MISSISSIPPI PREPAID AFFORDABLE COLLEGE …...Prepaid Affordable College Tuition Plan (“MPACT”)...

M I S S I S S I P P I P R E P A I D A F F O R D A B L E

C O L L E G E T U I T I O N P L A N – L E G A C Y P L A N

A C T U A R I A L V A L U A T I O N R E P O R T

AS OF JUNE 30, 2016

November 7, 2016

Board of Trustees

College Savings Plans of Mississippi

501 North West Street, Suite 1101

Jackson, MS 39201

Attention: Ms. Lynn Fitch, State Treasurer

Re: College Savings Plans of Mississippi Legacy Plan Actuarial Valuation as of June 30, 2016

Dear Trustees:

Gabriel, Roeder, Smith & Company (“GRS”) has performed an actuarial valuation of the Mississippi

Prepaid Affordable College Tuition Plan (“MPACT”) as of June 30, 2016. The purpose of this

actuarial valuation is to evaluate the financial status of the Program’s Legacy Plan as of June 30, 2016.

The liabilities and assets of the Program’s Horizon Plan are covered in a separate report and are not

included in this report.

This report presents the principal results of the actuarial valuation of MPACT including the following:

A comparison of the actuarial present value of the obligations for prepaid tuition contracts

purchased through June 30, 2016, with the value of the assets associated with the program as of

that same date;

An analysis of the factors which caused the deficit/margin to change since the prior actuarial

valuation; and

A summary of the actuarial assumptions and methods utilized in the actuarial calculations.

This report was prepared at the request of the College Savings Plans of Mississippi Board (the Board)

and is intended for use by the Board and those designated or approved by the Board. This report may

be provided to parties other than the Board only in its entirety and only with the permission of the

Board. This report should not be relied on for any purpose other than the purpose described above.

GRS is not responsible for unauthorized use of this report.

The valuation results set forth in this report are based upon data and information, furnished by

MPACT, concerning Plan benefits, financial transactions, and beneficiaries of MPACT. We reviewed

this information for internal and year-to-year consistency, but did not audit the data. We are not

responsible for the accuracy or completeness of the information provided by MPACT. Further, the data

and information provided is through June 30, 2016, and does not reflect subsequent market changes.

There are currently no Actuarial Standards of Practice that specifically refer to prepaid tuition plans.

We have followed the guidance from the Actuarial Standards of Practice on pensions due to their

similar nature.

Board of Trustees

November 7, 2016

Page 2

The valuation results summarized in this report involve actuarial calculations that require assumptions

about future events. The major actuarial assumptions used in this analysis were adopted by and are the

responsibility of the Plan and the Plan’s Board. We have not performed a detailed experience study,

but have performed some analyses on the assumptions as described in our Phase II Actuarial Audit

Report dated April 19, 2013. Economic assumptions are also reviewed annually. Based on our own

annual review of economic assumptions, limited analysis of additional utilization data received in

2014, and observations related to the difference between actual and expected benefit payouts, we

believe the assumptions adopted by the Board are within a reasonable range and are in compliance

with actuarial standards regarding pension calculations.

The Program was re-opened during the 2015 Fiscal Year. However, we understand that assets and

liabilities from the Legacy Plan (this closed plan) are accounted for separately from the Horizon Plan

(the new open plan), but pooled together for investment purposes. Since the two plans are pooled

together for investment purposes, we believe that it is reasonable to use the same investment return

assumption for both plans. This, in effect, treats the Legacy Plan as an open, on-going plan for

investment purposes. If the plans cease to be pooled for investment purposes in the future, the

assumed rate of investment return for the Legacy Plan may need to be lowered, resulting in an increase

in liabilities and unfunded liabilities.

Future actuarial measurements may differ significantly from the current measurements presented in

this report due to such factors as the following: Plan experience differing from that anticipated by the

economic or demographic assumptions; changes in economic or demographic assumptions; and

changes in Plan provisions or applicable law. We have performed an analysis of the sensitivity of

certain changes in future assumptions. See Section G of this report for additional details.

The actuarial assumptions are set by the Board based on consultation with the actuary. We believe that

the actuarial methods used in this report are reasonable and appropriate for the purpose for which they

have been used. In addition, because it is not possible or practical to consider every possible

contingency, we may use summary information, estimates or simplifications of calculations to

facilitate the modeling of future events. We may also exclude factors or data that are deemed to be

immaterial.

This report is not a recommendation to anyone to participate in MPACT. GRS makes no

representations or warranties to any person participating in or considering participation in the Program.

To the best of our knowledge, the information contained in this report is accurate and fairly presents

the actuarial position of the Mississippi Prepaid Affordable College Tuition Plan as of June 30, 2016.

Board of Trustees

November 7, 2016

Page 3

Under Mississippi Code 37-155-9 (6), the Board shall annually evaluate the actuarial soundness of the

fund. The term “sound” or “actuarially sound” is not explicitly defined in the statutes or in the

actuarial standards. To the extent it is used in this report, it refers to the situation where either:

(1) Assets meet or exceed liabilities on the valuation date; or

(2) Assets are expected to meet or exceed liabilities at a future date based on the measurements on

the valuation date and the expected future revenue based on the Program’s funding policy.

The Legacy Plan has a deficit of $126 Million as of June 30, 2016. This deficit is expected to grow at

the assumed rate of return of 6.75% per year. The Legacy Plan is projected to be insolvent before the

end of the 2025 Fiscal Year if all assumptions are met.

David T. Kausch is a Member of the American Academy of Actuaries (MAAA) and meets the

Qualification Standards of the American Academy of Actuaries to render the actuarial opinions

contained herein.

The signing individuals are independent of the plan sponsor.

