Assistance
Contri buti on Rate for purposes of si mpl icity.
Actuarial Methods
Pl ease note that the cost i mpact of i mpl ementi ng a new desi gn for future empl oyees
affects each system diferently due to the diferent actuari al methods empl oyed by the
systems i n determi ni ng the normal cost rate. Each system uti l izes the Entry Age
Normal cost method, but applies it differently. The normal cost rate represents the l ong
term average cost of the pl an as a percent of sal ary. I f thi s rate i s contributed each and
every year by members and/or empl oyers, pl an benefits woul d be funded upon
termi nati on of employment, i f al l actuari al assumpti ons were met.
Under the proposed hybrid pl an, employee contri buti ons are based upon DB pay, whi ch
is compensation up to the Defined Benefit Compensati on Li mit/Annual Compensati on
Li mit unti l 25 years of credited servi ce are accrued ( i . e. quadrant 1 i n the tabl es above) .
I ncreases in Fi nal Average Earni ngs occurri ng after the compl eti on of 25 years of
service are assumed to be ful l y accrued upon the completi on of 25 years of servi ce.
Therefore, whi l e the DB pl an benefit can i ncorporate DC pay past 25 years of service up
to the cap, the Entry Age normal cost rate i s determi ned as a percentage of total
projected DB pay onl y duri ng a member's career up to 25 years of service. No DC pay
was used i n devel opi ng the normal cost rate.
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefi t and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 2014
Page 1 1
PSERS
PSERS employs a more tradi ti onal method of Entry Age Normal , whi ch bases the
normal cost rate on the benefits bei ng earned by each member. Over ti me, the overal l
normal cost rate of the pl an wi l l migrate from the current benefits to the hybri d pl an
benefits. Note the overal l normal cost rate determi ned for the pl an i s weighted on DB
pay, whi ch i s total pay for members enteri ng the system pri or to the hybri d pl an efective
date and capped pay (to a maxi mum of 25 years) for T-G members. The overal l
employer normal contri buti on rate cannot be less than 0%.
SERS
SERS bases the normal cost rate on the benefits and demographics for new hi res i n the
general employee cl ass. Thus, the normal cost rate wi l l be based on the desi gn for
future empl oyees. Under the proposed hybri d pl an, the expected employer normal cost
rate i s very close to 0% (it cannot be less than 0%). Basi cal l y the current empl oyees'
future accrual s (that wi l l no l onger be funded vi a normal cost) are essenti al l y capital ized
as a l i abi l ity and funded vi a amortizati on. I n other words, al l future normal costs fr
current empl oyees are set to nearly $0 and i nstead would be converted to accrued
l i abi l ity, which woul d i ncrease the unfunded actuari al accrued l i abi l ity, with this i ncrease
i n the unfunded l i abi l ity to be funded through the amortizati on payment.
HB 1 353 speci fi es that thi s i ncrease i n the actuari al accrued l i abi l ity woul d be amorized
over 20 years and woul d be not be added to the contri buti on col l ars. This change wi l l
result i n a decl i ne i n the expected contri buti on rates at the end of the 20-year
amorizati on peri od. Any changes to the normal cost rate through the annual val uati on
process would be treated as an actuari al gai n/loss and amortized over a 30-year peri od.
Consi derati on shoul d be given to usi ng the 20-year period each year in the future due to
changes in the normal cost rate.
We recommend that consi derati on be gi ven by SERS and the System actuary to
modifyi ng the current method for determi ni ng the normal cost of SERS under a proposal
where the empl oyer normal cost rate for a new ti er of benefits i s nearly 0%. The
majority of the employees i n SERS wi l l conti nue to earn employer provided benefits
over the next decade. Based on the reasons discussed above we bel i eve it is more
appropri ate to fund these empl oyer provi ded benefits through the normal cost
cal cul ati on rather than through the amortization payment of the unfunded l i abi l ity.
Amorization Methods
The amortizati on period used for future pl an changes is 1 0 years. For PSERS, a level
percent of payrol l reflecti ng total payrol l (DB pl us DC payrol l ) method is used whereas
Thi s work product was prepared sol el y for PA Budget Office for the purposes described herei n and may
not be appropri ate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
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Actuari al Projecti ons of Governor's Proposal
May 23, 201 4
Page 1 2
SERS uses a level dol l ar approach. SERS al so uses total payrol l to convert the
amorti zati on amount to a percent of payrol l for determi ni ng the contri buti on rate.
Asset Valuation Method
For PSERS, HB 1 353 constrai ns the determi nati on of the actuari al val ue of assets to no
less than 70% and no more than 1 30% of market val ue. As of June 30, 201 3, the
actuari al val ue of assets i s approxi mately 1 1 7% of market val ue. Thi s provisi on wi l l not
al low the actuari al val ue to exceed the market value by more than 30%.
Actuarial Assumptions
Hybrid Plan
I n val ui ng the hybrid pl an for future employees, the demographi c assumpti ons related to
termi nati on, reti rement, death and disabi l ity used for Act 1 20 members were appl ied to
T-G/A-5 employees, with the fol l owi ng excepti ons:

For PSERS, rates of reti rement related to the subsi dized 55&25 early reti rement
benefit were assumed not to apply.

For SERS Hazardous Duty empl oyees (i f i ncl uded) and l egi slators, current Act
1 20 normal reti rement rates at ages 55 and later were assumed to conti nue to
apply to vested hybrid pl an members at the same ages.

For SERS State Pol i ce oficers (if i ncl uded) , members were assumed to behave
si mi lar to Hazardous Duty, with the exception of the mandatory reti rement at age
60 for State Police.

For SERS j udges, current Act 1 20 normal reti rement rates at ages 60 and later
were assumed to conti nue to appl y to vested hybrid pl an members at the same
ages.

Di sabi l i ty rates for SERS Hazardous Duty (i f i ncl uded) , l egi slators, and State
Pol ice oficers (i f i ncl uded) were assumed to appl y beyond age 55 (unti l age 60
when those rates cease for Act 1 20 general employees) .

For SERS Park Rangers and Capitol Pol i ce, the rates of withdrawal and early
retirement are extended beyond age 55 and completion of 20 years of serice
unti l normal retirement (age 65 el i gi bi l ity) to be consi stent with those used for
general empl oyees.

Members who termi nated employment afer 1 0 years of credited service and
pri or to 25 years of credited service were assumed to commence reti rement
benefits at age 65 (age 60 for State Pol i ce ofi cers, i f i ncl uded).
Modeling Assumptons
The esti mated projected contri buti on requi rements developed in thi s analysis are based
on a vari ety of actuarial assumpti ons.
Thi s work product was prepared solely for PA Budget Office for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to beneft and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Actuari al Projecti ons of Governor' s Proposal
May 23, 201 4
Page 1 3

The actual i nvestment return earned each val uati on year in the future is assumed to
equal the current assumpti on of 7. 5%. No change in the assumpti on has been
made duri ng the projecti on period. Val uati on year i s cal endar year for SERS and
fi scal year for PSERS. I n thi s analysi s, we have not made any adj ustment for
returns earned afer the respective 201 2 val uati on dates.

The current payrol l growth assumpti on of 3. 5% is used for amortizati on purposes for
PSERS. I t i s desi gned to produce an amorization rate that would remai n level as a
percentage of payrol l assumi ng payrol l i ncreases 3. 5% per year. SERS does not
use a payrol l growth assumpti on as the amortization amounts devel oped are based
on a level dol l ar approach. A level dol l ar approach wi l l result in a decreasi ng
amorti zati on rate as a percent of pay, assumi ng the enti re seri es of amortizati on
payments are made as schedul ed. There are advantages and di sadvantages to
usi ng ei ther approach. Projected payrol l is based on the actuari al assumpti ons and
the popul ati on projecti ons descri bed bel ow.

For SERS, new entrants are added i n future years as requi red to mai ntai n the active
popul ati on count at the current level of 1 06, 048 based on the 201 2 actuari al
val uati on. I n additi on, the propori on of the total popul ati on represented by the
di fferent groups fr SERS (general empl oyees (79. 1 %), hazardous duty (1 5. 4%),
legi sl ators (0. 2%), judges ( 1 . 0%), state pol i ce (4. 1 %) and park rangers (0. 2%)) are
hel d constant in each projection year.

For PSERS, new entrants are added in future years as requi red to mai ntai n the
active popul ati on count based on the PSERS Board Presentati on prel i mi nary 201 3
val uati on results of 267, 428. I n additi on, the proporti on of the total popul ati on
represented by ful l-time (83. 2%) and part-ti me empl oyees ( 1 6. 8%) i s hel d constant
i n each projection year. These percentages are based on the number of part-ti me
employees i ndi cated by the 201 2 val uati on and are hel d constant for the 201 3
val uati on. The decrease i n the popul ati on between the 201 2 and 201 3 val uati ons
was assumed to be appl ied to the number of ful lti me empl oyees onl y.

Age and sal ar distri buti ons for new entrants in future years are based on those
members who entered the system withi n one year pri or to the respective 201 2
val uati on dates. Compositi on of the new entrant group by employee type i n each
year i s adj usted to mai ntai n the propori on of the vari ous groups noted above i n the
active popul ati on.

Act 1 20 provi des new members a choi ce upon hi re to pay a l arger contri buti on i n
order t o el ect the ti er wi th the hi gher multi pl i er (T-F for PSERS and A-4 for SERS)
versus the default opti on (T-E for PSERS and A-3 for SERS). For these projecti ons,
al l new empl oyees were assumed to elect the default opti on. Approximately 1 0% of
el i gi bl e members have el ected these hi gher multi pl i er ti ers. We bel ieve that
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive this work.
Actuari al Projecti ons of Governor's Proposal
May 23, 2014
Page 1 4
assumi ng a porti on of future empl oyees el ecti ng to pay a l arger a contributi on under
the hi gher multi pl ier ti er woul d have a de mi ni mus i mpact on the projected net
empl oyer contri buti on rates.

Sal aries were assumed to i ncrease at the respective val uati on sal ary scales for
conti nui ng actives. New entrant sal aries were assumed to i ncrease at the wage
i nflati on rate i ndicated in the actuari al val uati on (3. 5% for PSERS and 3. 05% for
SERS) . For PSERS, an adjustment was made to compensati on to accommodate
the diference in Mi l l i man' s projected payrol l and the projected payrol l contai ned i n
the PSERS Board Presentation for the fiscal year endi ng June 30, 201 5.

An adj ustment of $600 mi l l i on of accrued l i abi l ity was added to Mi l l i man' s updated
projected June 30, 201 3 val uati on results to accommodate the di ferences i n
Mi l l i man' s i niti al projected accrued l i abi l ity and the accrued l i abi l ity contai ned i n the
PSERS Board Presentati on.

Future pl an experi ence with respect to termi nati ons, reti rement, mortal ity, overti me,
etc. i s assumed to exactly equal the actuari al assumpti ons uti l i zed i n the December
31 , 201 2 Actuari al Val uation for SERS and June 30, 201 2 Actuari al Val uati on for
PSERS, unl ess noted otheri se. Except as noted herei n, the pl an provi si ons used
i n the cal culations are those summarized i n the respective 201 2 actuari al val uati on
reports and are assumed not to change duri ng the projection period.
SFP:GDB:mlm\PSB01-80
g:\corr14\psb\lmemo_HybridProposal_05231 4. doc
Thi s work product was prepared solely for PA Budget Ofice for the purposes described herei n and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Refor
Baseline
HB 1 353, PN 21 52
Pennsylvania Public School Empl oyees' Retirement System
Results Summar ($ amounts shown in milions)
bX0CM0U00fBru00htf0ut0 0Bm bX0Ct00 bCh00 StfCt0tf0u00h 0Bm
Fiscal Year Fiscal Years
201 5 - 2024 2025 - 2034 2035 - 2044 201 5 - 204 2015 - 2024 2025 - 2034 2035 - 204 201 5 - 204
25,583.1 37,979.3 1 9,631 .5 83,1 93.9 1 8,900.5 25,855.4 1 1 ,41 3.4 56,1 69.3
25,264.1 36,555.3 1 7,221 .8 79,041.2 1 8,622.1 24,800.2 9,657.6 53,079.9
(319.0) (1 ,424.0) (2,409,7) (4,1 52.7) (278.4) (1 ,055.2) (1,755.8} (3,089.4)
Page 1 5
bX0CM0bSt0m 0tf0u00 0BM
Fiscal Years
201 5 - 2024 2025 - 2034 2035 - 2044 201 5 - 204
44,483.6 63,834.7 31 ,044.9 1 39,363.2
43,886.2 61 ,355.5 26,879.4 1 32, 121 . 1
(597.4) (2,479.2) (4, 1 65.5} (7,242. 1 )
This exhibit i s an attachment to a May 23, 201 4 memorandum. Please refer to that letter fr more infrmation, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Mi lliman
does not intend to beneft and assumes no duty or liability to other parties who receive this work.

