New York City Retirement Systems Part II Experience Study Report Proposed Assumptions – TRS and BERS
Executive Summary
This report summarizes the Part II Experience Study performed by Milliman of the five New York City Retirement Systems (“NYCRS”):
- Section I – New York City Employees’ Retirement System (NYCERS)
- Section II – Teachers’ Retirement System of the City of New York (TRS)
- Section III – Board of Education Retirement System of the City of New York (BERS)
- Section IV – New York City Police Pension Fund (POLICE)
- Section V – New York City Fire Pension Fund (FIRE) This report includes Sections II and III for TRS and BERS.
The primary purpose of the Part II Experience Study Report is to provide proposed actuarial assumptions based on the experience for the indicated systems:
- This report provides information on key pre-retirement demographic assumptions – withdrawal, retirement and disability – used in the actuarial valuations performed by the
- This report provides information on key salary-related actuarial assumptions – rates of salary increase and overtime (not applicable for TRS and BERS).
- This report provides information on the pre-retirement and postretirement mortality assumptions used in the actuarial valuations performed by the OA.
- This report is supplemented by Excel files containing full age service tables detailing the proposed assumptions.
The experience study includes information for the 10-year period ending June 30, 2021 as provided by the OA. This includes data from 2012 – 2017 contained in the historical database along with updates for the 4-year period ending June 30, 2021 completed by Milliman.
The following is a summary of the proposed assumptions and the potential impact on plan liabilities for TRS and BERS. Milliman was not engaged to perform a replication nor determine the cost impact of the proposed assumptions. Therefore, the comments reflect our thoughts on the potential impact, but will ultimately depend on the current active membership based on analysis to be conducted by OA.
TRS
| Summary of TRS Proposed Assumptions | ||
| Decrement | Proposed Assumption | Potential Impact |
| Salary | Lower rates of salary increase but some service periods with higher rates. | Reducing salary increases will result in lower plan liabilities. Actual impact to be
determined by OA. |
| Withdrawal | Lower rates of terminations for longer service members, although higher rates are proposed for shorter service members. | Reducing withdrawal rates results in higher plan liabilities. Actual impact to be determined by OA. |
| Retirement | Higher rates of retirement proposed at 20 or more years of service whereas lower rates are proposed for shorter service periods increasing the number of members to receive
the 2% formula benefit. |
Higher rates for longer service members will result in higher plan liabilities but actual impact to be determined by
OA. |
| Ordinary Disability | Higher ordinary disability rates for members not eligible for the 2% benefit formula and unreduced retirement plus elimination of the assumption for those eligible. | Higher rates of ordinary disability result in higher plan liabilities plus eliminating retirement eligible members
will result in higher plan liabilities. |
| Accidental Disability | Higher accidental disability rates for female members. | Increasing accidental disability rates results in higher plan
liabilities. |
| Ordinary Death | No change in the assumption. | No impact on plan liabilities. |
| Post Retirement Mortality | ||
| Service Retirees | Proposing adjustments to current custom table. Higher projected annuity factors for ages until early 70s and lower for older ages. | Anticipating higher liability for active members but potentially lower liability for retirees.
Actual impact to be determined by OA. |
| Disabled Retirees | Proposed assumption consistent with industry
standards, decreasing projected life expectancy. |
Lower life expectancies are
anticipated to decrease plan liabilities. |
| Contingent Beneficiaries | Proposed assumption consistent with industry
standards, decreasing projected life expectancy. |
Lower life expectancies are
anticipated to decrease plan liabilities. |
The actual direction of the impact of the changes to rates of salary increases, withdrawal and retirement is unknown. Changes to ordinary and accidental disability retirements will lead to higher costs. Changes to postretirement mortality tables will lead to higher costs for active members, but potentially lower costs for retirees. The net effect is probably an increase in plan liabilities, but the actual impact will be determined by OA.
BERS
| Summary of BERS Proposed Assumptions | ||
| Decrement | Proposed Assumption | Potential Impact |
| Salary | Lower rates of salary increase for longer service members but higher rates for shorter service members. | Reducing salary increases will result in lower plan liabilities. Actual impact to be
determined by OA. |
| Withdrawal | Lower rates of terminations for longer service members, although higher rates are proposed for shorter service members. | Reducing withdrawal rates results in higher plan liabilities. Actual impact to be determined by OA. |
| Retirement | Higher rates of retirement proposed at 20 or more years of service whereas lower rates are proposed for shorter service periods increasing the number of members to receive
the 2% formula benefit. |
Higher rates for longer service members will result in higher plan liabilities. |
| Ordinary Disability | Higher ordinary disability rates for members not eligible for the 2% benefit formula and unreduced retirement plus elimination of the assumption for those eligible. | Higher rates of ordinary disability result in higher plan liabilities plus eliminating retirement eligible members
will result in higher plan liabilities. |
| Accidental Disability | Higher accidental disability rates. | Increasing accidental disability rates results in higher plan
liabilities. |
| Ordinary Death | Higher mortality rates. | Increasing rates of mortality results in lower plan liabilities. |
| Post Retirement Mortality | ||
| Service Retirees | Proposed assumption consistent with industry standards, generally decreasing projected life
expectancy. |
Lower life expectancies are anticipated to decrease plan
liabilities. |
| Disabled Retirees | Proposed assumption consistent with industry standards, decreasing projected life
expectancy. |
Lower life expectancies are anticipated to decrease plan
liabilities. |
| Contingent Beneficiaries | Proposed assumption consistent with industry standards, decreasing projected life expectancy. | Lower life expectancies are anticipated to decrease plan liabilities. |
Excluding the impact of the changes to the postretirement mortality tables, we believe the changes in withdrawal, retirement, ordinary disability and accidental disability that are anticipated to increase plan liabilities will exceed the impact of the changes in rates of salary increase and ordinary death that are anticipated to decrease plan liabilities. Changes to the postretirement mortality tables are anticipated to decrease plan liabilities. The net effect is probably a decrease in plan liabilities, but the actual impact will be determined by OA.