Respectfully submitted,

Kenneth G. Alberts

David T. Kausch, FSA, EA, FCA, MAAA

KGA/DTK:rmn

3325

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan

MISSISSIPPI PREPAID AFFORDABLE COLLEGE TUITION PLAN

LEGACY PLAN

TABLE OF CONTENTS

Page

Section A Executive Summary

Summary of Results ...................................................................................................... 1

Discussion ..................................................................................................................... 4

Section B Plan Description

Summary of Plan Description ....................................................................................... 1

Section C Valuation Results

Principal Valuation Results ........................................................................................... 1

Gain/(Loss) Summary ................................................................................................... 3

Sensitivity Testing Results ............................................................................................ 4

Section D Plan Assets

Statement of Plan Assets (at Market Value) ................................................................. 1

Reconciliation of Plan Assets (at Market Value) .......................................................... 2

Development of Actuarial Value of Assets................................................................... 3

Section E Participant Data

Member Data Beginning to End of Year Summary ...................................................... 1

Member Matriculation Summary .................................................................................. 2

Member Payment Option Summary ............................................................................. 3

Section F Methods and Assumptions

Valuation Methods and Assumptions ........................................................................... 1

Section G Projection Results

Projection Results ......................................................................................................... 1

Section H Funding Policy

Funding Policy .............................................................................................................. 1

SECTION A

EX EC U TIV E S U MMA RY

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan A-1


LEGACY PLAN

SUMMARY OF RESULTS

Principal Valuation Results

Valuation Date: June 30, 2016 June 30, 2015

Membership Summary:

Accounts

Not yet Matriculating 12,571 13,842

Matriculated or Termination in Progress 5,502 5,308

Total 18,073 19,150

5.0 5.1

Assets

Actuarial Value of Assets (AVA) $ 306,085,437 $ 323,856,851

Present Value of Future Contract Payments $ 19,957,703 $ 24,905,059

Total $ 326,043,140 $ 348,761,910

Return on AVA for Year Ended June 30, 2016 2.11% 5.50%

Return on Market Value of Assets for Year Ended June 30, 2016 -2.79% 2.50%

$ 452,513,010 $ 476,528,201

Margin/(Deficit) $ (126,469,870) $ (127,766,291)

Funded Ratio # 72.1% 73.2%

Actuarial Liabilities (Present Value of Future Tuition Payments, Refunds,

Fees, and Administrative Expenses)

Average Years until Expected Enrollment If Not Yet in Payment Status

# Based on the Board’s funding target of 100%, this plan is not currently meeting the Board’s funding target and is not

expected to meet the target in the future without substantial experience gains or future infusions of cash.



LEGACY PLAN

SUMMARY OF ASSETS AND LIABILITIES AS OF JUNE 30, 2016

306.1

431.0

20.0

21.5

$0

$100

$200

$300

$400

$500

$600

$700

Assets Liability

($ in Millions)

326.0

452.5

PV – Present Value

ASSETS LIABILITIES

PV Future Contributions PV Administrative Expenses

Actuarial Value of Assets PV Benefits



LEGACY PLAN

FUNDED STATUS

June 30, 2016 June 30, 2015

Actuarial Present Value of Future Tuition Payments, Fees

and Expenses$ 452,513,010 $ 476,528,201

Actuarial Value of Assets (Including the Present Value of

Installment Contract Receivables)$ 326,043,140 $ 348,761,910

Margin/(Deficit) $(126,469,870) $(127,766,291)

GAIN/(LOSS) SUMMARY FOR YEAR ENDING JUNE 30, 2016

Margin/(Deficit)

(1) Values as of June 30, 2015 $ (127,766,291)

(2) Expected Contract Payments (Excluding New Enrollments)* $ -

(3) Expected Tuition Payments, Refunds, and Administrative Fees* $ -

(4) Interest on (1), (2), and (3) at Assumed Rate from Previous Valuation $ (8,624,224)

(5) New Enrollments (Actual) # $ -

(6) Projected Values as of June 30, 2016 [(1) + (2) + (3) + (4) + (5)] $ (136,390,515)

(7) Change Due to:

a. Investment Experience $ (14,451,759)

b. Tuition/Fee Inflation 6,157,264

c. Change in Plan Assumptions 6,471,699

d. Other Plan Experience During Fiscal Year 2016 11,743,441

(8) Total [(7)a + (7)b + (7)c + (7)d] $ 9,920,645

(9) Actual Values as of June 30, 2016 [(6) + (8)] $ (126,469,870)

* Discounted to beginning of prior year.

# The Legacy Plan is closed to new enrollments.



LEGACY PLAN

DISCUSSION

Actuarial Valuation

Gabriel, Roeder, Smith & Company (“GRS”) has performed an actuarial valuation of the Mississippi

Prepaid Affordable College Tuition Plan as of June 30, 2016.

The primary purpose of the actuarial valuation is to evaluate the financial status of the Plan as of June

30, 2016. This is accomplished by:

Determining the actuarial present value of the obligations for prepaid tuition contracts

purchased through June 30, 2016, and comparing such liabilities with the value of the assets

associated with the program as of that same date; and

Analyzing the factors which caused the deficit/margin to change since the prior actuarial

valuation.

This report summarizes the results under the current assumptions and also presents the impact of

variances in the rate of tuition and fee increases as well as the rate of investment return on assets.

In addition, the report provides summaries of the member data, financial data, plan provisions, and

actuarial assumptions and methods.

The statutes and the actuarial standards do not define the term “sound” or “actuarially sound.” For

purposes of this report we are defining this term to mean the following:

(1) Assets meet or exceed liabilities on the valuation date; or

(2) Assets are expected to meet or exceed liabilities at a future date based on the measurements on

the valuation date and the expected future revenue based on the Plan’s funding policy.

Financial Status of Plan

As of June 30, 2016, the present value of all future tuition obligations under contracts outstanding (and

including estimated future administrative expenses) at that date is $452.5 million. Legacy Plan assets

as of June 30, 2016, including the Actuarial Value of Plan Assets and the present value of installment

contract receivables, are $326.0 million.

The difference between the Actuarial Value of Assets of $326.0 million and Legacy Plan obligations of

$452.5 million represents a Plan deficit of $126.5 million. The comparable plan deficit as of the last

actuarial valuation as of June 30, 2015, was $127.8 million. The Legacy Plan is 72.1% funded. On a

Market Value basis, the Legacy Plan is 66.5% funded. The funded status is not appropriate for

measuring the settlement cost of the Plan. A funded status less than 100% is an indication that

additional contributions will be needed in the Plan to satisfy all the Plan liabilities, even if all

assumptions are met.

Liabilities of this Plan are backed by the full faith and credit of the State of Mississippi in accordance

with Mississippi Code 37-155-125. It is our understanding that this means that the State of Mississippi

will pay for the unfunded benefits when they come due in the absence of future gains.