Valuation Fiscal Prel i mi nary


Year Year DB Rate
7/1/201 3 201 5 25.69%
7/1 /2014 201 6 26.99%
7/1 /201 5 201 7 28. 1 0%
7/1 /201 6 201 8 29.03%
7/1/201 7 201 9 30.04%
7/1 /201 8 2020 30.80%
7/1/201 9 2021 30.70%
7/1 /2020 2022 30. 67%
7/1/2021 2023 30.83%
7/1 /2022 2024 30.87%
7/1 /2023 2025 30.88%
7/1 /2024 2026 30.89%
7/1/2025 2027 30.89%
7/1 /2026 2028 30.88%
7/1 /2027 2029 30.88%
7/1 /2028 2030 30. 87%
7/1 /2029 2031 30. 87%
7/1 /2030 2032 30. 87%
7/1/2031 2033 30.87%
7/1 /2032 2034 30.87%
7/1 /2033 2035 30. 88%
7/1 /2034 2036 1 7. 57%
7/1 /2035 2037 1 4. 1 3%
7/1 /2036 2038 1 2. 36%
7/1 /2037 2039 1 0. 89%
7/1/2038 2040 9.24%
7/1/2039 2041 7. 84%
7/1 /2040 2042 6.62%
7/1 /2041 2043 5. 30%
7/1 /2042 2044 4.29%
Pennsylvani a Publ i c School Employees' Retirement System
Attachment to May 23, 201 4 memorandum.
Baseline Projection Results
Contribution Rates Contribution Dol l ars
Bl ended School ($ i n Mi l l ions)
Collared Final DB DB and DC Di stricts General School Total
Rate Rate Rate Rate Fund Di stricts System
20.50% 20.50% 20.50% 20. 50% 1 , 491 . 7 1 , 272.7 2, 764.4
25. 00% 25.00% 25.00% 25. 00% 1 , 890. 5 1 , 571 .8 3,462. 3
n/a 28. 1 0% 28. 1 0% 28. 1 0% 2, 237.3 1 , 763.8 4, 001 . 1
n/a 29. 03% 29. 03% 29.03% 2,440.0 1 , 81 4. 1 4, 254. 1
n/a 30. 04% 30. 04% 30.04% 2, 607. 9 1 , 926.3 4, 534.2
n/a 30. 80% 30. 80% 30.80% 2, 771 .7 2, 01 9. 8 4, 791 . 5
n/a 30.70% 30. 70% 30.70% 2, 879. 8 2, 043. 3 4, 923. 1
n/a 30. 67% 30.67% 30.67% 2, 974.4 2, 096.9 5, 071 .3
n/a 30.83% 30.83% 30.83% 3,087.9 2, 1 68. 0 5, 255.9
n/a 30.87% 30.87% 30.87% 3, 201 . 9 2, 223. 8 5, 425.7
n/a 30.88% 30.88% 30.88% 3, 31 3. 9 2, 281 .2 5, 595. 1
n/a 30.89% 30.89% 30.89% 3,427.0 2, 338.6 5, 765.6
n/a 30.89% 30.89% 30.89% 3, 532.8 2, 404. 0 5, 936.8
n/a 30.88% 30.88% 30.88% 3, 635.7 2,472.7 6, 1 08.4
n/a 30.88% 30.88% 30.88% 3,740.6 2, 543. 8 6, 284.4
n/a 30.87% 30. 87% 30:87% 3, 846. 1 2, 614. 1 6,460.2
n/a 30.87% 30. 87% 30.87% 3, 953.7 2, 687. 3 6, 641 . 0
n/a 30. 87% 30.87% 30.87% 4,063.6 2, 761 . 5 6, 825. 1
n/a 30.87% 30. 87% 30.87% 4, 1 75. 8 2, 837. 5 7, 01 3. 3
n/a 30.87% 30.87% 30.87% 4, 290. 1 2, 91 4. 7 7, 204.8
n/a 30.88% 30.88% 30.88% 4,408.5 2, 995. 9 7,404.4
n/a 1 7. 57% 1 7. 57% 1 7.57% 3, 1 23. 0 1 , 205. 9 4, 328. 9
n/a 14. 1 3% 14. 1 3% 1 4. 1 3% 2, 275. 3 1 , 303. 0 3, 578. 3
n/a 12. 36% 12. 36% 1 2. 36% 1 , 992.2 1 , 225.5 3, 21 7. 7
n/a 1 0. 89% 1 0. 89% 1 0.89% 1 , 800.5 1 , 1 1 3. 9 2, 91 4.4
n/a 9. 24% 9. 24% 9. 24% 1 , 588.7 953. 0 2, 541 . 7
n/a 7. 84% 7. 84% 7.84% 1 , 385.8 831 . 5 2, 21 7. 3
n/a 6.62% 6.62% 6.62% 1 , 205.6 721 . 0 1 , 926.6
n/a 5.30% 5.30% 5.30% 1 , 01 1 . 1 577.9 1 , 589.0
n/a 4.29% 4.29% 4.29% 840.8 485. 8 1 , 326.6
(Based on Actuarial Value)
Unfunded Funded
Li abi l ity Ratio
32,470. 1 63.90%
35, 399. 0 61 .66%
37, 975. 0 59. 91%
40, 1 97. 3 58.61 %
42,554.4 57.26%
44,375.4 56.52%
44, 1 92. 3 57.75%
43,904.8 59.05%
43, 950.6 60.00%
43, 550.2 61 . 32%
42, 878.3 62. 83%
41 , 934. 7 64.52%
40, 740. 1 66. 35%
39,248.9 68. 34%
37,447. 0 70.50%
35, 323. 1 72. 81 %
32, 858. 9 75. 27%
30,026. 1 77.90%
26,791 . 6 80.70%
23, 1 23. 9 83.68%
1 8, 986. 9 86.87%
1 4,346.0 90.27%
9, 1 56. 7 93. 91 %
6, 776.4 95. 58%
5, 003. 3 96. 79%
3, 480.7 97. 81 %
2 , 1 65.6 98. 66%
1 , 1 46. 0 99. 30%
396.0 99.76%
(95.0) 1 00. 06%
This work product was prepared solely for PA Budget Office for purposes described herein and may not be appropriate for other purposes.
intend to benefit and assumes no duty or l i abil ity to other paries who receive this work.
Page 1 6
Mi l l i man does not
Pennsylvani a Publ i c School Employees' Retirement System
Atachment to May 23, 201 4 memorandum.
I nput Summary for: HB 1 353
Hybrid Pl an Desi gn Hybri d I ndex 1 %
Collar I ncrements N
201 6 Fresh Star Opti ons
Amorization Method
Amorization Period
N
None
None
Projection Results of Proposed Plan Design Based on I nput Summary
Contribution Rates Contribution Dol l ars (Based on Actuarial Value)
Blended School ($ in Millions)
Valuation Fiscal Prel i mi nary Collared Fi nal DB DB and DC Di stricts General School Total Unfunded Funded
Year Year DB Rate Rate Rate Rate Rate Fund Districts System Li abi l ity Ratio
7/1 /201 3 201 5 25. 69% 20. 50% 20. 50% 20. 50% 20. 50% 1 , 491 . 7 1 , 272.7 2, 764.4 32, 470.4 63. 90%
7/1 /201 4 201 6 26.97% 25. 00% 25. 00% 25. 03% 25. 03% 1 , 892.7 1 , 573. 6 3, 466. 3 35, 400. 0 61 .66%
7/1/201 5 201 7 28.06% n/a 28.06% 28. 1 2% 28. 1 2% 2, 240. 0 1 , 764. 1 4, 004. 1 37, 976.8 59. 91 %
7/1 /201 6 201 8 28. 79% n/a 28. 79% 28.88% 28.88% 2, 432.4 1 , 800. 2 4, 232. 6 40, 1 70. 0 58. 63%
7/1 /201 7 201 9 29. 61 % n/a 29. 61 % 29.74% 29. 74% 2, 586. 1 1 , 902. 5 4, 488.6 42, 480. 3 57. 30%
7/1 /201 8 2020 30. 20% n/a 30.20% 30. 36% 30. 36% 2, 736.6 1 , 987. 0 4, 723. 6 44, 260. 2 56. 55%
7/1 /201 9 2021 29. 94% n/a 29. 94% 30. 1 4% 30. 1 4% 2, 831 . 8 2, 00 1 . 8 4, 833. 6 44, 043. 0 57. 76%
7/1/2020 2022 29. 77% n/a 29. 77% 30. 0 1 % 30. 01 % 2, 91 4. 9 2, 048. 1 4, 963. 0 43, 727. 8 59. 01 %
7/1 /2021 2023 29. 80% n/a 29. 80% 30. 09% 30. 09% 3, 01 7. 7 2, 1 1 2. 3 5, 1 30. 0 43, 752. 6 59. 90%
7/1 /2022 2024 29. 70% n/a 29. 70% 30. 04% 30. 04% 3, 1 20. 2 2, 1 59. 8 5, 280. 0 43, 335. 5 61 . 1 4%
7/1 /2023 2025 29. 59% n/a 29. 59% 29. 98% 29.98% 3, 221 . 7 2, 21 1 . 0 5, 432. 7 42, 651 . 3 62.56%
7/1 /2024 2026 29. 47% n/a 29.47% 29.92% 29. 92% 3, 324. 0 2, 260. 7 5, 584.7 41 , 703. 1 64. 1 6%
7/1 /2025 2027 29. 33% n/a 29. 33% 29.84% 29.84% 3,41 8. 0 2, 31 7. 6 5, 735. 6 40, 483. 3 65. 91 %
7/1 /2026 2028 29. 1 9% n/a 29. 1 9% 29.77% 29. 77% 3, 509. 7 2, 378. 9 5, 888.6 38, 971 .4 67.82%
7/1 /2027 2029 29. 06% n/a 29.06% 29. 71 % 29. 71 % 3, 603. 6 2,442.2 6, 045. 8 37, 1 55. 2 69.88%
7/1 /2028 2030 28. 92% n/a 28.92% 29.64% 29.64% 3, 697. 9 2, 504.6 6, 202. 5 35, 021 .4 72. 1 1 %
7/1 /2029 2031 28. 79% n/a 28. 79% 29. 58% 29. 58% 3, 794. 5 2, 570. 0 6, 364.5 32, 551 . 7 74. 50%
7/1/2030 2032 28.66% n/a 28.66% 29. 53% 29. 53% 3, 893. 5 2,636. 4 6, 529. 9 29,71 8. 0 77. 07%
7/1 /2031 2033 28. 52% n/a 28. 52% 29.48% 29.48% 3, 993. 7 2, 703. 2 6, 696. 9 26,486.5 79. 84%
7/1 /2032 2034 28.41 % n/a 28.41 % 29.45% 29.45% 4, 098. 7 2, 775. 6 6, 874.3 22, 825. 1 82. 84%
7/1/2033 2035 28. 28% n/a 28.28% 29.41 % 29. 41 % 4, 205. 7 2, 846.6 7, 052. 3 1 8, 700. 2 86. 08%
7/1/2034 2036 1 4. 85% n/a 1 4. 85% 1 6. 07% 1 6. 07% 2, 909. 6 1 , 050. 4 3, 960. 0 1 4, 069.6 89. 62%
7/1/2035 2037 1 1 . 30% n/a 1 1 . 30% 1 2.61 % 1 2.61 % 2, 053. 0 1 , 1 41 . 5 3, 1 94. 5 8, 896. 5 93.48%
7/1 /2036 2038 9. 40% n/a 9. 40% 1 0. 81 % 1 0. 81 % 1 , 759. 3 1 , 054.8 2, 81 4. 1 6, 533. 0 95.24%
7/1 /2037 2039 7. 80% n/a 7. 80% 9. 31 % 9. 31 % 1 , 555. 9 934.8 2, 490. 7 4, 775. 7 96. 53%
7/1 /2038 2040 6. 02% n/a 6. 02% 7.66% 7.66% 1 , 337. 4 768.7 2, 1 06. 1 3, 272. 8 97. 63%
7/1/2039 2041 4.47% n/a 4.47% 6. 23% 6. 23% 1 , 1 24.8 638.2 1 , 763. 0 1 , 981 .7 98. 56%
7/1 /2040 2042 3. 1 8% n/a 3. 1 8% 5. 07% 5. 07% 942.6 532. 0 1 , 474.6 990. 9 99. 28%
7/1 /2041 2043 1 . 80% n/a 1 . 80% 3. 80% 3. 80% 750. 4 390. 4 1 , 1 40. 8 252. 9 99. 81 %
7/1 /2042 2044 0.72% n/a 0. 74% 2.85% 2.85% 583. 1 300. 2 883. 3 (250. 0) 1 00. 1 9%
Thi s work product was prepared solely for PA Budget Ofice for purposes described herein and may not be appropri ate for other purposes.
intend to benefit and assumes no duty or l i abi l ity to other paries who receive this work.
Page 1 7
Mi l l i man does not
Valuation Fiscal
Year Year
7/1/201 3 201 5
7/1 /201 4 201 6
7/1/201 5 201 7
7/1 /201 6 201 8
7/1 /201 7 201 9
7/1 /201 8 2020
7/1 /201 9 2021
7/1/2020 2022
7/1/2021 2023
7/1 /2022 2024
7/1 /2023 2025
7/1 /2024 2026
7/1 /2025 2027
7/1 /2026 2028
7/1 /2027 2029
7/1 /2028 2030
7/1 /2029 2031
7/1/2030 2032
7/1 /2031 2033
7/1/2032 2034
7/1/2033 2035
7/1/2034 2036
7/1/2035 2037
7/1/2036 2038
7/1 /2037 2039
7/1/2038 2040
7/1/2039 2041
7/1 /2040 2042
7/1/2041 2043
7/1 /2042 2044
Pennsylvani a Publ i c School Employees' Retirement System
Attachment to May 23, 2014 memorandum.
Costs/(Savi ngs) Summary
l
GF SD Total
5 Years (FYs 201 5 - 201 9) (24.5) (35.6) (60. 1 )
Next 5 Years (FYs 2020 - 2024) (294.5) (242.8) (537. 3)
Next 1 0 Years (FY s 2025 - 2034) ( 1 ,424. 0) ( 1 , 055.2) (2, 479.2)
Next 1 0 Years (FYs 2035 - 2044) (2. 409. 7) (, 755. 8) (4, 1 65. 5)
30-Year Totals (4,1 52.7) (3,089.4) (7,242.1 )
Costs/(Savings) - $ i n Mill ions
Contribution Dollars Cumul ative Dol l ars
General School Total General School TOtal
Fund Districts System Fund Districts S_stOm
2. 2 1 . 8 4. 0 2. 2 1 . 8 4. 0
2. 7 0. 3 3. 0 4. 9 2. 1 7. 0
(7. 6) ( 1 3. 9) (21 . 5) (2. 7) (1 1 . 8) ( 1 4. 5)
(21 .8) (23.8) (45.6) (24.5) (35.6) (60. 1 )
(35. 1 ) (32.8) (67.9) (59. 6) (68.4) ( 1 28. 0)
(48.0) (41 . 5) (89.5) ( 1 07,6) ( 1 09. 9) (21 7. 5)
(59. 5) (48.8) ( 1 08. 3) ( 1 67. 1 ) (1 58.7) (325. 8)
(70.2) (55. 7) ( 1 25. 9) (237.3) (21 4.4) (451 . 7)
(81 . 7) (64.0) ( 1 45. 7) (31 9. 0) (278.4) (597.4)
(92.2) (70.2) ( 1 62.4) (41 1 . 2) (348.6) (759.8)
( 1 03. 0) (77. 9) ( 1 80. 9) (51 4.2) (426. 5) (940.7)
( 1 1 4.8) (86.4) (201 .2) (629.0) ( 51 2. 9) ( 1 , 1 41 . 9)
( 1 26. 0) (93. 8) (21 9. 8) (755. 0) (606.7) ( 1 , 361 .7)
( 1 37. 0) ( 1 01 .6) (236.6) (892.0) (708.3) ( 1 , 600. 3)
( 1 48.2) ( 1 09. 5) (257.7) ( 1 , 040.2) (81 7.8) ( 1 , 858. 0)
( 1 59. 2) ( 1 1 7. 3) (276.5) ( 1 , 1 99.4) (935. 1 ) (2, 1 34. 5)
(1 70. 1 ) ( 1 25. 1 ) (295. 2) ( 1 , 369. 5) ( 1 , 060.2) (2, 429.7)
( 1 82. 1 ) ( 1 34. 3) (31 6.4) ( 1 , 551 .6) (1 , 1 94.5) (2, 746. 1 )
( 1 91 .4) ( 1 39. 1 ) (330. 5) ( 1 ,743.0) { 1 , 333.6) (3, 076.6)
(202.8) ( 1 49. 3) (352. 1 ) ( 1 , 945.8) ( 1 ,482.9) (3,428.7)
(21 3.4) ( 1 55. 5) (368. 9) (2, 1 59.2) ( 1 ,638.4) (3, 797.6)
(222. 3) ( 1 61 . 5) (383. 8) {2, 381 . 5) ( 1 , 799. 9) (4, 1 81 .4)
(232. 9) ( 1 70. 7) (403.6) (2, 61 4.4) { 1 , 970.6) (4, 585. 0)
(244.6) ( 1 79. 1 ) (423. 7) (2, 859. 0) (2, 1 49. 7) (5, 008. 7)
(251 . 3) ( 1 84. 3) (435.6) (3, 1 1 0. 3) {2, 334. 0) (5, 444.3)
(261 . 0) ( 1 93. 3) (454. 3) (3, 371 . 3) (2, 527. 3) (5, 898. 6)
(263. 0) ( 1 89. 0) (452.0) {3, 634. 3) (2, 71 6. 3) (6, 350.6)
(260.7) ( 1 87.5) (448.2) (3, 895. 0) (2, 903. 8) (6, 798.8)
(257.7) ( 1 85.6) (443. 3) {4, 1 52.7) {3, 089.4) (7,242. 1 )
Page 1 8
Thi s work product was prepared solely for PA Budget Ofice for purposes described herein and may not be appropriate for other purposes. Mi l l i man does not
intend to benefit and assumes no duty or l i abi l ity to other parties who receive thi s work.
Reform
Baseline
HB 1 353, A0691 7
HB 1 353, A07080 (exclude State Police)
HB 1 353, (exclude State Police
Hazrdous Du)
Pennsylvani a State Empl oyees' Reti rement System
Results Summar ($ amounts shown in mi ions)
Page 1 9
Expected General Fund Contribution Dollar Expected System Contribution Dollar
Fiscal Years Fi scal Years
201 5 - 2024 2025 - 2034 2035 - 2044 ' 201 5 - 2044 201 5 - 2024 2025 - 2034 2035 - 2044 201 5 - 2044
8,227.9 9,51 7.7 8, 71 1 .4 26, 457-0 1 9,874.7 22,989.5 21 ,041 .9 63,906. 1
8,075.8 8,81 3.9 6, 31 0.0 231 b9. 1 9,506.0 21 ,289.5 1 5,240.9 56,036.4
(1 52. 1 ) (703.8) (2,401 .4)
|3, 257. 3) (368.7) (1 ,700.0) (5,801 .0) (7,869.7)
8,090.7 8, 91 2.2 6,457.9 2d4O0.8 1 9,542.2 21 ,527.0 1 5,598.9 56,668. 1
(1 37.2) (605.5) (2,253.5) [2, 000.2j (332.5) ( 1 ,462.5) (5,443.0) (7,238.0)
8, 1 48.8 9, 147.7 6, 866.0 24, 1 62.5 1 9,682.5 22,095.9 1 6,585.0 58,363.4
(79. 1 ) (370.0) ( 1
,
84
5.4) [2,294.5) (1 92.2) (893.6) (4,456.9) (5,542.7)
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that l etter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropri ate to use for other purposes. Mi lliman
does not intend to beneft and assumes no duty or liability to other paries who receive this work.
Valuation Fiscal Preli mi nar
Year Year DB Rate
1 2/31 /201 3 201 5 30.93%
1 2/31 /201 4 2016 31 . 31 %
1 2/31 /201 5 201 7 31 .52%
1 2/31 /201 6 201 8 30.93%
1 2/31 /201 7 201 9 30.26%
1 2/31 /201 8 2020 29.49%
1 2/31 /201 9 2021 28.74%
1 2/31 /2020 2022 28. 02%
1 2/31 /2021 2023 27.32%
1 2/31 /2022 2024 26.65%
1 2/31/2023 2025 26.00%
1 2/31 /2024 2026 25. 38%
1 2/31 /2025 2027 24.79%
1 2/31 /2026 2028 24.20%
1 2/31 /2027 2029 23.64%
1 2/31 /2028 2030 23.09%
1 2/31 /2029 2031 22.56%
1 2/31 /2030 2032 22.05%
