FROM: Amy McInerny, Chief Financial Officer
SUBJECT: Actuarial Experience Study by Segal
RECOMMENDATION:
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Review and approve the Actuarial Experience Study for the period from July 1, 2022 to June 30, 2025, and adopt Segal's recommended actuarial assumptions.
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BACKGROUND:
Every three years, SBCERA engages its actuarial firm to prepare an Actuarial Experience Study (Study). The purpose of the Study is to review the economic and demographic assumptions for the prior three years. The actuarial assumptions are then incorporated into SBCERA's actuarial reports for the next three years. Assumptions are made about all future events that could affect the amount and timing of the benefits to be paid and the assets to be accumulated. Each year, actual experience is compared against the project experience, and to the extent there are differences, the future contribution requirements are adjusted.
A summary of the recommended assumptions is found on pages 5-7 of the Study. The major recommendations include the following:
* Reducing the current investment return assumption of 7.25% to 7.00%.
* Separating salary assumptions associated with individual salary increases by Tier 1 and Tier 2 membership. For General and Safety Tier 1 members with ten or more years of service, increasing the salary increase rate. For General and Safety Tier 2 members with eleven or more years of service, increasing the salary increase rate.
* Increasing the explicit administrative expense load from 0.90% to 1.05%.
* Adjusting assumptions associated with retirement rates.
* Changing mortality base rate tables from 2010 to 2016 and adjusting mortality assumptions.
* Incorporating reductions in disability incidence for general members and increasing disability incidence for safety members.
* Adjusting termination rates to reflect a higher incidence of termination overall.
* Adjusting the current retirement rates to reflect retirement age changes.
* Adjusting the assumpti...
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