The Legacy Plan’s deficit is expected to grow at the assumed rate of return of 6.75% per year. The

Legacy Plan is projected to be insolvent before the 2025 Fiscal Year ends if all assumptions are met.



LEGACY PLAN

DISCUSSION (CONTINUED)

Gain/(Loss) Analysis

The Legacy Plan experienced an overall gain during the year. The primary sources of the overall gain

were:

Tuition increases during the 2015/2016 to 2016/2017 Plan Years on 4-Year Universities being

lower than expected (4.7% increase in WAT versus 6.25% expected); and

Refunds on participants’ contracts along with less credit utilization than expected.

The overall gain was partially offset by investment losses as a result of the Plan experiencing less than

the assumed 6.75% investment return on an Actuarial Value of Assets basis.

Valuation Assumptions

Assumed Tuition Increases was reduced by ¼% from 6.25% to 6.00% for 4-Year Universities and from

5.75% to 5.50% for 2-Year Community Colleges. This assumption change placed upward pressure on

the funded status.

Valuation Methods

In accordance with the funding policy adopted by the Board, we have implemented an actuarial value of

assets method (also known as an asset smoothing method or funding value of assets method). The

method is detailed on page D-3 and spreads investment income above or below the assumed rate of

return over a 3-year period, subject to a 20% corridor around the market value. This method is intended

to reduce the volatility of the annual measurement of the funded status. This was first implemented for

the June 30, 2015 Actuarial Valuation.

Benefit Provisions

We understand there were no changes in the Legacy Plan provisions since the last actuarial valuation as

of June 30, 2015.

Plan Status

MPACT is now an open program. However, there are two sub-plans (or tiers): the Legacy Plan and the

Horizon Plan. The Legacy Plan covers beneficiaries who joined the plan in 2012 or earlier. The Horizon

Plan covers those participants who joined the Plan in 2014 or later. The Legacy Plan is closed to new

beneficiaries. However, for investment purposes, the assets of both tiers will be pooled and invested

together, thereby allowing for the use of an assumed rate of return associated with an on-going open plan

for both tiers. The funded status of the Legacy Plan, as of June 30, 2016 is 72.1%. The funded status of

the Horizon Plan is detailed in a separate report. The assumptions used to value the liabilities are

adopted by the Board based on recommendations from the Actuary. We believe the assumptions

currently in use are reasonable. Please see Section G to see how changes in assumptions (sensitivity)

affect the funded status.



LEGACY PLAN

DISCUSSION (CONCLUDED)

Future Outlook

The Actuarial Value of Assets recognized a 2.11% rate of return compared to a market rate of return of

(2.79)%. Unless offset by future gains, the funded status of the Plan is expected to decrease as the

market losses for the prior two years are recognized in the Actuarial Value of Assets over each of the

next two years.

As this plan contracts in size, the funded status is expected to decline in the absence of future experience

gains, since tuition payments are made at 100% of the amount due and the funded status is currently less

than 100%. This is illustrated in the June 30, 2016 valuation results where the funded status dropped 110

basis points from the June 30, 2015 valuation results despite the fact that the deficit dropped by

approximately $1 million.

SECTION B

P LA N D ES C RIP TIO N

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan B-1


LEGACY PLAN

SUMMARY OF PLAN DESCRIPTION EVALUATED JUNE 30, 2016

Legacy Plan (contract purchased prior to October 1, 2014)

Purchasing Contracts – Contract holders may purchase contracts during an enrollment period for

beneficiaries who are ages eighteen (18) years or younger on date of purchase. These contracts lock in

the cost of tuition for the contract holder at the time of purchase. The holder may choose between a

variety of school types and credit hours. Contracts available for purchase include the following:

University Plans

o 5-Year University (160 University Level Credit Hours)





Community College Plan o 2-Year Community College (64 Community College Credit Hours)

o 1-Year Community College (32 Community College Credit Hours)

University and Community College Plan

o 1-Year Community College & 4-Year Univ. (32 Community College and 128 Univ. Credit Hours)





Contract Payments – Contract holders may agree to pay-off their contracts in a variety of ways:

Lump-Sum Payment (Full Contract paid-in-full at time of enrollment to the Program)

1-Year Monthly Payments* (12 monthly payments after purchase of contract)








Extended Monthly Payments* (Monthly payments after purchase of contract for defined period up to and

including the year of high school matriculation)

3-Year Annual Payments* (3 annual payments after purchase of contract)

5-Year Annual Payments* (5 annual payments after purchase of contract)

* Members may also elect monthly payment options with an additional down payment up to $10,000 made at the time

of enrollment to the Plan.

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan B-2


LEGACY PLAN

SUMMARY OF PLAN DESCRIPTION EVALUATED JUNE 30, 2016

(CONCLUDED)

Tuition Payments – When the beneficiary matriculates, the portion of tuition covered by the Plan will

be dependent on the school of which they attend and the plan they purchase. The Plan will pay the

tuition and mandatory fees for all public Universities or Community Colleges in the State of

Mississippi. If the beneficiary elects to attend a private or out-of-state University or Community

College, the Plan will pay out the maximum amount that it would have paid to a Mississippi school

under the matching contract that was purchased.

Refunds – If a contract purchaser elects to withdraw from the Plan, the amount refunded will include,

but not be limited to, the amount paid in and an additional amount in the nature of interest at a rate that

corresponds to the prevailing interest rates for savings accounts provided by banks and savings and

loan associations.

This is a summary of the contract provisions as they pertain to this valuation. The actual terms of the

contracts will apply to policy holders.