1 2/31 /2031 2033 21 .57%
1 2/31 /2032 2034 21 . 1 0%
1 2/31/2033 2035 20.64%
1 2/31 /2034 2036 20.20%
1 2/31 /2035 2037 1 9.76%
1 2/31 /2036 2038 1 9.34%
1 2/31 /2037 2039 1 8.94%
1 2/31 /2038 2040 1 8.56%
1 2/31 /2039 2041 1 4.82%
1 2/31 /2040 2042 1 1 .98%
1 2/31 /2041 2043 8. 88%
1 2/31 /2042 2044 6.93%
Pennsylvania State Employees' Retirement System
Attachment to May 23, 2014 memorandum.
Basel i ne Projection Results
Contribution Rates Contribution Dollars (Based on Actuarial Value)
Blended ($ in Mi llions)
Collared Fi nal DB DB and DC General Total Unfunded Funded
Rate Rate Rate Fund System Liability Ratio
20. 50% 20. 50% 20.50% 524.2 1 , 266. 3 1 8,442. 8 58. 1 8%
25.00% 25. 00% 25.00% 660. 5 1 , 595. 5 1 9, 1 37.6 57.61 %
29. 50% 29.50% 29.50% 804.8 1 , 944. 1 1 9,697.4 57.35%
n/a 30.93% 30.93% 870.7 2, 1 03. 2 1 9, 608.4 58.46%
n/a 30.26% 30.26% 879.3 2, 1 23. 8 1 9,427. 1 59.70%
n/a 29.49% 29.49% 885. 1 2, 1 38. 0 1 9, 1 44. 9 61 .08%
n/a 28.74% 28.74% 891 . 1 2, 1 52.4 1 8, 833. 5 62.46%
n/a 28. 02% 28.02% 897.5 2, 1 67. 9 1 8, 501 . 9 63. 83%
n/a 27.32% 27.32% 904.0 2, 1 83.7 1 8, 1 40. 7 65. 1 9%
n/a 26.65% 26.65% 91 0. 7 2, 1 99. 8 1 7, 750.9 66.56%
n/a 26.00% 26.00% 91 7. 4 2, 21 6. 0 1 7, 328.4 67.93%
n/a 25.38% 25.38% 924.5 2,233. 1 1 6, 875. 0 69. 32%
n/a 24.79% 24.79% 932. 1 2, 251 . 5 1 6, 387.4 70.72%
n/a 24.20% 24.20% 939.3 2, 268. 9 1 5, 852.4 72. 1 6%
n/a 23.64% 23.64% 947. 1 2, 287. 6 1 5, 278. 3 73.63%
n/a 23.09% 23. 09% 954.7 2, 306. 1 1 4, 660.9 75. 1 3%
n/a 22. 56% 22.56% 962.8 2, 325. 5 1 3, 992.4 76.67%
n/a 22.05% 22.05% 971 . 0 2, 345. 4 1 3, 271 . 9 78.26%
n/a 21 .57% 21 .57% 979.9 2, 366. 8 1 2,497. 1 79.89%
n/a 21 . 1 0% 21 . 1 0% 988.9 2, 388. 6 1 1 , 665.6 81 .56%
n/a 20. 64% 20.64% 998. 0 2, 41 0. 5 1 0,762.7 83.29%
n/a 20. 20% 20.20% 1 , 007.7 2,434.0 9, 795. 5 85. 08%
n/a 1 9.76% 1 9.76% 1 , 01 7. 1 2,456. 8 8, 745. 9 86.93%
n/a 1 9.34% 1 9. 34% 1 , 027.0 2,480.6 7, 61 7. 7 88. 84%
n/a 1 8.94% 1 8. 94% 1 , 037.4 2, 505. 9 6, 404. 2 90. 80%
n/a 1 8. 56% 1 8.56% 1 , 048.6 2, 532. 8 5, 098.4 92. 83%
n/a 1 4.82% 1 4. 82% 863.5 2, 085. 7 3, 695. 6 94.91 %
n/a 1 1 .98% 1 1 .98% 71 9. 7 1 , 738.4 2,432.9 96.73%
n/a 8. 88% 8. 88% 550.0 1 , 328. 5 1 , 51 3. 8 98. 01 %
n/a 6. 93% 6. 93% 442.4 1 , 068.7 948. 1 98.78%
Thi s work product was prepared solely for PA Budget Ofce for purposes described herei n and may not be appropriate for other purposes.
beneft and assumes no duty or l i abi l ity to other paries who receive this work.
Page 20
Mi l l i man does not intend to
Pennsylvania State Employees' Retirement System
Page 21
Attachment t o May 23, 2014 memorandum.
I nput Summar for: HB 1 353 201 6 Fresh Star Ogtions N
Hybrid Plan Design Hybrid 1 % Index Amorization Method None
Collar I ncrements N Amorization Period None
Projection Results of Proposed Plan Design Based on I nput Summary
Contribution Rates Contribution Dollars (Based on Actuarial Value)
Blended ($ in Millions)
Valuation Fiscal Prel i mi nar Collared Fi nal DB DB and DC General Total Unfunded Funded
Year Year DB Rate Rate Rate Rate Fund System Liability Ratio
1 2/31 /201 3 201 5 30. 86% 20.50% 20.50% 20. 52% 525. 0 1 , 268.3 21 ,484.6 54.43%
1 2/31 /201 4 201 6 31 .32% 25.00% 25.00% 25. 05% 662.7 1 ,600.7 22, 273. 3 53. 87%
1 2/31 /201 5 201 7 3 1 . 31 % 29.50% 29.50% 29.59% 808.7 1 , 953. 1 22,701 .2 53. 85%
1 2/31 /201 6 201 8 30. 51 % n/a 30. 51 % 30.65% 864.6 2, 088. 3 22, 453.6 55. 1 4%
1 2/31 /201 7 201 9 29.63% n/a 29.63% 29.82% 868.7 2, 098.3 22, 1 20. 1 56.53%
1 2/31 /201 8 2020 28.61 % n/a 28.61 % 28.86% 868.8 2, 098.4 21 ,629.4 58. 1 0%
1 2/31 /201 9 2021 27.61 % n/a 27.61 % 27.92% 868.7 2, 098. 1 21 , 1 1 5.2 59.66%
1 2/31 /2020 2022 26.65% n/a 26.65% 27. 03% 869. 1 2, 099, 1 20, 560. 3 61 . 21 %
1 2/31 /2021 2023 25. 71 % n/a 25.71 % 26. 1 6% 869.4 4, 1 00. 0 1 9, 984.6 62. 73%
1 2/31 /2022 2024 24.81 % n/a 24. 81 % 25.34% 870. 1 2, 1 0 1 .7 1 9, 370. 6 64.26%
1 2/31 /2023 2025 23. 95% n/a 23.95% 24.57% 871. 3 2, 1 04.8 1 8, 723.4 65. 79%
1 2/31 /2024 2026 23. 1 2% n/a 23. 1 2% 23. 83% 872.8 2, 1 08. 2 1 8, 033. 1 67. 34%
1 2/31 /2025 2027 22.32% n/a 22.32% 23. 1 2% 874.6 2, 1 1 2.4 1 7, 295.9 68. 91 %
1 2/31 /2026 2028 21 . 53% n/a 21 . 53% 22.43% 876. 1 2, 1 1 6.2 1 6, 51 2. 0 70. 52%
1 2/31 /2027 2029 20. 78% n/a 20.78% 21 .78% 878.4 2, 1 21 .7 1 5,676.2 72. 1 7%
1 2/31 /2028 2030 20. 06% n/a 20.06% 21 . 1 6% 881 .2 2, 1 28. 5 1 4,782.7 73. 88%
1 2/31 /2029 2031 1 9.35% n/a 1 9. 35% 20.56% 884.0 2, 1 35. 2 1 3, 833. 8 75.65%
1 2/31 /2030 2032 1 8. 68% n/a ,1 8. 68% 20.00% 887.5 2, 1 43. 7 1 2, 804. 1 77.52%
1 2/31 /2031 2033 1 8. 05% n/a 1 8. 05% 1 9.47% 891 . 7 2, 1 53. 8 1 1 , 689. 8 79.50%
1 2/31 /2032 2034 1 7.44% n/a 1 7.44% 1 8.97% 896.3 2, 1 65. 0 1 0,497.9 81 .59%
1 2/31 /2033 2035 1 4. 31 % n/a 1 4. 31 % 1 5.94% 777.4 1 , 877.7 9, 222.0 83. 8 1 %
1 2/31 /2034 2036 1 3.72% n/a 1 3.72% 1 5.45% 777.8 1 , 878. 7 8, 01 2. 0 85.91 %
1 2/31 /2035 2037 1 3.24% n/a 1 3.24% 1 5. 08% 783. 3 1 , 891 . 9 6, 878. 9 87. 87%
1 2/31 /2036 2038 1 2. 80% n/a 1 2. 80% 1 4.74% 790.2 1 , 908. 7 5, 673. 3 89. 95%
1 2/31 /2037 2039 1 2. 36% n/a 1 2.36% 1 4.40% 796.7 1 , 924. 5 4, 382.3 92.20%
1 2/31 /2038 2040 1 1 .94% n/a 1 1 .94% 1 4. 1 0% 804. 8 1 , 943.7 2, 999. 1 94.63%
1 2/31 /2039 2041 8. 20% n/a 8.20% 1 0.48% 61 7.4 1 , 491 .3 1 , 51 7. 3 97.27%
1 2/31 /2040 2042 5. 36% n/a 5. 36% 7.76% 472.0 1 , 1 40. 0 1 75. 0 99.68%
1 2/31 /2041 2043 2.27% n/a 2.27% 4.79% 300. 7 726. 3 (824.8) 1 0 1 . 51 %
1 2/31 /2042 2044 0. 30% n/a 0. 30% 2. 93% 1 89.7 458. 1 (1 ,476.3) 1 02.74%
Thi s work product was prepared solely for PA Budget Ofice for purposes described herein and may not be appropriate for other purposes. Mi l l i man does not intend to
benefit and assumes no duty or l i abi lity to other paries who receive this work.
Valuation Fiscal
Year Year
1 2/31 /201 3 201 5
1 2/31 /201 4 201 6
1 2/31 /201 5 2017
1 2/31 1201 6 201 8
1 2/31 /201 7 201 9
1 2/31 /201 8 2020
1 2/31 /201 9 2021
1 2/31 /2020 2022
1 2/31 /2021 2023
1 2/31 /2022 2024
1 2/31 /2023 2025
1 2/31 /2024 2026
1 2/31 /2025 2027
1 2/31/2026 2028
1 2/31 /2027 2029
1 2/31 /2028 2030
1 2/31 /2029 2031
1 2/31 /2030 2032
1 2/31 /2031 2033
1 2/31 /2032 2034
1 2/31 /2033 2035
1 2/31 /2034 2036
1 2/31 /2035 2037
1 2/31 /2036 2038
1 2/31 /2037 2039
1 2/31 /2038 2040
1 2/31 /2039 2041
1 2/31 /2040 2042
1 2/31 /2041 2043
1 2/31 /2042 2044
Pennsylvania State Employees' Retirement System
Attachment to May 23, 2014 memorandum.
Costs/(Savings) Summary
|
GF Total
5 Years (FYs 201 5 - 201 9) (9.8) (24.2)
Next 5 Years (FYs 2020 - 2024) ( 1 42. 3) (344.5)
Next 1 0 Years (FYs 2025 - 2034) (703.8) ( 1 , 700. 0)
Next 1 0 Years (FY s 2035 - 2044) (2, 401 .4) (5, 801 . 0)
30-Year Totals (J,Z57.J) [7, 869.7)
e e
Costs/(Savings) - $ m Mi llions
Contribution Dollars Cumul ative Dollars
General Total General Total
Fund System Fund System
0. 8 2. 0 0. 8 2. 0
2. 2 5.2 3. 0 7.2
3. 9 9. 0 6. 9 1 6.2
(6. 1 ) (1 4. 9) 0. 8 1 .3
( 1 0.6) (25. 5) (9.8) (24.2)
( 1 6. 3) (39.6) (26. 1 ) (63. 8)
(22.4) (54.3) (48.5) ( 1 1 8. 1 )
(28.4) (68.8) (76.9) (1 86.9)
(34.6) (83.7) ( 1 1 1 .5) (270.6)
(40.6) (98. 1 ) ( 1 52. 1 ) (368. 7)
(46. 1 ) ( 1 1 1 .2) ( 1 98.2) (479.9)
(51 .7) ( 1 24.9) (249.9) (604. 8)
(57.5) ( 1 39. 1 ) (307.4) (743.9)
(63.2) ( 1 52.7) (370.6) (896.6)
(68.7) ( 1 65. 9) (439.3) ( 1 , 062. 5)
(73. 5) (1 77.6) (51 2.8) ( 1 ,240. 1 )
(78.8) (1 90. 3) (591 .6) ( 1 ,430.4)
(83.5) (201 . 7) (675. 1 ) ( 1 ,632. 1 )
(88. 2) (21 3. 0) (763.3) ( 1 ,845. 1 )
(92.6) (223.6) (855.9) (2,068.7)
(220.6) (532.8) ( 1 , 076.5) (2,601 . 5)
(229.9) (555.3) (1 , 306.4) (3, 1 56. 8)
(233.8) (564.9) ( 1 , 540.2) (3, 721 .7)
(236.8) (571 .9) (1 ,777.0) (4,293.6)
(240.7) (581 . 4) (2, 01 7.7) (4,875.0)
(243.8) (589. 1 ) (2, 261 .5) (5,464. 1 )
(246. 1 ) (594.4) (2,507.6) (6, 058. 5)
(247.7) (598.4) (2, 755.3) (6,656. 9)
(249.3) (602.2) (3,004.6) (7, 259. 1 )
(252.7) (61 0.6) (3, 257. 3) (7,869.7)
This work product was prepared solely for PA Budget Ofice for purposes described herein and may not be appropriate for other purposes.
benefit and assumes no duty or liabil ity to other parties who receive thi s work.
Page 22
Mi l l i man does not intend to
Valuation Fiscal
Year Year
1 2/31 /201 3 201 5
1 2/31 /201 4 2016
1 2/31 /201 5 201 7
1 2/31 /201 6 201 8
1 2/31 /201 7 201 9
1 2/31 /201 8 2020
1 2/31 /201 9 2021
1 2/31 /2020 2022
1 2/31 /2021 2023
1 2/31 /2022 2024
1 2/31 /2023 2025
1 2/31 /2024 2026
1 2/31 /2025 2027
1 2/31 /2026 2028
1 2/31 /2027 2029
1 2/31 /2028 2030
1 2/31 /2029 2031
1 2/31 /2030 2032
1 2/31 /2031 2033
1 2/31 /2032 2034
1 2/31 /2033 2035
1 2/31 /2034 2036
1 2/31 /2035 2037
1 2/31 /2036 2038
1 2/31 /2037 2039
1 2/31 /2038 2040
1 2/31 /2039 2041
1 2/31 /2040 2042
1 2/31 /2041 2043
1 2/31 /2042 2044
Pennsylvania State Empl oyees' Retirement System
Attachment to May 23, 2014 memorandum.
I nput Summar for: HB 1 353 - Exclude State Police 201 6 Fresh Star 0Rtions N
Hybrid Plan Design Hybrid 1 % Index No SP Amortization Method None
Collar I ncrements N Amorization Period None
Projection Results of Proposed Plan Design Based on I nput Summar
Contribution Rates Contribution Dollars (Based on Actuarial Val ue)
Blended
Preliminary Collared Final DB DB and DC
DB Rate Rate Rate Rate
30. 86% 20. 50% 20. 50% 20.52%
31 . 32% 25. 00% 25. 00% 25. 05%
31 . 31 % 29.50% 29.50% 29.59%
30. 51 % n/a 30. 51 % 30.64%
29.63% n/a 29.63% 29.80%
28. 67% n/a 28.67% 28.88%
27. 73% n/a 27.73% 27.99%
26.82% n/a 26. 82% 27. 1 3%
25. 93% n/a 25. 93% 26.29%
25. 08% n/a 25. 08% 25. 51 %
24.25% n/a 24.25% 24.75%
23.45% n/a 23.45% 24.02%
22. 69% n/a 22.69% 23.34%
21 . 93% n/a 21 .93% 22.66%
21 .21 % n/a 21 .21 % 22.02%
20.51 % n/a 20. 51 % 21 . 41 %
1 9. 83% n/a 1 9. 83% 20.82%
1 9. 1 8% n/a 1 9. 1 8% 20.26%
1 8. 57% n/a 1 8.57% 1 9.73%
1 7.99% n/a 1 7.99% 1 9.24%
1 4.88% n/a 1 4. 88% 1 6.21 %
1 4. 31 % n/a 14. 31 % 1 5.73%
1 3. 86% n/a 1 3.86% 1 5.36%
1 3. 43% n/a 1 3.43% 1 5. 01 %
1 3. 01 % n/a 1 3. 01 % 14.67%
1 2.62% n/a 1 2.62% 1 4. 37%
8. 90% n/a 8. 90% 1 0.75%
6. 09% n/a 6. 09% 8. 04%
3. 01 % n/a 3. 01 % 5. 05%
1 . 07% n/a 1 . 07% 3. 1 9%
($ in Millions)
General
Fund
525.0
662.7
808.7
864. 4
868.0
869.4
870.6
872.2
873. 8
875.9
877. 8
879.9
882.8
885. 1
888.2
891 . 5
895. 1
899.0
903.6
909.2
790.7
791 . 5
797.8
804. 5
81 1 .2
820.0
632.7
487. 8
31 5. 8
205. 9
Total
System
1 , 268.3
1 , 600.7
1 , 953. 1
2, 087.7
2, 096.6
2, 099. 8
2, 1 03. 0
2, 1 06.8
Z,1 1 0.7
2, 1 1 5. 5
2, 1 20. 2
2, 1 25. 4
2, 1 32.4
2, 1 38. 1
2, 1 45. 4
2, 1 53.4
2, 1 62.0
2, 1 71 . 5
2, 1 82. 7
2, 1 95.9
1 , 909. 8
1 , 91 1 . 8
1 , 927.0
1 , 943.2
1 , 959.5
1 , 980. 5
1 , 528.4
1 , 1 78. 3
763. 0
497.4
Unfunded Funded
Li abi lit Ratio
21 ,484.6 54.43%
22,273.3 53. 87%
22, 701 .2 53. 85%
22,453.6 55. 1 4%
22, 1 20. 1 56. 53%
21 , 681 . 3 58. 04%
21 , 21 6.4 59. 55%
20, 716. 5 61 . 03%
20, 1 89. 0 62. 51 %
1 9, 622.8 63.99%
1 9, 01 8. 3 65. 48%
1 8,372. 0 66. 99%
1 7, 681 . 0 68. 51 %
1 6, 935. 7 70. 09%
1 6, 1 39. 5 71 .70%
1 5, 287. 9 73.37%
1 4, 377.0 75.09%
1 3, 385. 5 76. 92%
1 2, 31 1 .4 78. 85%
1 1 , 1 65. 9 80. 87%
9, 929. 1 83. 02%
8, 765. 4 85. 03%
7, 668. 3 86. 91 %
6, 501 .4 88. 90%
5, 250. 7 91 . 03%
3, 91 0. 5 93. 31 %
2,477.6 95.75%
1 , 1 88. 4 97.96%
242.5 99.58%
(349.2) 1 00. 60%
Thi s work product was prepared solely for PA Budget Ofice for purposes described herei n and may not be appropriate for other purposes.
benefit and assumes no duty or l i abil ity to other paries who receive this work.
Page 23
Mi lli man does not intend to
Valuation Fiscal
Year Year
1 2/31 /201 3 201 5
1 2/31 /201 4 201 6
1 2/31 /201 5 201 7
1 2/31 /201 6 201 8
1 2/31 /201 7 201 9
1 2/31 /201 8 2020
1 2/31 /201 9 2021
1 2/31 /2020 2022
1 2/31 /2021 2023
1 2/31 /2022 2024
1 2/31 /2023 2025
1 2/31 /2024 2026
1 2/31 /2025 2027
1 2/31 /2026 2028
1 2/31 /2027 2029
1 2/31 /2028 2030
1 2/31 /2029 2031
1 2/31 /2030 2032
1 2/31 /2031 2033
1 2/31 /2032 2034
1 2/31 /2033 2035
1 2/31 /2034 2036
1 2/31 /2035 2037
1 2/31 /2036 2038
1 2/31 /2037 2039
1 2/31 /2038 2040
1 2/31 /2039 2041
1 2/31 /2040 2042
1 2/31 /2041 2043
1 2/31 /2042 2044
Pennsylvania State Employees' Retirement System
Attachment to May 23, 2014 memorandum.
Costs/(Savings) Summary

