Arizona State Retirement System - Amazon S3 · Arizona State Retirement System ASRS Investment...

May 14, 2013

Arizona State Retirement System

National Institute of Governmental PurchasingArizona State Capitol Chapter

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Arizona StateRetirement System

Discussion Topics

ASRS Financial Health

2013 ASRS Legislative Initiatives

DC and Retirement Study Committee

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ASRS Investment Returns(as of June 30, 2012)

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1 Year 3 Year 5 Year 10 Year Inception

Market Returns 1.3% 13.2% 1.8% 6.3% 9.8%

July, 2012–Dec. 31, 2012 6.2%

July, 2012 –Jan. 7, 2013 7.7%

July, 2012 –May 10, 2013 16.2%


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ASRS Investment Returns

-20%

-10%

0%

10%

20%

30%

40%

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

8%


ASRS Investment Asset Allocation

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Investment Category Policy Target Policy Range

U.S. Fixed Income 26% 16-36%

Core 24%

High Yield 2%

U.S. Equity 40% 30-50%

Large Cap 28%

Mid Cap 6%

Small Cap 6%

International Equity 18% 8-28%

Developed Large Cap 13%

Developed Small Cap 2%

Emerging Markets 3%

Private Equity 7% 5-9%

Real Estate 6% 4-8%

Inflation Linked Assets 3% 0-10%

Commodities 3% 0-5%

TIPS 0% 0-5%

Risk Parity 0% 0-5%

Absolute Return 0% 0-5%

Opportunistic 0% 0-10%

GTAA* (Included in allocation above) 10% 8-12%

Green: Denotes asset classes typically absent from DC investment options.


Distribution of ASRS Pensionsas of June 30, 2012

79,269 = 69.30%

29,162 = 25.48%

5,134= 4.49%

641 = 0.56%

156 = 0.14%

46= 0.04%

11 = 0.01%

7 = 0.006%

4 = 0.004%

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

$0 -$25,000

$25,000 - $50,000

$50,000 - $75,000

$75,000 - $100,000

$100,000 - $125,000

$125,000 - $150,000

$150,000 - $175,000

$175,000 - $200,000

$200,000 and over

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Average Pension$19,568.00

Average Years of Service

37.3

40.0

35.6

33.4

33.6

33.5

32.1

28.3

15.2


Defined Benefit Plan

ASRS Defined Benefit Plan 1996 – 2012

Fiscal Year End June 30

Market Return

Market Value of Assets

(in millions)

Excess Actuarial

Return

Actuarial Funded Status

Contribution Rate* EE & ER Contri-butions

(in millions)

Benefit Payments (in millions)

# of New Retirees by Year

Avg. Monthly Benefit**

Actual Normal Cost

1996 16.7% $13,917.6 8.7% 113.2% 3.36% 5.44% $299.7 $536.5 3,845 $ 920

1997 20.6% $16,397.9 12.6% 117.1% 3.20% 5.20% $309.4 $580.9 3,578 $ 945

1998 21.3% $19,390.0 13.3% 120.7% 3.05% 5.21% $321.3 $628.6 3,353 $ 982

1999 16.8% $21,836.4 8.8% 116.6% 2.85% 5.24% $348.0 $678.9 4,380 $1,024

2000 10.0% $23,187.6 2.0% 120.4% 2.17% 5.24% $283.8 $788.6 4,822 $1,125

2001 (6.7%) $21,872.9 (14.7%) 115.1% 2.17% 5.48% $367.2 $920.4 4,224 $1,211

2002 (8.2%) $18,594.9 (16.2 %) 106.4% 2.00% 5.36% $321.8 $1,029.1 3,954 $1,371

2003 2.4% $18,116.8 (5.6%) 98.4% 2.00% 5.88% $375.5 $1,162.8 5,955 $1,401

2004 17.5% $20,749.6 9.5% 92.5% 5.20% 5.95% $866.0 $1,326.4 6,430 $1,487

2005 8.5% $21,901.0 0.5% 86.1% 5.20% 6.52% $946.7 $1,510.7 7,005 $1,508

2006 9.8% $23,641.1 1.8% 84.3% 6.90% 6.51% $1,265.2 $1,652.6 7,143 $1,566

2007 17.8% $27,639.0 9.8% 83.2% 8.60% 6.58% $1,631.2 $1,784.0 7,393 $1,584

2008 (7.5%) $25,296.1 (15.6%) 82.8% 9.10% 6.71% $1,805.7 $1,931.1 7,784 $1,596

2009 (18.1%) $20,403.5 (26.1%) 79.3% 8.95% 6.46% $1,667.0 $2,012.0 6,615 $1,613

2010 14.6% $23,142.1 6.6% 76.7% 9.00% 6.49% $1,702.0 $2,270.0 8,845 $1,619

2011 24.6% $28,033.3 16.6% 75.8% 9.60% 6.45% $1,735.2 $2,441.0 8,730 $1,627

2012 1.3% $27,604.5 (6.7%) 75.8% 10.50% 6.76% $1,863.9 $2,577.2 9,227 $1,631

2013 16/2%*** $31,045*** 10.90% 6.82% * The actual contribution rate is what each active member contributes during a fiscal year. The normal cost rate is what the contribution rate would be

if there was no surplus or deficit to amortize. ** Over the 16-year period, average monthly benefits have increased 77% and the number of members retiring each year has increased by 240% *** As of May 10, 2013

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ASRS Contribution Rates

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Pension LTD ACR2012-13 10.90% 0.24% 8.64%

2013-14 11.30% 0.24% 9.20%


2013 Legislative Initiatives Administration

Federal Conforming Changes – increases the annual limit of retirement benefits; non-portability of normal retirement benefits; termination or partial termination of fund would cause full vesting

Amortization Period Member Identity Security – identifies what data the ASRS will release and what

data won’t be released Health Insurance

ASRS Self-insurance – adding language to allow the ASRS to self-insure Long Term Disability Plan

36-month calculation for average monthly salary 60% benefit level

Plan Design Eliminate PBI for new member

Survivor Benefits Non-retired survivor benefit redesign – simplify the non-retired survivor benefit

calculation by eliminating the PV option and allowing a straight life annuity only

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Defined Contribution and Retirement Study Committee

The Legislature established this Committee in the 2011 session to address the concerns expressed “globally” about DB plans The Committee is comprised of:

Investment Committee of the Treasurer’s Office 3 Senators 3 Representatives ASRS & PSPRS Representatives

Reports: Interim 12/31/2011; Final 12/31/12

Appropriations $50,000 each from ASRS and PSPRS

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The Committee shall study: Feasibility and cost of transferring existing members

of a public retirement system or plan to a new defined contribution plan

Recommendations to the Legislature: Any proposed changes should only apply to future

employees or as a choice to existing employees

For non-public safety employees, retirement ages for new employees should match that of Social Security

Contributions should never be less than what is required to move the plans to fully funded status

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The Committee shall study: All existing supplemental retirement plans of PSPRS

and ASRS and the feasibility of merging these supplemental plans

Recommendations to the Legislature: There doesn’t appear to be any cost savings to either

members or employers by consolidating these plans at the state level

Employers participating in all four retirement systems should be encouraged to use the deferred compensation plans offered by the systems rather than contracting with their own providers

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The Committee shall study: The definition of compensation and each plan’s

“spiking” capability

Recommendations to the Legislature: Limit pensionable compensation to base salary

excluding earnings from off-duty work and lump sum payouts of vacation and/or sick leave at termination

Consider restricting “other methods of increasing compensation that affect final retirement benefits”

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