SECTION C

VA LU ATIO N R ES U LTS

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan C-1


LEGACY PLAN

PRINCIPAL VALUATION RESULTS AS OF JUNE 30, 2016

2016 2015

1. Number of Members

a. Not yet Matriculated 12,571 13,842

b. Matriculated or Termination in Progress 5,502 5,308

c. Total 18,073 19,150

Average Years until Enrollment if Not Yet

Matriculating

5.0 5.1

2.

a. Actuarial Value of Assets (in Trust) $ 306,085,437 $ 323,856,851

b. PV Future Member Contributions 19,957,703 24,905,059

c. Total Actuarial Value of Assets $ 326,043,140 $ 348,761,910

3. Actuarial Results

Liabilities - Tuition and Fees $ 430,964,771 $ 453,836,382

Liabilities - Present Value of Future Administrative

Expenses

$ 21,548,239 $ 22,691,819

Liabilities Total $ 452,513,010 $ 476,528,201

Margin/(Deficit) $ (126,469,870) $ (127,766,291)

Funded Ratio 72.1% 73.2%

Assets



LEGACY PLAN

PRINCIPAL VALUATION RESULTS AS OF JUNE 30, 2016 (CONCLUDED)

2016 2015

1.

a. Actuarial Value of Assets (in Trust) $ 306,085,437 $ 323,856,851

b. PVFMC* (Short-Term)a 4,330,771 5,453,049

c. PVFMC* (Long-Term)b 15,626,932 19,452,010

d. Total Actuarial Value of Assets $ 326,043,140 $ 348,761,910

2. Actuarial Present Value of Tuition,

Refunds, Fees and Admin Expenses

a. Short-Terma $ 34,476,556 $ 31,468,608

b. Long-Termb 418,036,454 445,059,593

c. Total $ 452,513,010 $ 476,528,201

Margin/(Deficit) $ (126,469,870) $ (127,766,291)

Funded Ratio 72.1% 73.2%

Assets

a Present value of amounts in following year.

b Present value of amounts after first year.

* Present value of future member contributions.



LEGACY PLAN

GAIN/(LOSS) SUMMARY

Present Value

of Benefits

PV Future

Member

Contributions

Actuarial Value

of Assets Margin/(Deficit)

(1.) Values as of June 30, 2015 $ 476,528,201 $ 24,905,059 $ 323,856,851 $ (127,766,291)

(2.) Expected Contract Payments (Excluding New Enrollments)* $ - $ (5,453,049) $ 5,453,049 $ -

(3.) Expected Tuition Payments, Refunds, and Administrative Fees* $ (33,042,038) $ - $ (33,042,038) $ -

(4.) Interest on (1), (2), and (3) at Assumed Rate from Previous Valuation $ 29,935,316 $ 1,313,011 $ 19,998,081 $ (8,624,224)

(5.) New Enrollments (Actual) # $ - $ - $ - $ -

(6.) Projected Values as of June 30, 2016 [(1) + (2) + (3) + (4) + (5)] $ 473,421,479 $ 20,765,021 $ 316,265,943 $ (136,390,515)

(7.) Change Due to:

a. Investment Experience $ - $ - $ (14,451,759) $ (14,451,759)

b. Tuition/Fee Inflation (6,157,264) - - 6,157,264

c. Change in Plan Assumptions (6,471,699) - - 6,471,699

d. Other Plan Experience During Fiscal Year 2016 (8,279,506) (807,318) 4,271,253 11,743,441

(8.) Total [(7)a + (7)b + (7)c + (7)d] $ (20,908,469) $ (807,318) $ (10,180,506) $ 9,920,645

(9.) Actual Values as of June 30, 2016 [(6) + (8)] $ 452,513,010 $ 19,957,703 $ 306,085,437 $ (126,469,870)

* Discounted to beginning of prior year.

# The Legacy Plan is closed to new enrollments.



LEGACY PLAN

SENSITIVITY TESTING RESULTS

The actuarial assumptions regarding future increases in tuition costs and fees and the future rate of

investment return were adopted by the Mississippi Prepaid Affordable College Tuition Plan. In our

opinion, the assumptions prescribed to us are reasonable for the purpose of the measurement.

However, no one knows with certainty what the future holds with respect to economic and other

contingencies. For example, while it is assumed that the assets of the Plan will earn 6.75% net of

investment expenses each year throughout the life of the contracts, actual returns are expected to vary

from year to year. Therefore, we have projected the Plan’s results under alternative assumptions for

future investment income and tuition increases, as follows:

1. Current valuation assumptions approved by the Plan’s Board (6.75% investment return net

of investment expenses, 6.00%/5.50% long-term tuition increases for

Universities/Community Colleges respectively).

2-3. Tuition increases are 100 basis points higher/lower in each future year than assumed in this

year’s valuation.

4-5. The investment return is 100 basis points higher/lower in each future year than assumed in

this year’s valuation.

6. Tuition increases are 100 basis points higher and the investment return is 100 basis points

lower in each future year than assumed in this year’s valuation.

7. Tuition increases are 100 basis points lower and the investment return is 100 basis points

higher in each future year than assumed in this year’s valuation.

8. Cash Infusion Projection.

The summary of the impact of each of these scenarios on the principal valuation results is presented on

the following page. See Section G for detailed projection results of each scenario.



LEGACY PLAN

SENSITIVITY TESTING RESULTS (CONCLUDED)

$ in Millions

Current

Valuation

Assumptions

G-1

Assumed

Tuition

Increases

+100 Basis

Points

G-2

Assumed

Tuition

Increases

-100 Basis

Points

G-3

Assumed

Investment

Return

+100 Basis

Points

G-4

Assumed

Investment

Return

-100 Basis

Points

G-5

Assumed

Tuition

Increases +100

Basis Points and

Investment

Return -100

Basis Points

G-6

Assumed

Tuition

Increases -100

Basis Points and

Investment

Return +100

Basis Points

G-7

Cash Infusion

Projection

G-8 #

Assumed Investment Return 6.75% 6.75% 6.75% 7.75% 5.75% 5.75% 7.75% 6.75%

Assumed Tuition Increases 6.00%/5.50% 7.00%/6.50% 5.00%/4.50% 6.00%/5.50% 6.00%/5.50% 7.00%/6.50% 5.00%/4.50% 6.00%/5.50%

1 Assets

a. Actuarial Value of Assets (in Trust) $ 306.1 $ 306.1 $ 306.1 $ 306.1 $ 306.1 $ 306.1 $ 306.1 $ 306.1

b. PV Future Member Contributions 19.9 19.9 19.9 19.3 20.5 20.5 19.3 19.9

c. Total Actuarial Value of Assets $ 326.0 $ 326.0 $ 326.0 $ 325.4 $ 326.6 $ 326.6 $ 325.4 $ 326.0

2 Actuarial Results

Liabilities - Tuition and Fees $ 431.0 $ 456.4 $ 407.4 $ 405.8 $ 458.7 $ 486.6 $ 384.2 $ 287.8 *

Liabilities - PV of Future Admin. Expenses 21.5 22.8 20.4 20.3 22.9 24.3 19.2 21.5

Liabilities Total $ 452.5 $ 479.2 $ 427.8 $ 426.1 $ 481.6 $ 510.9 $ 403.4 $ 309.3

Margin/(Deficit) $(126.5) $(153.2) $(101.8) $(100.7) $(155.0) $(184.3) $(78.0) $ 16.7

Funded Ratio 72.1% 68.0% 76.2% 76.4% 67.8% 63.9% 80.7% 105.4%

Increase/(Decrease) in

Margin/(Deficit) $ 0.0 $ (26.7) $ 24.7 $ 25.8 $ (28.5) $ (57.8) $ 48.5 $143.2

Funded Ratio 0.0% (4.1)% 4.1% 4.3% (4.3)% (8.2)% 8.6% 33.3%

* Net of additional annual cash contributions.