Total
5 Years (FYs 201 5 - 201 9) (1 0.7) (26.5)
Next 5 Years (FYs 2020 - 2024) ( 1 26. 5) (306.0)
Next 1 Years (FYs 2025 - 2034) (605.5) (1 ,462.5)
Next 1 0 Years (FY s 2035 - 2044) {2, 253. 5) {5,443. 0)
30-Year Totals (Z,996.Z) (7,ZJ8.0)
Costs/(Savings) $ in Mi l l ions
Contribution Dollars Cumulative Dollars
General Total General Total
Fund System Fund System
0. 8 2. 0 0. 8 2. 0
2. 2 5. 2 3. 0 7. 2
3. 9 9. 0 6. 9 1 6.2
(6. 3) ( 1 5.5) 0.6 0.7
(1 1 . 3) (27.2) (1 0. 7) (26.5)
(1 5.7) (38.2) (26.4) (64.7)
(20.5) (49.4) (46.9) (1 1 4. 1 )
(25.3) (61 . 1 ) (72.2) (1 75.2)
(30.2) (73.0) (1 02.4) (248.2)
(34.8) (84.3) (1 37.2) (332.5)
(39.6) (95.8) (1 76.8) (428.3)
(44.6) ( 1 07.7) (221 . 4) (536.0)
(49.3) (1 1 9. 1 ) (270.7) (655. 1 )
(54.2) (1 30. 8) (324.9) (785.9)
(58.9) ( 1 42.2) (383.8) (928. 1 )
(63.2) ( 1 52.7) (447.0) (1 , 080. 8)
(67.7) ( 1 63.5) (51 4.7) (1 ,244.3)
(72.0) (1 73. 9) (586.7) (1 ,41 8.2)
(76.3) (1 84. 1 ) (663.0) (1 , 602.3)
(79.7) (1 92.7) (742.7) (1 , 795.0)
(207.3) (500.7) (950.0) (2,295.7)
(21 6.2) (522.2) (1 , 1 66.2) (2, 81 7.9)
(21 9. 3) (529.8) (1 , 385. 5) (3, 347.7)
(222.5) (537.4) (1 , 608.0) (3, 885. 1 )
(226.2) (546.4) (1 , 834. 2) (4,431 .5)
(228.6) (552.3) (2,062.8) (4, 983.8)
(230.8) (557.3) (2, 293.6) (5, 541 . 1 )
(231 .9) (560. 1 ) (2, 525.5) (6, 1 01 .2)
(234.2) (565.5) (2,759.7) (6,666.7)
(236.5) (571 .3) (2,996.2) (7, 238.0)
Thi s work product was prepared solely for PA Budget Ofce for purposes described herein and may not be appropriate for other purposes.
beneft and assumes no duty or l i abi lity to other paries who receive this work.
Page 24
Milliman does not intend to
Pennsylvania State Employees' Retirement System
Page 25
Attachment to May 23, 2014 memorandum.
I nput Summar for: HB 1 353 Exel St. Pol Haz Duty 201 6 Fresh Start Options N
Hybrid Plan Desi gn Hybrid 1 % I ndex No SP/Haz Amorization Method None
Collar I ncrements N Amorization Period None
Projection Results of Proposed Plan Design Based on I nput Summary
Contribution Rates Contribution Dollars (Based on Actuarial Value
Blended ($ in Mi l lions)
Valuation Fiscal Preli mi nary Collared Final DB DB and DC General Total Unfunded Funded
Year Year DB Rate Rate Rate Rate Fund Svstem Liabilit Ratio
1 2/31 /201 3 201 5 30. 86% 20. 50% 20. 50% 20.52% 525.0 1 , 268.2 21 ,484.6 54.43%
1 2/31 /201 4 201 6 31 .32% 25. 00% 25. 00% 25. 05% 662.6 1 , 600. 5 22, 273. 3 53. 87%
1 2/31 /201 5 201 7 31 .37% 29.50% 29.50% 29. 58% 808. 5 1 , 952.7 22, 747. 0 53. 80%
1 2/31 /201 6 201 8 30.63% n/a 30.63% 30.75% 867.4 2, 095. 2 22, 550. 6 55. 04%
1 2/31 /201 7 201 9 29.82% n/a 29.82% 29.97% 873.2 2, 1 09.0 22, 270. 0 56. 37%
1 2/31 /201 8 2020 28. 91 % n/a 28. 91 % 29. 1 0% 876.0 2, 1 1 5. 9 21 , 882. 9 57. 83%
1 2/31 1201 9 2021 28. 02% n/a 28.02% 28.25% 878.9 2, 1 22. 8 21 , 471 . 1 59.28%
1 2/31 /2020 2022 27. 1 7% n/a 27. 1 7% 27.44% 882.3 2, 1 31 . 1 21 , 025.6 60.72%
1 2/31 /2021 2023 26.33% n/a 26.33% 26.65% 885. 6 2, 1 39. 1 20, 554.3 62. 1 5%
1 2/31 /2022 2024 25. 53% n/a 25. 53% 25. 90% 889. 3 2, 148. 0 20, 045. 5 63. 59%
1 2/31 /2023 2025 24. 75% n/a 24.75% 25. 1 8% 893. 0 2, 1 57. 0 1 9, 500. 3 65. 03%
1 2/31 /2024 2026 24. 01 % n/a 24. 01 % 24.50% 897. 3 2, 1 67. 4 1 8, 91 4. 4 66.48%
1 2/31 /2025 2027 23.29% n/a 23.29% 23.85% 901 . 7 2, 1 78. 1 1 8,284. 6 67.96%
1 2/31 /2026 2028 22.58% n/a 22. 58% 23.20% 906. 1 2, 1 88. 5 1 7, 601 .9 69.48%
1 2/31 /2027 2029 21 .90% n/a 21 . 90% 22. 59% 91 0. 8 2, 200. 0 1 6, 869. 5 71 .04%
1 2/31 /2028 2030 21 .25% n/a 21 .25% 22. 01 % 91 6. 2 2,21 3. 1 1 6, 082. 6 72.65%
1 2/31 /2029 2031 20.60% n/a 20.60% 21 .43% 921 .2 2, 225.2 1 5, 237. 9 74. 31 %
1 2/31 /2030 2032 1 9.99% n/a 1 9.99% 20.90% 927.0 2, 239. 1 1 4, 31 1 .6 76. 07%
1 2/31 /2031 2033 1 9.42% n/a 1 9.42% 20.40% 933.6 2, 255. 1 1 3, 301 . 3 77. 92%
1 2/31 /2032 2034 1 8. 87% n/a 1 8.87% 1 9. 91 % 940.8 2,272.4 1 2, 21 9. 1 79. 85%
1 2/31 /2033 2035 1 5. 80% n/a 1 5. 80% 1 6. 91 % 824.5 1 , 991 .6 1 1 ,044. 8 81 .90%
1 2/31 /2034 2036 1 5.26% n/a 1 5.26% 1 6.44% 827. 1 1 , 997.9 9,941 . 6 83. 80%
1 2/31 /2035 2037 1 4. 83% n/a 1 4. 83% 1 6.07% 834. 8 2, 01 6. 3 8, 902. 6 85. 58%
1 2/31 /2036 2038 14. 42% n/a 14.42% 1 5.73% 842. 8 2, 035. 8 7, 792.2 87.44%
1 2/31/2037 2039 1 4. 03% n/a 1 4. 03% 1 5.40% 851 . 5 2, 056.9 6, 596.7 89.42%
1 2/31 /2038 2040 1 3.66% n/a 1 3.66% 1 5. 1 0% 861 . 6 2, 081 . 1 5, 309. 3 91 . 53%
1 2/31 /2039 2041 9. 97% n/a 9. 97% 1 1 .49% 676. 3 1 ,633. 7 3, 926. 0 93.77%
1 2/31 /2040 2042 7. 1 7% n/a 7. 1 7% 8.77% 532.2 1 , 285.6 2, 683. 6 95. 76%
1 2/31 /2041 2043 4. 1 1 % n/a 4. 1 1 % 5.78% 361 . 8 873. 9 1 , 782.8 97. 20%
1 2/31 /2042 2044 2. 1 9% n/a 2. 1 9% 3.93% 253.4 61 2. 2 1 ,235. 0 98. 07%
Thi s work product was prepared solely for PA Budget Offce for purposes described herei n and may not be appropriate for other purposes. Milliman does not intend to
benefit and assumes no duty or liabil ity to other paries who receive this work.
Valuation Fiscal
Year Year
1 2/31 /201 3 201 5
1 2/31 /201 4 201 6
1 2/31 /201 5 201 7
1 2/31 /201 6 201 8
1 2/31 /201 7 201 9
1 2/31 /201 8 2020
1 2/31 /201 9 2021
1 2/31 /2020 2022
1 2/31 /2021 2023
1 2/31 /2022 2024
1 2/31 /2023 2025
1 2/31 /2024 2026
1 2/31 /2025 2027
1 2/31 /2026 2028
1 2/31 /2027 2029
1 2/31 /2028 2030
1 2/31 /2029 2031
1 2/31 /2030 2032
1 2/31 /2031 2033
1 2/31 /2032 2034
1 2/31 /2033 2035
1 2/31 /2034 2036
1 2/31 /2035 2037
1 2/31 /2036 2038
1 2/31 /2037 2039
1 2/31 /2038 2040
1 2/31 /2039 2041
1 2/31 /2040 2042
1 2/31 /2041 2043
1 2/31 /2042 2044
Pennsylvania State Employees' Retirement System
Attachment to May 23, 201 4 memorandum.
Costs/(Savings) Summar
|
Total
5 Years (FYs 201 5 - 201 9) (2. 8) (7.3)
Next 5 Years (FYs 2020 - 2024) (76.3) ( 1 84. 9)
Next 1 0 Years (FYs 2025 - 2034) (370.0) (893.6)
Next 1 0 Years (FYs 2035 - 2044) {1 , 845.4) {4, 456. 9)
30-Year Totals (2,294.5) (5,542.7)
.
Costs/(Savmgs) $ m Mi l l ions
Contribution Dollars Cumul ative Dollars
General Total General Total
Fund System Fund System
0. 8 1 . 9 0. 8 1 . 9
2. 1 5. 0 2. 9 6. 9
3. 7 8. 6 6. 6 1 5. 5
(3.3) (8.0) 3.3 7. 5
(6. 1 ) ( 1 4.8) (2.8) (7. 3)
(9. 1 ) (22. 1 ) (1 1 .9) (29.4)
(1 2.2) (29.6) (24. 1 ) (59.0)
( 1 5. 2) (36. 8) (39.3) (95.8)
( 1 8.4) (44.6) (57.7) ( 1 40.4)
(21 .4) (51 .8) (79. 1 ) (1 92.2)
(24.4) (59.0) (1 03. 5) (251 .2)
(27.2) (65.7) ( 1 30. 7) (31 6. 9)
(30.4) (73.4) ( 1 61 . 1 ) (390.3)
(33.2) (80.4) ( 1 94. 3) (470.7)
(36.3) (87.6) (230. 6) (558.3)
(38.5) (93. 0) (269. 1 ) (651 . 3)
(41 . 6) ( 1 00. 3) (31 0. 7) (751 .6)
(44.0) (1 06.3) (354.7) (857.9)
(46.3) (1 1 1 . 7) (401 . 0) (969.6)
(48. 1 ) (1 1 6.2) (449. 1 ) ( 1 , 085. 8)
( 1 73.5) (41 8. 9) (622.6) ( 1 , 504.7)
( 1 80.6) (436. 1 ) (803. 2) ( 1 , 940. 8)
( 1 82.3) (440. 5) (985. 5) (2, 381 . 3)
( 1 84.2) (444.8) (1 , 1 69.7) (2, 826. 1 )
( 1 85. 9) (449.0) (1 , 355. 6) (3,275. 1 )
( 1 87. 0) (451 .7) (1 ,542.6) (3,726.8)
( 1 87.2) (452.0) (1 , 729. 8) (4, 1 78. 8)
(1 87. 5) (452.8) (1 , 91 7. 3) (4, 631 .6)
( 1 88.2) (454.6) (2, 1 05. 5) (5, 086.2)
( 1 89.0) (456.5) (2,294.5) (5, 542.7)
Thi s work product was prepared solely for PA Budget Ofice for purposes described herein and may not be appropriate for other purposes.
beneft and assumes no duty or liabil ity to other paries who receive this work.
Page 26
Mi l l i man does not intend to
100.
8."
20."
0.0%
Pennsylvania Publ i c School Employees' Reti rement System
HB !33 versus Baselne Projections
(based on June 30, 2012 Milliman Replication Valuation Adjusted for Preliminar 2013 Valuation Results)
PbLKb: U00 K8IDVU8ID0YB8f
Page 27
2012 201 201 201 201 201 201 2019 202 202 202 202 2024 202 202 202 202 202 203 203 203 203 203 203 203 203 203 203 20 201 204
&im HB )$
This exhibit is an atachment to a May 23, 2014 memorandum. Please refer to that leter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liabi lity to other paries who receive this work.
55,00.0
45,00.0
35,00.0
25,00.0
15,00.0
5,000.0
(5,000. 0)