# Based on current valuation assumptions, an approximate annual amount of $15.3 million is required to prevent depletion of the fund before satisfying all expected

tuition payments. Note the amount is rounded to the nearest $100,000 and can be reduced once annual tuition payments plus expenses falls below $15.3 million.

Numbers may not match schedules in Section G due to rounding.

SECTION D

P LA N A S S ETS

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan D-1


STATEMENT OF TOTAL MPACT ASSETS (AT MARKET VALUE)

2016 2015

1. Cash and Cash Equivalents $ N/A $ N/A

2. Investments

a. U.S. Treasury & Agency Obligations $ N/A $ N/A

b. Corporate Bonds N/A N/A

c. Domestic Equity N/A N/A

d. International Equity N/A N/A

e. Other Long-Term Investments N/A N/A

f. Allowance for Change in Market Value N/A N/A

Total Investments $ N/A $ N/A

3. Receivables

a. Investments $ N/A $ N/A

b. Interest and Dividends Receivable N/A N/A

Total Receivables $ N/A $ N/A

4. Payables $ N/A $ N/A

5. Net Total MPACT Assets 1 + 2 + 3 - 4 297,617,243$ 322,080,130$

6. Net Total MPACT Assets Allocated for Legacy Plan 281,135,043$ 314,286,575$

7. Net Total MPACT Assets Allocated for Horizon Plan 16,482,200$ 7,793,555$

As of June 30,



RECONCILIATION OF TOTAL MPACT ASSETS (AT MARKET VALUE)

Legacy Plan Horizon Plan Total

315,253,240$ 7,860,824$ 323,114,064$

2. Less Deferred Outflows 367,447$ 3,974$ 371,421$

3. Market Value of Assets reported as of 6/30/2015 = 1. - 2. 314,885,793$ 7,856,850$ 322,742,643$

4. Changes during year

a. Additions

(1) Contract Payments (net of refunds) 3,506,030$ 9,268,491$ 12,774,521$

(2) Administrative Fees - - -

Total Additions = (1) + (2) 3,506,030$ 9,268,491$ 12,774,521$

b. Deductions

(1) Tuition Payments 26,370,093$ 156,383$ 26,526,476$

(2) Administrative Expenses 1,314,204 357,047 1,671,251

Total Deductions = (1) + (2) 27,684,297$ 513,430$ 28,197,727$

c. Investment Income (9,392,837)$ (47,623)$ (9,440,460)$

d. Deferred Outflows (Pension Related) 339,176$ 14,427$ 353,603$

Net Increases (Decreases) during Year = a - b + c + d (33,231,928)$ 8,721,865$ (24,510,063)$

5. Payables as of 6/30/2016 518,822$ 96,515$ 615,337$

6. Net Total MPACT Market Value of Assets at End of Year = 3. + 4. + 5. 281,135,043$ 16,482,200$ 297,617,243$

1. Market Value of Assets and Deffered Outflows reported for 6/30/2015 Valuation

Twelve-Month Period Ended June 30, 2016


DEVELOPMENT OF LEGACY PLAN ACTUARIAL VALUE OF ASSETS

Year Ended June 30 2015 2016 2017 2018

A. Total MPACT Actuarial Value of Assets Beginning of Year 327,092,089$ 331,686,951$

B. Total MPACT Market Value End of Year 322,080,130$ 297,617,243$

C. Total MPACT Market Value Beginning of Year 327,092,089$ 322,080,130$

D. Total MPACT Non-Investment Cash Flow

D1. Revenue (Contract payments, net of refunds, admin fees, etc.) 13,601,815 12,774,521

D2. Expenses (Tuition, Admin Expenses, etc.) (27,050,883) (27,844,124)

D3. Change in Accounts Payable 407,355 (615,337)

D4. Total Net Cash Flow: D1+D2+D3 (13,041,713)$ (15,684,940)$

E. Total MPACT Investment Return

E1. Market Total: B-C-D4 * 8,029,754$ (8,777,947)$

E2. Assumed Rate of Return (prior valuation assumed rate of return) 7.00% 6.75%

E3. Assumed Amount of Return 22,439,986 21,859,502

E4. Amount Subject to Phase-In: E1-E3 (14,410,232)$ (30,637,449)$

F. Total MPACT Phased-In Recognition of Investment Return

F1. Current Year: E4 / 3 (4,803,411)$ (10,212,483)$

F2. First Prior Year - (4,803,411)$ (10,212,483)$

F3. Second Prior Year - - (4,803,410)$ (10,212,483)$

F4. Total Phase-Ins (4,803,411)$ (15,015,894)$ (15,015,893)$ (10,212,483)$

G. Total MPACT Actuarial Value of Assets End of Year

G1. Preliminary Actuarial Value End of Year: A+D3+E3+F4 $ 331,686,951 $ 322,845,619

G2. Upper Corridor Limit: 120% x B 386,496,156 357,140,692

G3. Lower Corridor Limit: 80% x B 257,664,104 238,093,794

G4. Total MPACT Actuarial Value of Assets End of Year $ 331,686,951 $ 322,845,619

H. Difference Between Market and Actuarial Value (9,606,821) (25,228,376) (10,212,483) -

I. Recognized Rate of Return 5.50 % 2.11 %

J. Market Rate of Return 2.50 % (2.79)%

K. Ratio of Actuarial Value to Market Value 103 % 108 %

L. Legacy Plan Actuarial Value of Assets Beginning of Year 327,092,089$ 323,856,851$

M. Legacy Plan Non-Investment/Administrative Net Cash Flow

M1. Revenue (Contract payments, net of refunds, admin fees, etc.) 5,651,177 3,506,030

M2. Expenses (Tuition, Admin Expenses, etc.) (26,773,453) (27,345,121)

M3. Change in Accounts Payable 460,087 (518,822)

M4. Total Net Cash Flow: M1+M2+M3 (20,662,189)$ (24,357,913)$

N. Legacy Plan Phased-In Recognition of Investment Return: ( L+ M4 / 2) x I 17,426,951$ 6,586,499$

O. Legacy Plan Actuarial Value of Assets End of Year: L+M4+N 323,856,851$ 306,085,437$

P. Reported Legacy Plan Market Value of Assets 314,286,576$ 281,135,043$ (24,950,394)$ (14,850,439)$

(25,228,376)$

Legacy Plan Assumed Return 22,173,270 21,038,258

Legacy Plan Phase-In (Investment G/(L)) (4,746,319) (14,451,759)

* The market value investment return is net of the beginning of year adjustment to the Market Value of Assets (see item 3.

on page D-2).

For the year ended June 30, 2014 the Actuarial Value of Assets was set to the Market Value of Assets.

The Actuarial Value of Assets recognizes assumed investment return (line E3) fully each year. Differences

between actual and assumed investment return (line E4) are phased-in over a closed 3-year period. During

periods when investment performance exceeds the assumed rate, Actuarial Value of Assets will tend to be less

than Market Value. During periods when investment performance is less than the assumed rate, Actuarial Value

of Assets will tend to be greater than Market Value. If assumed rates are exactly realized for 2 consecutive

years, Actuarial Value will become equal to Market Value.

SECTION E

PA RTIC IPA NT D ATA

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan E-1


LEGACY PLAN

MEMBER DATA BEGINNING TO END OF YEAR SUMMARY AS OF JUNE 30, 2016

2 + 2 1 + 3

4-Yr.

Univ

3-Yr.

Univ

2-Yr.

Univ

1-Yr.

Univ

2-Yr. Jr.

Coll

1-Yr. Jr.

Col

5-Yr.

Univ 1 + 4 2 + 3 Other* Total

Beginning of Year (6/30/2015) 3,813 354 10,579 127 972 508 1,038 118 1,231 40 368 2 19,150

New Contracts # 1 - 2 - - - 3 - - - - - 6

Removed Contracts 211 32 608 11 54 24 78 11 43 2 9 - 1,083

End of Year (6/30/2016) 3,603 322 9,973 116 918 484 963 107 1,188 38 359 2 18,073

Type of Contract

# 6 contracts were included in this year’s valuation that were excluded from last year’s valuation as a result of data changes.

* A contract was split equally between parents as a result of a court order.



LEGACY PLAN

MEMBER MATRICULATION SUMMARY AS OF JUNE 30, 2016

2 + 2 1 + 3

4-Yr.

Univ

3-Yr.

Univ

2-Yr.

Univ

1-Yr.

Univ

2-Yr. Jr.

Coll

1-Yr. Jr.

Col

5-Yr.

Univ 1 + 4 2 + 3 Other*

2003 - 1 - - - - - - - - - - 1 0.0%

2004 - - - - - - - - - - - - - 0.0%

2005 2 - 4 - 1 - 1 - - - 1 - 9 0.0%

2006 25 2 84 1 5 8 16 - 3 - 1 - 145 0.8%

2007 40 4 158 4 5 6 15 2 5 2 3 - 244 1.4%

2008 61 3 196 2 9 7 16 2 6 - 3 - 305 1.7%

2009 68 12 225 4 16 12 23 1 14 1 5 - 381 2.1%

2010 86 10 277 4 20 8 32 1 23 3 9 - 473 2.6%

2011 111 11 361 3 16 16 24 3 34 - 7 - 586 3.2%

2012 186 16 480 4 28 19 25 3 44 1 10 - 816 4.5%

2013 241 32 638 6 55 16 45 3 49 1 12 - 1,098 6.1%

2014 230 31 675 10 59 34 53 2 54 1 21 - 1,170 6.5%

2015 271 40 738 7 60 36 68 7 48 1 13 - 1,289 7.2%

2016 248 22 669 7 58 37 66 10 51 3 24 - 1,195 6.6%

2017 244 27 596 10 71 26 67 7 77 4 32 - 1,161 6.4%

2018 231 23 645 9 54 42 69 7 99 5 24 - 1,208 6.7%

2019 232 24 650 8 66 25 73 6 102 3 27 - 1,216 6.7%

2020 226 8 515 4 51 28 48 9 68 5 33 2 997 5.5%

2021 222 9 435 5 62 33 55 5 83 2 21 - 932 5.2%

2022 165 8 492 3 60 20 42 4 70 1 22 - 887 4.9%

2023 137 9 425 2 40 25 61 6 61 - 16 - 782 4.3%

2024 147 4 405 6 35 15 34 10 71 1 22 - 750 4.1%

2025 115 8 307 6 32 24 28 5 52 - 22 - 599 3.3%

2026 102 6 287 5 35 17 35 7 63 1 12 - 570 3.2%

2027 83 7 305 1 37 13 30 4 39 1 5 - 525 2.9%

2028 72 2 221 2 33 7 26 - 35 2 8 - 408 2.3%

2029 58 3 185 3 10 10 11 3 37 - 6 - 326 1.8%

3,603 322 9,973 116 918 484 963 107 1,188 38 359 2 18,073 100.0%

19.9% 1.8% 55.2% 0.6% 5.1% 2.7% 5.3% 0.6% 6.6% 0.2% 2.0% 0.0% 100.0%

Type of Contract

Total

Total

Projected

Matriculation

Year

* A contract was split equally between parents as a result of a court order.



LEGACY PLAN

MEMBER PAYMENT OPTION SUMMARY AS OF JUNE 30, 2016

Contract Payment Type 2 + 2 1 + 3

4-Yr.

Univ

3-Yr.

Univ

2-Yr.

Univ

1-Yr.

Univ

2-Yr. Jr.

Coll

1-Yr. Jr.

Col

5-Yr.