Pennsylvania Public School Empl oyees' Reti rement System
HB !33 versus Baselne Prjections
(based on June 30, 2012 Millman Replication Valuation Adjusted for Preliminar 2013 Valuation Results)
PSERS: Unfunded Liabi l it
(Amounts in Millions)
Page 28

2012 2013 2014 2015 2016 2011 2018 2019 2020 2021 2022 Z0?3 2024 2025 2026 2021 2028 202 2030 2031 2032 2033 2034 2035 2035 2037 2038 2039 204 2041 2042
-Baseline .HB 1353
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that letter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may not be appropriate to use for other purposes. Mi l liman
does not intend to benefit and assumes no duty or liabil ity to other parties who receive this work.
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Pennsylvania Publ i c School Employees' Retirement System
HB !33 versus Baselne Prjections
(based on June 30, 2012 Miliman Replication Valuation Adjusted for Preliminar 2013 Valuation Results)
PSERS: Liquidity Ratio - Market Val ue to Benefit Payments
(Amounts in Millions)

Page 29

W
"
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20?? 20?3 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 2041 2042
-Baseline .HB 153
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may not be appropriate to use for other purposes. Mil liman
does not i ntend to benefit and assumes no duty or liability to other parties who receive this work.
35.00
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
I
Pennsylvania Publ ic School Employees' Retirement System
HB !33 versus Baselne Prjections
(based on June 30, 2012 Mi iman Replication Valuaton Adjusted for Preliminar 2013 Valuation Results)
PSERS: Blended Contribution Rates by Fiscal Vear (DB+DC)
Page 30
Excl udes HCPremi um
Assistance Rate
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Z0Z5 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 204
-Baseline Blended Rate ..HB 1353 Blended Rate
This exhibit is an atachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to benefit and assumes no duty or liability to other paries who receive this work.
8,000.0
7,000.0
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0
Pennsylvani a Publ i c School Employees' Retirement System
HB !33 versus Baseline Prjections
(based on June 30, 2012 Mi iman Replication Valuation Adjusted for Preliminar 2013 Valuation Results)
PSERS: Contribution Dol l ars by Fiscal Year (DB+DC)
(Amounts in Millions)
Page 31
Excl udes HCPremium
Assistance Dollar
2014 201 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 204
__Baseline Contributions -. Baseline G| Payments _ HB 1353 Contributi ons * HB 1353 GFPayments
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that letter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Mi l l iman
does not intend to benefit and assumes no duty or liability to other parties who receive this work.
120.0
100.0
&O
|

*
@
I
20D"
Pennsylvania State Employees' Retirement System
HB !33 versus Baseline Prjections
(based on December 31, 2012 Milman Replication Valuation)
bLKb: U00B0 K8ID0VU8ID0W8f
Page 32
20U 201 2014 2 201 2017 201 201 202 2021 2022 202 2024 202 202 2Z 202 202 203 203 203 203 203 2( 203 203 203 2 20 20 2042
^&im HI353- l5PamHz HBI53 SPl H I53
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Mi l l i man
does not intend to benefit and assumes no duty or liability to other paries who receive this work.
25,00.0
20,00.0
15,00.0
10,00.0
5,000.0
(5,000.0)
Pennsylvani a State Empl oyees' Reti rement System
HB !33 versus Baselne Prjections
(based on December 31, 2012 Mi iman Replication Valuation)
SERS: Unfunded Liabil ity
(Amounts in Millions)
Page 33
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20f3 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 ?04I 4?
-Baseline HB 1353 - Ecl SP and Haz -HB 1353 - Ecl St Pol .Ha 1353
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may not be appropriate to use for other purposes. Mi l l i man
does not intend to beneft and assumes no duty or liabil ity to other paries who receive this work.
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Pennsylvania State Employees' Retirement System
HB !33 versus Baselne Projections
(based on December 31, 2012 Miliman Replication Valuation)
SERS: Liqui dity Ratio - Market Val ue to Benefit Payments
(Amounts in Millions)
Page 34
2012 2013 2014 2015 2016 2017 2018 2019 202 2021 2022 2023 2024 2025 2026 2027 2028 2029 203 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 2041 2042
-Basel ine -HB 1353 Eel SP and Haz -HB 13S3 Eel St. Pol _ HB 1353
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Mi l l i man
does not intend to beneft and assumes no duty or liability to other parties who receive this work.
35.00
30.00
25.00
20.00%
15.00
10.00
5.00%
0.00%