Univ 1 + 4 2 + 3 Other*

Lump Sum 1,054 83 4,140 44 363 267 326 45 495 8 118 - 6,943 38.4%

1-Year Monthly 4 5 10 1 1 - 1 - 1 - - - 23 0.1%

2-Year Monthly 4 1 15 - 3 1 1 2 2 - - - 29 0.2%

3-Year Monthly 209 21 503 3 53 35 101 12 71 3 20 - 1,031 5.7%

5-Year Monthly 625 55 1,307 10 94 50 189 12 119 7 43 - 2,511 13.9%

6-Year Monthly 67 6 182 1 27 5 30 2 14 1 3 - 338 1.9%

9-Year Monthly 82 7 122 2 13 6 15 - 21 2 7 - 277 1.5%

10-Year Monthly 573 46 1,052 14 93 31 76 9 141 9 63 - 2,107 11.7%

12-Year Monthly 129 13 311 3 38 11 28 5 76 - 18 - 632 3.5%

Monthly Extended 677 70 1,550 34 186 63 177 17 144 3 66 2 2,989 16.5%

3-Year Annually 86 9 379 1 28 10 15 - 49 2 7 - 586 3.2%

5-Year Annually 93 6 402 3 19 5 4 3 55 3 14 - 607 3.4%

3,603 322 9,973 116 918 484 963 107 1,188 38 359 2 18,073 100.0%

19.9% 1.8% 55.2% 0.6% 5.1% 2.7% 5.3% 0.6% 6.6% 0.2% 2.0% 0.0% 100.0%

Type of Contract

Total

Total

*A contract was split equally between parents as a result of a court order.

SECTION F

METH O D S A N D A S S U MP TIO N S

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan F-1


LEGACY PLAN

VALUATION METHODS AND ASSUMPTIONS

Assumed Rate of Return:

Gross

Net of Investment

Expenses

Net of Investment and

Admin Expenses

Current Assumptions 7.25% 6.75%* 6.25% @

* Discount rate actually used in valuation calculation.

@ Approximate return net of investment and administrative expenses. Not directly used in valuation.

Assumed Rate of Tuition Increases:

4-Year Universities – 6.00%

2-Year Community Colleges – 5.50%

Utilization of Credits*: Members who have matriculated or are expected to matriculate on or after

the valuation date are expected to utilize 25.6 credits per year at the University level and 23.8 credits

per year at the Community College level until they have exhausted all credits. Seventy-Five percent

(75%) of remaining members who were expected to matriculate prior to the valuation date but have

not, are assumed to matriculate in each of the next three years with all remaining matriculating in the

fourth year after the valuation date.

* Liabilities are modeled assuming two payments per year (one in mid-September, one in mid-February) for

beneficiaries who have matriculated.

Refunds: Eighty percent (80%) of members who are past their expected matriculation and have

utilized zero credits or have not utilized credits during both the past fall and spring semesters are

assumed to refund their remaining balances on the 10th

anniversary of their original expected

matriculation. If the 10th

anniversary has already occurred, these members are assumed to refund on

the valuation date.

Election of Program Changes: None.

Election of Change of Beneficiary: None.

Liability Adjustments for Administrative Expenses: A 5% load is added to all expected future

tuition payments to adjust for administrative expenses experienced by the Plan.

Contract Terms: No changes in contract terms are assumed once initiated.

Pricing Methodology: Based on Weighted Average Tuition (WAT) rate increased to assumed year of

payment, based on tuition rate increase assumption and discounted to payment date based on net

investment return assumption.

Weighted Average Tuition (WAT) for the year as of June 30, 2016:

4-Year Universities – $7,425

2-Year Community Colleges – $2,797

Bias Load: Liabilities are increased by 2.0% to account for the 2.6% bias (this is approximately equal

to 75% x 2.6%) for future costs for attendance at 4-year colleges.

SECTION G

P R O J EC TIO N R ES U LTS

Mississippi Prepaid Affordable College Tuition Plan – Legacy Plan G-1


LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 VALUATION RESULTS

Present Value of Future Tuition and Fees

Present Value of Future Contract Payments

June 30, 2016 Assets

Unfunded Liability / (Margin)

Funded Status

Year Insolvent

Annual Cash Contribution from State

or Other Outside Source -$

Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 6.75% n/a n/a 306,085,437$ 32,834,815$ 1,641,741$ 4,330,771$

2018 6.75% 6.00% 5.50% 279,715,140 36,220,635 1,811,032 3,982,508

2019 6.75% 6.00% 5.50% 252,148,480 40,777,859 2,038,893 3,471,591

2020 6.75% 6.00% 5.50% 227,167,543 45,704,482 2,285,224 2,961,320

2021 6.75% 6.00% 5.50% 194,433,550 48,804,099 2,440,205 2,408,279

2022 6.75% 6.00% 5.50% 155,425,358 48,239,282 2,411,964 1,882,631

2023 6.75% 6.00% 5.50% 113,856,074 49,069,973 2,453,499 1,433,773

2024 6.75% 6.00% 5.50% 68,070,605 48,995,666 2,449,783 1,163,283

2025 6.75% 6.00% 5.50% 18,989,158 47,569,374 2,378,469 889,706

2026 6.75% 6.00% 5.50% (32,098,634) 47,460,085 2,373,004 694,256

2027 6.75% 6.00% 5.50% (86,720,996) 41,815,270 2,090,763 500,244

2028 6.75% 6.00% 5.50% (138,910,343) 39,970,557 1,998,528 333,789

2029 6.75% 6.00% 5.50% (192,732,469) 37,718,388 1,885,919 193,057

2030 6.75% 6.00% 5.50% (247,813,421) 34,381,010 1,719,051 85,514

2031 6.75% 6.00% 5.50% (302,986,355) 27,648,556 1,382,428 48,641

2032 6.75% 6.00% 5.50% (354,376,586) 20,936,079 1,046,804 30,238

2033 6.75% 6.00% 5.50% (401,731,454) 13,403,368 670,168 15,129

2034 6.75% 6.00% 5.50% (443,855,677) 7,167,890 358,394 1,111

2035 6.75% 6.00% 5.50% (481,849,058) 1,436,466 71,823 -

2036 6.75% 6.00% 5.50% (515,983,968) 284,630 14,232 -

2037 6.75% 6.00% 5.50% (551,131,921) - - -

2038 6.75% 6.00% 5.50% (588,333,326) - - -

* Includes estimated refund payments for contracts who are past the expected matriculation year and did not utilize credits within the past year.