Pennsylvani a State Empl oyees' Reti rement System


HB !33 versus Baseline Prjections
(based on December 31, 2012 Miliman Replication Valuation)
SERS: Blended Contri bution Rates by Fiscal Year (DB+DC)
Page 35
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Z024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 2041 2042 2043 204
-Baseline Blended Rate -HB 1353 Lxc' SPand Haz Blended Rate -HB 1353 Eel St. Pol Blended Rate -HB 1353 Blended Rate
This exhibit is an atachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanator notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropri ate to use for other purposes. Mi lliman
does not i ntend to benefit and assumes no duty or liabi lity to other paries who receive this work.
3,000.0
2,500.0
2,000.0
1,500.0
1,000.0
500.0
Pennsylvania State Employees' Reti rement System
HB !33 versus Baselne Prjections
(based on December 31, 2012 Milman Replication Valuation)
SERS: Contri bution Dol l ars by Fiscal Year (DB+DC}
(Amounts in Millions)
Page 36
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 202 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 2041 2042 2043 204
-Baseline Contributions -HB 1353 Exel SP and Haz Contributions -HB 1353 Exel St. Pol Contributi ons -HB 1353 Contributions
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that leter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Ofce for the purposes described herein and may not be appropriate to use for other purposes. Milliman
does not intend to beneft and assumes no duty or liability to other paries who receive this work.
1,200.0
Pennsylvania State Employees' Retirement System
HB !33 versus Baselne Projections
(based on December 31, 2012 Miliman Replcation Valuation)
SERS: General Fund Contribution Dol l ars by Fiscal Year (DB+DC)
Page 37
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 204 2041 2042 2043 2044
-Baseline G| Payments HB 1353 c| SP and Haz GF Payments -HB 1353 Eel St. Pol GFPayment .HB 1353 GFPayment
This exhibit is an attachment to a May 23, 201 4 memorandum. Please refer to that letter for more information, including explanatory notes and statements of
reliance.
This work product was prepared solely for PA Budget Office for the purposes described herein and may not be appropriate to use fr other purposes. Milliman
does not intend to benefit and assumes no duty or liabil ity to other paries who receive this work.
Page 38
Appendix I - Replacement Ratio Analysis
The purpose of thi s analysi s i s to esti mate the potenti al repl acement i ncome of the
proposed hybri d pl an desi gn contai ned i n HB 1 353 A0691 7, PN 21 52. The repl acement
i ncome developed in this analysi s i s based on the total i ncome expected to be
generated by each of the desi gns. I t does not consi der the porti on provi ded by member
contri buti ons separately from empl oyer contri buti ons.
Repl acement i ncome for the proposed hybrid pl an i s based on the sum of the DB and
DC porti ons. The i ncome on the DC porti on i s estimated by annuitizi ng the projected
bal ance at the i ndicated reti rement age based on the actuari al equival ent factors
currently used by SERS and PSERS. These factors are consistent with the factors
used for annuiti zi ng member contri buti on bal ances under Opti on 4 withdrawal s. Pl ease
note that these factors are based on a 4% i nterest rate assumpti on, i . e. the assumed
i nterest earned after reti rement i s 4% per year. To the extent that i nterest earned after
reti rement is hi gher (or lower) , the DC bal ance woul d resul t i n hi gher (or lower)
esti mated i ncome.
Target Repl acement Ratio
The repl acement ratio equal s reti rement i ncome divi ded by the member's last sal ary. A
2008 study by Aon Consul ti ng in conj unction with Georgi a State University
(http://V. aon. com/about-aon/i ntel l ectual -capital/attachments/human-capital
consulti ng/RRStudy070308.pdf) i ndicates that an adequate repl acement ratio derived
from Soci al Security, empl oyee savi ngs and empl oyer sources i s approxi mately 75% -
80% dependi ng on the level of an i ndi vi dual ' s i ncome. Soci al Security typi cal l y repl aces
between 25% - 40% of an i ndi vi dual ' s i ncome. Repl acement ratios from Soci al Security
for hi gher wage earners wi l l tend to be lower. The hi gher the i ncome the lower the ratio
as the Soci al Security formul a i s heavily wei ghted towards lower i ncome.
Consi deri ng the level of starti ng sal ary and the assumed fi nal pre-reti rement i ncome
used i n thi s analysi s and the results i ncl uded i n the 2008 study, the porti on of i ncome to
be repl aced by employer reti rement pl ans and employee savi ngs to mai ntai n the same
standard of l ivi ng vari es from approxi mately 35% to roughl y 50%. Other factors such as
health, fami ly composition, etc. also afect the repl acement rati o. Thi s anal ysi s does not
i ncl ude esti mates of Soci al Security benefits nor does it consi der these other factors,
but rather focuses on the porti on of an i ndivi dual ' s i ncome that woul d be replaced by
empl oyee and employer provided benefits through the proposed hybri d pl an.
Replacement Ratio Comparison with Private I ndustry
Attached are replacement ratio gri ds for PSERS employees, SERS general employees
and SERS State Pol i ce. Many factors can i mpact a member' s repl acement ratio some
of whi ch are i ncl uded i n the gri ds and wi l l be di scussed i n more detai l bel ow. The
fol l owi ng chart summarizes the anal ysi s assumi ng a reti rement of age 65.
Thi s work product was prepared solely for PA Budget Office for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive this work.
Page 39
Appendi x I Replacement Ratio Analysi s
Range of Repl acement Ratios for PSERS and SERS Members
(excl udi ng State Pol i ce) under the Proposed Hybri d Pl an *
Sal ary Level : Sal ary Level :
Hi re Age $30, 000 - $35, 000 $50, 000 - $60, 000
25 42% - 5 1 % 37% - 57%
35 39% - 45% 33% - 41 %
45 35% - 40% 27% - 30%
* Based on Retirement Age of 65 and I nvestment Returns on the DC Bal ances of 4. 5% - 7. 5%
For an empl oyee hi red at age 25, the repl acement ratio i s expected to reach the 52-
54% level if i nvestment returns on the DC account bal ance average at least 7. 5% duri ng
the worki ng career. I f returns are l ess than 7. 5%, then the di fference wi l l need to be
made up through addi ti onal savi ngs by the empl oyee. For a 35-year ol d hi re, there may
or may not be benefits earned with a pri or employer to make up any difference. For a
45-year ol d hi re, benefits earned under thi s pl an woul d be combi ned with benefits
earned under pri or empl oyment and/or addi ti onal empl oyee savi ngs to determi ne if the
target repl acement l evel woul d be attai ned.
The benefits provi ded under the proposed hybri d pl an are less than the benefits
provi ded under Act 1 20. The accrual rate of 2% is the same, but service is l i mited to 25
years and compensation attri butable to DB plan benefits is l i mited by the cap.
Empl oyee and employer contri buti ons to the DC pl an hel p narrow the gap between the
DB benefits provided under Act 1 20 compared to the DB benefits provi ded by the
proposed hybrid pl an.
For lower pai d employees, a smal ler porti on of pre-reti rement i ncome woul d be repl aced
by the DC pl an, but the DB po
r
i on woul d be si mi l ar to Act 1 20 benefit level s for the first
25 years. Hi gher paid empl oyees wi l l have a smal l er percentage of pre-reti rement
i ncome repl aced by the DB plan and a l arger percentage repl aced by the DC pl an.
I n compari ng the replacement ratios to pri vate sector empl oyees, the 50
th
percenti l e DB
pl an accrual rate i n the mid-Atl anti c i s 1 . 5% (Bureau of Labor Statistics 201 0 Nati onal
Compensati on Survey) . For DC pl ans, the 5o
h
percentile on employee and empl oyer
contri buti ons i s 50% up to 6% contributed by the employee for a maxi mum empl oyer
match of 3%. Usi ng the same assumpti ons to determi ne the repl acement ratios under
the proposed hybri d pl an, the fol l owi ng tabl e esti mates the repl acement ratios for the
these two common private sector pl an desi gns assumi ng a retirement age of 65.
Range of Repl acement Ratios Based on Average Private
Sector Retirement Designs *
DB Pl an: DC Pl an:
Hi re Age 1 . 5% Accrual 6% EE Contri buti ons
No Servi ce Cap 3% ER Contri buti ons
25 56% 29% - 55%
35 42% 21 % - 34%
45 28% 1 4% - 1 9%
* Based on Retirement Age of 65 and I nvestment Returns on the DC Balances of 4. 5% - 7. 5%
This work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
liability to other parties who receive this work.
Page 40
Appendix I Repl acement Ratio Analysis
There are several observations that can be made i n compari ng the proposed hybri d
pl an to the repl acement ratios generated based on these to common private sector
desi gns:

For pri vate-sector empl oyers that ofer a DC pl an only, the range of repl acement
rati os i s wi der than under the proposed hybrid pl an si nce the proposed hybri d
pl an contai ns a defi ned benefit porti on. The repl acement ratios under the DC
pl an are heavi l y dependent on the returns earned on the DC bal ance.

For private-sector empl oyers that ofer a DB pl an onl y, the ful l-career 40-year
service employee (hi re age of 25) provi des for as hi gh or a hi gher repl acement
rati o than the proposed hybrid pl an and there i s no range as al l the i nvestment
risk is wi th the employer.

For the 35 year ol d hi re, the repl acement ratios beteen the pri vate-sector DB
only and the proposed hybrid pl an are si mi l ar and for a 45-year ol d hi re, the
repl acement rati os under the hybrid pl an are greater than the private-sector DB
pl an.
Replacement Ratio Factors
Many factors can i mpact the replacement ratios of the hybrid pl an or any pl an desi gn.
The attached repl acement ratio gri ds show the i mpact of some of these el ements.

Sal ary I ncreases - hi gher salary i ncreases wi l l resul t i n a greater portion of the
sal ary to be repl aced by the DC pl an versus the DB pl an. For SERS general
empl oyees and PSERS, the attached repl acement ratios are based on a 4%
sal ary i ncrease assumpti on. For the State Pol i ce, the sal ary i ncrease
assumpti on from the val uati on i s used.

Years of Service - l onger peri ods of empl oyment wi l l result in a greater porti on of
the sal ary to be replaced by the DC pl an versus the DB pl an. To understand the
i mpact of thi s pl an design el ement, we have i ncl uded members hi red at vari ous
ages based on the cohort of members hi red i n the year pri or to the 201 2 actuari al
val uati on dates.

Starti ng sal ary - hi gher starti ng sal aries wi l l result i n a greater porti on of the
sal ary to be replaced by the DC pl an versus the DB pl an. To understand the
i mpact of thi s pl an desi gn el ement, we revi ewed the ratios based on diferent
starti ng sal ari es. The sal aries were based on a review of members hi red at the
i ndi cated ages i n the year pri or to the 201 2 actuari al val uati on dates. For
PSERS, stari ng sal aries were relatively consistent and di d not var si gnificantly
by hi re age. We used $30, 000 for most empl oyees, and i ncl uded stari ng
sal aries around $50, 000 for higher wage earners. For SERS general empl oyees,
starti ng sal aries were sl i ghtly hi gher. We used sal aries of $35, 000 and $60, 000
for higher wage earners.
Thi s work product was prepared solely for PA Budget Ofice for the purposes described herein and may
not be appropri ate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive this work.
Page 41
Appendix I Replacement Ratio Anal ysis

I nvestment Return on DC account bal ance - because the hybrid pl an contai ns a


DC porti on, the actual i ncome generated wi l l be based on the i nvestment i ncome
earned pri or to reti rement. We have provided the repl acement rati os for al l
combi nati ons under three sets of DC i nvestment returns 6%, 7. 5% and 4. 5%.
The younger the hi re age the greater the i mpact the return wi l l have on a
member's benefits.

Retirement Age - when a member deci des to retire has a si gnifi cant i mpact on
the overal l repl acement ratio under each pl an. The proposed hybri d pl an
el i mi nates al l early reti rement subsi dies under the DB pl an. To understand the
i mpact of thi s pl an desi gn el ement, we reviewed up to four reti rement ages, i f
appl i cabl e, for each hi re age, sal ary and DC i nvestment return combi nati on:
C Age 65 - the age when the hybri d pl an provi des unreduced benefits. For
State Pol i ce, age 60 was used.
C Age 62, but not less than 25 years - the hybrid pl an onl y al l ows early
commencement at 25 years of servi ce. Age 62 is the first age members
are el i gi bl e to commence Soci al Security benefits.
C 35 Years of Service - if earl i er than age 65, current law al l ows empl oyees
to retire with an unreduced benefit at 35 years (with 92 poi nts) whereas
the hybrid pl an provi des reduced benefits payabl e pri or to age 65 based
on an actuari al equival ent reduction. Thi s desi gn diference has a bi gger
i mpact on members hi red at younger ages who become el i gi bl e fr
unreduced benefits pri or to age 65.
For State Pol i ce, 25 years of service was used as thi s i s the first age the
member i s el i gi bl e for the 75% of pay benefit under the Di lauro Award.
C Age 55 with at l east 25 Years of Service - current law al l ows PSERS
members to reti re with a subsidized earl y reti rement benefit at these
el i gi bi l ity poi nts whereas any early reti rement benefits provided under the
hybri d pl an are based on actuari al equi val ent reducti ons.
General Observati ons
The fol l owi ng are some general observati ons regardi ng the replacement ratios for the
hybri d pl an:

For members reti ri ng at 65, repl acement ratios general ly range between 35%
and 50% of pay.

Due to the DB service cap, repl acement ratios do not i ncrease as much for
service i n excess of 25 years.
Thi s work product was prepared sol el y for PA Budget Ofice for the purposes described herei n and may
not be appropriate to use for other purposes. Mi l l i man does not i ntend to benefit and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Page 42
Appendi x I Replacement Ratio Analysis

The replacement ratio for members with lower pay wi l l not have as much
vari ance as a greater pori on of the benefit is covered under the DB pl an.

Early reti rement benefits are si gnificantly reduced maki ng reti rement pri or to age
65 much more costly from an employee perspective.

For State Pol i ce members, replacement ratios at 25 years of service are reduced
si gnificantly parti al l y due to the early reti rement reducti ons that appl y in the
hybri d pl an, but do not currently apply due to the Di lauro Award.

For State Pol ice members and higher wage earni ngs, the DC i nvestment return
has a more si gnificant i mpact on reti rement i ncome due to the hi gher
contri buti ons made to the DC pl an resulti ng i n repl acement ratios that vary
between approximately 40% and 60% dependi ng on the amount of i nvestment
i ncome earned.
Thi s work product was prepared sol el y for PA Budget Ofice for the purposes described herei n and may
not be appropriate to use for other purposes. Mi l l i man does not intend to benefit and assumes no duty or
l i abi l ity to other parties who receive thi s work.
Retirement Age
25 Years; min 55
35 Years
62, min 25 years
65
Retirement Age
25 Years; miD55
35 Years
62, m|025 years
65
Retirement Age
25 Years; min OO
35 Years
62, min 25 years
65
Retirement Age
25 Years; min 55
35 Years
62, min 25 years
65
Retirement Age
25 Years; mi n 55
35 Years
62, m|D 25 years
65
Retirement Age
25 Years; min 55
35 Years
62, min 25 years
65
DB
18%
22%
23%
26%
DB
11%
13%
14%
16%
DB
18%
22%
23%
26%
DB
11%
13%
14%
16%
DB
18%
22%
23%
26%
DB
11%
13%
14%
16%
Pennyslvanla Public School Employees' Retirement System (PSERS)
Projected Replacement Ratio Analysls
Proposed Hybrid Plan under HB 1353 for Future Employees
Based 004% Salary Scale Assumption
Hire Age = 25
DC
7%
12%
15%
19%
DC
12%
18%
21%
26%
. Total
25%
34%
38%
45%
C!8
23%
31%
35%
42%

8%
14%
18%
23%
Total
26%
0X
".
^%
-:0x
DC O\S
14% 25%
22% 1,s%
26% 40%
34% 49%
DC
6%
10%
13%
16%
DC
10%
15%
17%
21%
Total
24%
32%
36%
42%
Total
21%
28%
31%
37%
.'`
Hire Ag6 = d
DC Retur = 6%
Salary = $s0,000
29%
N/A
31%
35%
4%
N/A
5%
9%
32%
N/A
36%
44%
DC Retur = 6%
Salary = $:0,000
17%
N/A
19%
21%
8%
N/A
11%
-14%
' 2x
N/A
29%
''
.
35%
DC netiri 1.s%
%. Salary = $10,000
: b . DC
" .
Otal
& * *
x

_
_
33%
NIA: ` N/A N/A
31%
35%.
6%
10%
37%
45%
DC Retur 7.5%
Salary = $:0,000
17%
N/A
19%
21%
10%
N/A
12%
17%
DC Retur = 4.5%
Sotcrv = $10,000
DB DC
29% 3%
N/A N/A
31% 5%
35% 8%
17%
N/A
19%
21%
DC Return 4.5%
Solcry = $:0,000
7%
N/A
9%
12%
27%
N/A
31%
38%
Total
32%
N/A
36%
42%
24%
N/A
28%
33%
DB
N/A
N/A
N/A
37%
b
NIA
N/A
N/A
22%
DB
N/A
N/A
N/A
37%
DB
N/A
N/A
N/A
22%
DB
N/A
N/A
N/A
37%
DB
N/A
N/A
N/A
22%
Page 43
Hire Age = 45
DC
N/A
NIA
N/A
3%
DC
N/A
N/A
N/A
6%
DC
N/A
N/A
N/A
3%
DC
N/A
N/A
N/A
7%
DC
N/A
N/A
N/A
2%
DC
N/A
N/A
N/A
6%

N/A
N/A
N/A
39%
Total
N/A
N/A
N/A
29%
Total
N/A
N/A
N/A
40%
Total
N/A
N/A
N/A
30%
Total
N/A
N/A
N/A
39%
Total
N/A
N/A
N/A
28%
Retirement Age DB
25 Years; min bb 16%
35 Years 19%
62, min 25 years 20%
65 22%
Retirement Age DB
25 Years; min 55 9%
35 Years 11%
62, min 25 years 12%
65 13%
Retirement Age DB
25 Years; mi n 55 16%
35 Years 19%
62, min 25 years 20%
65 22%
Retirement Age DB
25 Years; min 55 9%
35 Years 11%
62, min 25 years 12%
65 13%
Retirement Age DB
25 Years; min 55 16%
35 Years 19%
62, min 25 years 20%
65 22%
Retirement Age DB
25 Years; min 55 9%
35 Years 11%
62, min 25 years 12%
65 13%
Pennysluanla State Employees' Retirement System (SERS)
Projected Replacement Ratio Analysis
Proposed Hybrid Plan under HB Jdb for Future Employees
Based on 4% Salar Scale Assumption
Hire Age = 25
DC
9%
15%
18%
23%
DC
15%
23%
27%
34%
DC
10%
17%
21%
28%
DC
19%
2%
34
%
44%
DC
7%
12%
15%
19%
DC
13%
19%
21%
26%
TDal
24%
33%
38%
45%
D8
25%
34%
38%
47%
@tal
26%
36
%
41%
.. 51%
.
T!a|
28%
4%
. . : 46%
57%
1Ltal
23%
31%
3b%
42%
Total
22%
29%
33%
39%
.
Hire Age " db
DC Retur 6%
Salary $35,000
DB DC Toal
25% 5% 30%
N/A N/A N/A
27% 7% 34%
30% 11% 41%
DC Retur 6%
Salary = $60,000
DB DC Tohjl
15% 12% .. . J%
N/A N/A p
16% 1
%
30%
17% 70X 37%
. .
' ,
=

. '
DC Retu/11 ; 7.5%
Salary = $35,000
, b

Total
25% 6% 31%
N/A. N/A N/A
27% 8% 35%
J7_
13% 43%
_ .
DC Retur 7.5%
Salary $60,000
DB DC Ttal
15% 14% 28%
N/A N/A N/A
16% 17% 33%
17% 24% 41%
DC Retur = 4.5%
Salary = $35, 0DO
DB DC Total
25% 4% 29%
N/A N/A N/A
27% 6% 33%
30% 9% 39%
DC Retur = 4.5%
Salary = $60,000
DB DC Total
15% 10% 25%
N/A N/A N/A
16% 12% 28%
17% 16% 34%
Page 44
Hire Age =45
DB DC oa
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
32% 4% 36%
DB DC Total
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
19% 10% 28%
DB DC Total
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
32% 4% 36%
DB DC otal
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
19% 11% 30%
DB DC oal
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
32% 3% 35%
DB DC oSl
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
19% 8% 27%
|8g6 4b
Pennyslvanla State Empl oyees' Retirement System (SERS)
Projected Replacement Ratio Analysis
Proposed Hybrid Plan under HB 4fr Future State Police Oficers
Based on Valuation Salary Scale Assumption
Hire Age = Z Hire Age " Z7 Hire Age =10
LRetur 6%
Sclc@=$s0,000
Retireme
_
nt Age L Total L Total L Total
zYears Ix J8x zx 8x J9x z8x J0x z0x l0x
0 9x 4Jx 0x 10x lx 4x JJx l0x 4zx
LRetur 7.5%
Sclcq=$s0,000
Retirement Age L Total L Total L Total
zYears 7x zJx z9x 8x zlx l

^
J0x z4x lx
0 9x zx zx J0x 44x

5x JJx l1x 48x



LRetur 9.X ~ *
Sclcq =$s0,000
-. _
_

Retirement Age L Tota|


,

Total L Total
zYears 7x Jx zlx 8x Jx zx J0x J7x z7x
0 9x llx 4zx J0x z9x l9x JJx zx l1x
1
-
'
`
:
`+
.
Pm NwPN6mERremmSy
uWWZ
N B
lm>fM M13 {24.5) l4 (60,1)
.n Doslgn Hyhd lndm1% (29.5) (242.8) lP
r l@ N Nm10Yosr(Fa205-203) (1,42.0) |1.W~ (479.@
Nm10Yoar(F203204 ) LJ
NYmT|e 4 1S. .W- 4
BoslMno o_eRb ro_a eoR uImPrPlanBl Bon |a_ Sum@ cmum_a_5mMlDom
@am Pf0 00 Q||a m~g at@ Coh DNN unA CohMboh DN cwwee|ae
b0m 8 | lnml Mom 8N vWon
NDw 0D q M||m|0Q 0||0N 00l 0D !M Ge0oml 00| 10 UPUM U00M ||0|H0O LlMB0 rlH0l D DD |MO P0Ml 6NM 0 UM0000 0ND O00 D0l W0 0Bf0 00| 0W|
& 8 6 0 m m 8 8 8 & B w & L W L m w
7/1103 215 25.99g. 20.S% 20.5 20.5 20.5 1,491.7 1.=7 276.4 3470.1 63.90 2M9% 2.50 20.50% 20.50 20.5% 1,491.7 1.272.7 2.74 32,470.4 8390
7111014 216 26.9% 2.0 2.00% 2.00.
2.00" 1,80.5 1.571.8 3,483 35,39 .0 61.66 26.97% 25.00 2.00' 25.03 2.0" 1,8W7 1,57.8 3,45.3 3,400.0 61.69 2.2 1.8 4.0 2.2 1.8 4.0
7111015 217 :.10' N 25.10% 28.10' 2.10% 2,237.3 1,783.8 4,01.1 37,975.0 5U1% 28.06% N 2 2.JZ 28.12% 2240.0 1,76.1 4,0.1 37,976.8 59.91% 27 0.3 30 4.9 Z1 7.0
7111016 zcs 29.0% N 29.03% 2.03% 2.03% 2,40.0 1,814.1 4.1 40,197.3 61.81% 2.71% n 2.79 28.8 28.8% 24.4 1,8.2 .8 40,170.0 58.6 (7.8) (13.9) O) (11.8) (14 5)
T1Q17 7 3o.0% n 30.0% 3.0% 30.0% 287.9 1,9.3 4,5.2 4 Q 2.0 N 2.81% 2.74% 2.74% 2S.1 1,9.5 48.8 4,,$ .W l<1 I (J M (.8) (e. 11
711/018 20 38% nl 3.8% 30.80' 30,80'. 2n1.r 2019.8 4,791.5 4,37M >Z 30.2 2 0.% .W < 1,97.0 4.7.6 4,2.2 5&5% (1) (328) (6.9) (59.6) \P (12.0)
7/019 221 30.70% no 3.70% 30.70% 3,70% 2,878 2,03.3 4,923.1 4,1W3 5.7m 7.WW n W@
Q?4% W.JW 281.8 2,01.8 4.83.6 4,03.0 57.79 (48.0) (41.5) M) (107.8) [108) ~
7/1100 22 30.6% no 3.67% 3.87% 30.67% 2974,4 2.08.9 5,071.3 43,&.8 59.0% 2.7% n 2,n, 30.01% 30.1% 2914.9 208.1 4,W. 4,778 59.01% (59.5) (4.8) (10U) (J1) (1 +
711 021 20: 30.83. n 30.83% 30.8% 3,83% 3,07.9 2,188.0 5,26.9 43,950.6 80.0% 29.8% n/ 2.8 30.0% 30.09% 3,017.7 2112.3 5,13.0 43,7528 59.l% (70.2) ($.7) (125.9) (:7.3) Q) ("51,7)
711102 2024 30,87% No 30,87% 3.87% 30.87% 3.21.9 2 3.8 5,45.7 43,$0.2 0.T 2.70 n 2.70% 30.0% 30.0% 3,JZ.z 215.8 5.80.0 4,335.5 81.14% (81.7) (6.0) (145.7) (319.0) I (57.)
711/3 2025 30.88% no 30.88% 3.88% 30.88% 3,313.9 2,2.1.2 5,55.1 4s703 6W 29.59 a/ 2.59% 2.98". 2.99% 3,21.7 2211.0 M37 42,651.3 MW (S.2) (0.2) (1824) (411.2) JM#)
7tl 4 2026 30.8% n 3.85% 3.85% 3.89% 3,42.0 2,338.8 5,765.6 41 .W.7 .W ?A N 2 Z Z# 3,W4.0 2280.7 5,68.7 41,703.1 6.16% (103.0) (7.9) (180.9) (514.2) ? |D
7tl 5 ZX 30.89,, N 3.89% 3.M% 3.89% 3.532.8 2404.0 5,96.8 40,740.1 l.3" 2.3 N Z 29.8% 2.% ,41. 2317.6 5,73.6 %4 85.91% (114.8) (8.4) (12) (89.0) i29) (1,1'1,?)
7 G 2028 30.88% Na 3.8% 30.8% 3.8% 3,15.7 2.4727 6,1oa4 39,248.9 6.34% 2.19% N Z.19 2.7% 2.n' 3,5.7 2.378.G 5,888.6 3,971.4 67.% (1.0) (93.6) z1.s) 0>c; (5.7) (1,31.7
711'7 Z 30.88% n 3.8 3.8% 3.8% 3,740.6 2.53.8 6. 37,-7.0 705" 2.0% n 2.0 2.71% 2.71% 3,66 -9 37.155.2 85.8% (137.0) (101.6) (8920) I l1.0 .0|
7/l Z 3.87% n 30.87 :.87 3.87 3,88.1 2,614.1 6,40.2 ,3 72.811 2. Nu 2W 2.% 2.64% 3,697.9 25.6 6.205 3.01.4 71W (1^) (10.5) (27.7) (1:W1 (17.8) (1.M.O!
7/ 2031 30.. n 3.87 3.87% 3.87 3,95.7 2,697.3 6,61.0 32.88.9 752 2.79' na 2.79 2.5% 2.5% 3,79.S 2S0.0 6.36.5 41 74.60% (1W./ (:z.a, P (1,199.4) D4. 1j 4.1W.}
7/030 203 3.87% n 3.87% 30.87% 30.87 4,08.6 g761.5 6,8.1 zc,1 7.9% 28 n 2.68 2.53% 2.5J% 3,85 2.6.4 6,5W.8 2,718.0 7. 1170.1) (12.1) (25.) (1.:9.5) |I.
71/1 Z 30.87% N0 30.87% 30.87% 30.87 4,175.8 Z37.5 7,013.3 26,71.5 8,70 W N Z Z.0 W.% 3,993.7 2703.2 6,69.9 2,488.5 79.8% (181) (13.3) (316.4) (1.551.6) (1,1.5) |Z.7%J)
M 20 3.87% N 3.87% 30.87% 0.8P 4,290.1 291.7 7,204.8 Z,123.9 8.1%
241% N 28.41% 2.45% 2.45% 4,098.7 2,75.8 6,874.3 2,8.1 8.8% (191.4) (139.1) {T. (1,743.0) (1,S8 (3,0
? ZW 30.88% N 30.88% 30.88% 3.88% 4,408.S 299.9 7,40.4 18,988.9 88.67% 2.8% n 28. 2.41% 44W 4,5.7 2,8.6 7,0$3 18.70.2 86.08% (20.8) (149.3) (32.1) 11.95.8) (\.w^) |1<t|
71113 20 17.57 N 17.61 17.51 17.57 3,120 1,20.9 4,38.9 14,.0 80,27% 14.85% n 14.85" 16.07% 16.07% 2,909,8 1,050.4 3.98.0 14.0Sl .6 8.5% (213,4) (155.5) (W .S} (2.1.2) ( .=} (3,797.8)
71!03 207 14.13% N 14.13" 14.13 14.13 2.275.3 1,30.0 3,53 9.156.7 93.81% 11.30% n 11.3% 1261% 12.61% 2,00 1,141.S 3,19.5 8.896.5 93.4% 123) (161.5) (3.8) 12.31.5) (1,70,9) 14,181.41
71106 203 1235 N 1238" 1239 12.31 1W.2 1,2.5 3.217.7 8.ne.4 95,58% 9.40 n s.40% 1 0,81% 1061% 1.759.3 1,04.8 2814.1 6,5.0 9.4% 12329) (170.7) (403.6) (.614.4) (:.+t, (.c|
71/37 2 10.89 N 10.89 10.81 % 10.89% 1,80.5 1,113.9 2.914.4 5,003 96.'% 7.80 no 7.80% 9.31% S 31% 1,555. 9 $34.8 2.40.7 4,T5.7 9.53 (24.5) (179.1) (42.7) (28.0) (149.7 (5,D,7)
71/ 2 92% N 9.24% 9.2% 9.24% 1,57 95.0 2,51.7 3,480.7 97.81% e.02 na S.0% 7. 7.1 1,37.4 768.7 2.106.1 3.278 9.13% M1.3) 11&.3) (45.6) (3,110.3) (233.0) _4 3}
71/ 201 7.% N 7.8% 7.8% 7.8% 1,3. 81.5 2.217.3 21.6 98,8 447 no 4.47% 8.% 1,1248 e.2 1 ,783.0 1,881.7 95,, 1-0) (TW4) \^ (3,371.3) ~I l
711/ 202 6.8 M 8.8 86% 5.6% 1,205.6 T1.0 1,92.8 1,146.0 9.3 1s% w 3.18% 5.07" 5.07' 9>26 5320 1,44.6 89.9 99.28% (2.0) (189.0) (45.0) (3.8.3) (718.3) (8.
71/1 203 5.3% n 5.30% 5.30' 5.30% 1,011.1 5n.e 1,M.0 306.0 W.76% 1.80% n 1.80". 3.80% 3.8% 750.4 390.4 1,140 0 78 W.01W (20.7 (187.5) (4.) l3.85.o) (8) WI
7111042 20 4.2% Na 4,2% 4.29% 4.2% 80.e 485.8 1,32.6 (95.0) 10.06% 0.7 no 0.74% 28% 285% 583.1 300,2 83.3 (250.0) 10.19'.4 (257.7) (1858) (43.3) (4,152.7) 13.19.4) 01|
H8ane mo HuR
Cnlnbut|on Htoa Cntrbuon DUa_ameaem~-veae_
Bloded @ |aun|o-+_
Val1oon Fscl Prliminar Cllar Fnl OB OB and O Generl Toal U0V000 u0000
W b L M
1211!013 2015 30.93% 20.50% 20.5% 20.50% 524.2 1.26.3 16,442.8 58.18%
1231/014 2016 31.31% 25.00% 25.0% 25.00% 680.5 1,595.5 19,137.6 5.61%
1211015 2017 31.52"A 2.50% 29.5% 29.SOo 804.8 1,94.1 19,897.4 57.35%
121!016 2018 30,93% ns 30.93% 30.93% 870,7 2,103. 19,608.4 58.46%
1211017 2019 30.26% no 3.2% 30.6% 879.3 2,12.8 19,427.1 59.70%
1211018 2020 29.49% na 2.49% 29.49% 88.1 2,138.0 19,14.9 81.08%
1211019 2021 28.74% na 28.74% 26.74% 891.1 2,152.4 18,83 .5 62.4%
1211020 202 28.02% ne 28.02% 28.02% 697.5 2167.9 18,501.9 6,83%
121/021 203 27.32% na 27.3% 27.32% 90.0 2,183,7 18,140.7 65.194
1211202 2024 26.65% nQ 2.65% 26.65% 910.7 2, 199.8 17,750.9 68.56%
12112023 2025 X M0 Z 26.00% 917.4 2,216.0 17,328.4 67.93%
121/024 2026 25.3% na 25.38% 2,38% 924.5 2,23.1 16,875.0 69.32%
1231105 2027 24.79% n/o 24.79% 24.79% 93.1 2,251.5 16,387.4 70.7%
12112026 208 24.20% na 24.20% 24.0% 939.3 2,28.9 154 7.16%
12112027 209 23.8% l0 2.64% 23.8% 9.1 2,287.6 15,278.3 7.8%
1211202 2030 23.09% na 23.09% 23.09% 95.7 2,306.1 14,66.9 75. 13%
12112029 2031 2% na 2.56% 22.56% 96.8 2,325.5 13.99.4 76.67%
121/2030 2032 2.05% na 2.05% 205% 971.0' 2,35.4 13,271.9 78.6%
123112031 2033 21.5% nls 21.57 21.5% 979.9 2,36.8 12,497.1 79.89%
121102 203 21.10% n/a 21.10% 21.10% 98.9 2,388.6 1 1,665.6 81.56%
1211033 2035 2.6% na 20.6% 20.6% 998.0 2,410.5 10,7827 8.9%
121/ 20 20.% na 20.20% 20.20% 1,007.7 2,43.0 9,795.5 85.08%
1231/035 2037 19.Wk no 19.76% 19.78% 1,017.1 2,45.8 8,745.9 86.9%
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1231/037 2039 18.9% na 18.94% 18.94% 1,037.4 2,55.9 6.40. 90.8%
1211038 200 18.$% nla 18.56% 18.58% 1.0.8 2,532.8 5,08.4 928%
121/2039 201 14.82% n/D 14.82% 14.84 83.5 2,085.7 3,695.6 94.91%
1211200 202 11.98% na 11.98% 11.9% 719.7 1 ,73.4 2,4.9 S6.73%
121101 203 8.68% nla 8.88% 8.8% 550.0 1,328.5 1,513.8 9.01%
1231102 204 6.93% na 5.93% 6.9% 42.4 1,06.7 94.1 9.7%
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28.65% na 26.65% Z.Uo 869.1 2,099.1 20,50.3 61.1%
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24.81% na 24.81% 25.3% 870.1 2,101.7 19,370.6 8.26%
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23.12"A n/1 23.12% 23.83% 87.8 2,108.2 18,033.1 8.34%
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1%11014 2016 31.31% 25.C0% 25.W. Z.U 60.5 1,595.5 19,137.6 57.61% 31.32" 25.00% 25.0 25.oi 62.7 1,60 .7 2,273.3 53.87% 2 5.2 3.0 7.2
1211015 2017 31.52% 2.5% 29.5'/ 2.50% 804.8 J,W .T 19,697.4 5.35% 31.31% 2.50% 2.5 2.5% 808.7 1,9.1 22701.2 53.85% 3.9 9.0 6.9 18.2
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12311018 2020 ZV W 29.49'. 2.49% 85.1 2,13.0 19,14.9 61.08% 2.67% B4 28.e7% 28.8% 89.4 2,09.8 21,81.3 58.0' (15.7 (38.2) (26.4) (6.7
12311019 2021 28.74'. 0 28.74% 28.74% 891.1 2,152.4 18,13.5 64 27.73% na 27.7% 27.9% 80.6 2,103.0 21,216.4 59.55% (20.5) (49.4) (46.9) (114.1)
12311020 202 28.02% nu 28.02% 28.0 87.5 2,18.9 18,501 .9 63.83% 28.82% NB 26.8% 2.13% 872.2 2108.8 20,716.5 61.03% (25.3) (61.1) (175.2)
12311021 202 27.32% ma 27.:' 27.31 904.0 2,183.7 18.140.7 65.19% 25.93% N0 25.93% 28.9% 873.8 2,110.7 20,189.0 62.51% (30.2) (73.0) (1024) (24.2)
1%31/02 2024 26.85% 0 28.8% 26.65% 910.7 2,199.8 17,75.9 6.5% 25.08% n0 2S.08% 25.51% 875.9 2,115.5 19,62 .8 63.9% (3,8) (8.3 (137.) (3.5)
1%311023 202 26.00% Mu 26.W. 2.00% 917,4 2.216.0 17,328.4 67.93% 24.25% A0 24.25% 24.75% 87.8 2120.2 19,018.3 65,4% (39.6) (95.8) (178.8) (42.3)
124 2 25.38% na 25.3 25.3% 9.5 zm .1 16,875.0 59.32% 2345% wo 2.4W 24.02'. 879.9 2125,4 18,37.0 68.9% I+N (107.7 01.4) (5.0)
121102 2027 24.79% n 24.79% 24.79'A 932.1 2,2$1.5 16,37.4 70.7 2.89% Wu 26% 23.3% 88.8 134 17,681.0 88.51% (49.3) (119.1) (70.7) (65.1)
121106 Z 24.20% n 24.20% 24.20% 939.3 2.26.9 15,8.4 716% 21.9% A 21.9. 26% 85.1 2, 13.1 16,93.7 70.09% (5.2) (130.8) (24.9) (785.9)
1231/027 2029 23.6% n 23.6% 23.6% 97.1 2,287.6 15,278.3 7.63% 21.21% wb 21.21% 2.0% 88.2 2,145.4 16,139.5 71.70% (S8.9) (142.2) (38.B) (928.1)
12112028 2030 23.09% na 23.09% 2.09% 95.7 2,30.1 14,60.9 75.13% 20.51% na 20.51% 21.41% 891.5 2163.4 15,287.9 73.37% (83.2) (152.7 (47,0) (1.080.8)
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12311030 2032 2.05% W 2.05% 2.05% 971 .0 2,35.4 13,271.9 78.26% 19.18% 0 19.18% 20.26% 899.0 2,171.5 13,38.5 76.92% (2.0) (173.9) (586.7) (1,418.)
123112031 2033 21.57% W0 21.5% 21.5% 979.9 2,36.8 12.497.1 79.8% 18.5 n 18.5% 19.7% 93.8 2,187 12,31 1.4 78.8S' (6.3) (18,1) (86.0) (1,60.3)
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1211203 235 20.84% nB 20.8% 20.6% 93.0 2,410.S" 10,762.7 8. 14.88% n 14.8% 16.21% 790.7 1,98 9,92.1 8.02% (07.3) (500.7 (95.0) 74D
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1211015 2017 31.5- 2.50% 29.50% 29.50% 8.8 1 ,94 .1 19,697.4 57.5't 31.37% 29.50 29.50% 2.5% 808.5 1,952.7 2.747.0 5.80% 3.7 8.8 . 15.5
121/018 2018 30.93% N 30.93'o 30.93% 870.7 2,103. 19,608.4 58.48% 30.83% N 30.83% 30.75% 87.4 2,05.2 2550.6 5.04% (3.3) (.0) 3.3 7.5
1211017 2019 30.26% na 30.26% 30.25% 879.3 2.123.8 19,427.1 59.70% 29.82" na Z. 29.97% 873.2 2,109.0 2,270.0 58.37 (6.1) (14.8 (.8} (.3)
1211018 2020 29.49% N0 29.49% 2.49% 885.1 2.13.0 19,14.9 61,08% 28.91% M0 28.91% 2.10% 875.0 2,115.9 21,882.9 57.83% (9,1) (2.1) (11.9) (9.4)
1211019 2021 28.74% n3 28.74% 28.74% 891.1 2.15.4 18..5 .% 2.02% M 2.02. 28.2% 88.9 2,12.8 21,471.1 59.28% (12.2) (2.8) (24.1) (59.0)
121100 202 28.02% n/a 28.02% 28.0% 87.5 2,167.9 18,501.9 83.83% 27.17 0 27.17% 27.4% 82.3 2.131.1 21,05.6 80.72% (15.) (6.8) (39.3) (95.8}
12311021 2023 27.32% n/a 27.32"A Z. 94.0 2,18.7 18,140.7 65.19% 25.33% na 28.3% 28.65% 85.6 2,139.1 20,5.3 82.15% (18.4) (4.6) (f.7) (140.4)
121/2022 2024 26.65% W0 26.65% 2.65% 910.7 2,19.8 17.750.9 6.5% 25.53% n' 25.5% 25.90% 889.3 214.0 20,045.S 63.59% (21.4) (51.8) (9.1) (192.2}
12311023 Z 26.0% na 28.00% 2.0 917.4 2,216.0 17,38.4 67.9% 24.75% na 24.75% 25.18% 83.0 2, 15.0 19.50 .3 65.0% (24.4)
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123112024 206 25.38% n 25.38% 25.3% 94.5 2,23.1 16.875.0 89.3% 24.01% na 24.01% 24.5% 897.3 2,167.4 18,914.4 66.48% (27.) (65.7 (13.7 (18.9)
1211025 2027 24.79% na 24.79% 24.79% 932.1 2,251.S 16,3.4 70.7% 23.29% n0 23.29% 23.8% 901.7 2,178.1 1 8,28.6 67.96% (30,4) (73.4) (161.1) (390.3)
1211026 208 24.0% 00 24.20% 24.0% 939.3 2,26.9 15,854 7.16% 2.SS% W 2.5% 23.20% 98.1 2,18.5 17,601.9 69.4% (33.2) (80.4) (194.3) (470.7
121/027 229 23.6% nD 23.8% 23.8% 94.1 z2.0 "b,ZT.3 7.6% 21.00% r 21.9 Z.V 910.8 2.0.0 1.88.5 71.0% (36.3) (87.6) RN (6.z)
121/028 2030 23.09% n/o 23.0% 23.0% 95.7 2.306. 1 14,660.9 75.13% 21.25% n/ 21.5% 2.01% 916. 2.213.1 16,06.6 72.65% (38.5 (9.0) (69.1) (651.3)
1231/029 201 2.5% n/a 2.56% 256% 962.8 2,325.5 1 3,99.4 76.67% 20.6% n 20.80% 21.43% 921.2 2,25.2 15,27.9 74.31% (41.6) (100.3) (10.7 (51.S
1231/030 2032 2.05% rJa 2.05% 205% 971.0 2,35.4 1 3.271.9 7.6% 19.99% n/a 19.9% 20.90% 927.0 2,29.1 14,311.6 76.07% (4.0) (10.3) .7 (857.9)
121/2031 Z 21.57% 0o 21.57% 21.f% 979.9 2,38.8 12.497.1 79.89% 19.42"- 00 19.42% 20.40% 93.6 2,255.1 13,301.3 7.9% (46.3} (111.7 (41.0) (969.6)
12112032 203 21.10% nla 21.10 21.10% 98.9 2,38.6 11,68.6 81.56% 18.87% na 18.87% 1 9.91% 90.8 2,272.4 12,219.1 79.85% (48.1} (116.2) (49.1) (1,08.8)
1211033 2035 20.S% na 20.6% 20.8% 99.0 2,410.5 10,76.7 8.9% 15.8% na 15.80% 18.91% 824.5 1,991.6 11,0.8 81.90% (173.5) (418.9) (62.6) (1,50.7
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121103 203 19.3% NB 19.3 19.34% 1,027.0 2,480.6 7,617.7 88.84% 14.42% na 14.42% 15.73 8428 2,035.8 7,792.2 87.4% (18.} (4.8) (1,169.7) (2,86.1)
1211037 2039 18.9% N4 18.9% 18.94% 1,037.4 2,505.9 8,40.2 90.80% 14.03% B4 14.0% 15.40% 851.5 2,056.9 6,596.7 89.424 (185.9} (49.0) (1,355.6) (3,275.1)
121/038 204 18.5% na 18.5% 18.56% 1,04.6 2,52.8 S,0.4 92.8% 13.66% na 13.8% 15.10% 81.6 2,081.1 5,39.3 91.5% (187.0) (41.7) (1,52.6) (3,726.8)
121/039 2041 14.8% na 14.82% 14.82% 863.5 2,05.7 3,895.6 94.91% 9.97% na 9.97 11.49% 678.3 1 ,63.7 3,96.0 93.7% (187.2) (45.0} (1,7.8) (4,178.8)
1211040 202 11.9% na 11.98% 1 1.98% 719.7 1.78.4 2,4329 96.7% 7.17% na 7.17% 8.7% 53.2 1,85.8 2.63.6 95.76% (187.5) (45.8) (1,917.3) (4,631.6)
121/041 Z 8.8% N8 8.8% 8.88% 550.0 1,3.5 1,513.8 98.01% 4.1 1% na 4.11 % 5.78% 361.8 873.9 1 ,782.8 97.0% (18.2) (4.6) (,105.S) (S.06.)
121/042 Z 6.9% WB 6.9% 8.93% 424 1,08.7 98.1 98.78% 21V na 2.19% 3.93% 25.4 812.2 1.25.0 98.07% (189.0) (45.5) (2,29.5) (5,52.7
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