20256.75%

Assumed Rate of Investment Return 6.75%

Geometric Average of Actual Rates of

Investment Returns

Estimated Valuation Results

452,513,010$

19,957,703$

306,085,437$

Input

Valuation

126,469,870$

72.05%



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 TUITION INCREASES +100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 6.75% n/a n/a 306,085,437$ 32,834,815$ 1,641,741$ 4,330,771$

2018 6.75% 7.00% 6.50% 279,715,140 36,557,469 1,827,873 3,982,508

2019 6.75% 7.00% 6.50% 251,770,931 41,539,716 2,076,986 3,471,591

2020 6.75% 7.00% 6.50% 225,910,563 46,987,001 2,349,350 2,961,320

2021 6.75% 7.00% 6.50% 191,654,181 50,629,950 2,531,498 2,408,279

2022 6.75% 7.00% 6.50% 150,411,830 50,492,066 2,524,603 1,882,631

2023 6.75% 7.00% 6.50% 105,979,043 51,830,442 2,591,522 1,433,773

2024 6.75% 7.00% 6.50% 56,567,734 52,187,412 2,609,371 1,163,283

2025 6.75% 7.00% 6.50% 3,132,295 51,095,149 2,554,757 889,706

2026 6.75% 7.00% 6.50% (52,977,789) 51,260,494 2,563,025 694,256

2027 6.75% 7.00% 6.50% (113,269,277) 45,932,863 2,296,643 500,244

2028 6.75% 7.00% 6.50% (171,865,940) 44,320,737 2,216,037 333,789

2029 6.75% 7.00% 6.50% (232,788,577) 42,218,042 2,110,902 193,057

2030 6.75% 7.00% 6.50% (295,616,865) 38,845,581 1,942,279 85,514

2031 6.75% 7.00% 6.50% (359,020,758) 31,533,407 1,576,670 48,641

2032 6.75% 7.00% 6.50% (418,547,743) 24,102,795 1,205,140 30,238

2033 6.75% 7.00% 6.50% (473,783,657) 15,576,165 778,808 15,129

2034 6.75% 7.00% 6.50% (523,206,838) 8,408,448 420,422 1,111

2035 6.75% 7.00% 6.50% (567,946,932) 1,700,974 85,049 -

2036 6.75% 7.00% 6.50% (608,189,930) 340,221 17,011 -

2037 6.75% 7.00% 6.50% (649,624,096) - - -

2038 6.75% 7.00% 6.50% (693,473,722) - - -



Investment Returns

306,085,437$

153,141,162$

6.75%

68.04%

2025

Input

Valuation Estimated Valuation Results


479,184,302$

19,957,703$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 TUITION INCREASES -100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 6.75% n/a n/a 306,085,437$ 32,834,815$ 1,641,741$ 4,330,771$

2018 6.75% 5.00% 4.50% 279,715,140 35,883,802 1,794,190 3,982,508

2019 6.75% 5.00% 4.50% 252,526,028 40,023,157 2,001,158 3,471,591

2020 6.75% 5.00% 4.50% 228,416,502 44,445,941 2,222,297 2,961,320

2021 6.75% 5.00% 4.50% 197,177,480 47,029,213 2,351,461 2,408,279

2022 6.75% 5.00% 4.50% 160,343,929 46,069,947 2,303,497 1,882,631

2023 6.75% 5.00% 4.50% 121,538,201 46,436,722 2,321,836 1,433,773

2024 6.75% 5.00% 4.50% 79,222,821 45,979,605 2,298,980 1,163,283

2025 6.75% 5.00% 4.50% 34,274,777 44,268,957 2,213,448 889,706

2026 6.75% 5.00% 4.50% (12,081,882) 43,935,996 2,196,800 694,256

2027 6.75% 5.00% 4.50% (61,403,051) 38,032,911 1,901,646 500,244

2028 6.75% 5.00% 4.50% (107,643,885) 36,012,069 1,800,603 333,789

2029 6.75% 5.00% 4.50% (154,918,555) 33,662,326 1,683,116 193,057

2030 6.75% 5.00% 4.50% (202,900,729) 30,394,357 1,519,718 85,514

2031 6.75% 5.00% 4.50% (250,573,517) 24,212,115 1,210,606 48,641

2032 6.75% 5.00% 4.50% (294,574,059) 18,161,153 908,058 30,238

2033 6.75% 5.00% 4.50% (334,781,912) 11,517,253 575,863 15,129

2034 6.75% 5.00% 4.50% (370,272,941) 6,101,122 305,056 1,111

2035 6.75% 5.00% 4.50% (402,103,774) 1,211,148 60,557 -

2036 6.75% 5.00% 4.50% (430,603,324) 237,720 11,886 -

2037 6.75% 5.00% 4.50% (459,935,503) - - -

2038 6.75% 5.00% 4.50% (490,981,150) - - -



Investment Returns

306,085,437$

101,774,240$

6.75%

76.21%

2025

Input



427,817,380$

19,957,703$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 INVESTMENT RETURN +100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 7.75% n/a n/a 306,085,437$ 32,712,293$ 1,635,615$ 4,310,628$

2018 7.75% 6.00% 5.50% 282,591,451 36,086,224 1,804,311 3,963,985

2019 7.75% 6.00% 5.50% 257,836,475 40,626,024 2,031,301 3,455,444

2020 7.75% 6.00% 5.50% 235,578,775 45,533,823 2,276,691 2,947,547

2021 7.75% 6.00% 5.50% 205,496,283 48,620,800 2,431,040 2,397,078

2022 7.75% 6.00% 5.50% 168,996,739 48,058,818 2,402,941 1,873,875

2023 7.75% 6.00% 5.50% 129,740,541 48,886,847 2,444,342 1,427,104

2024 7.75% 6.00% 5.50% 86,023,781 48,815,195 2,440,760 1,157,873

2025 7.75% 6.00% 5.50% 38,709,941 47,396,265 2,369,813 885,568

2026 7.75% 6.00% 5.50% (10,958,789) 47,295,318 2,364,766 691,027

2027 7.75% 6.00% 5.50% (64,572,253) 41,655,124 2,082,756 497,917

2028 7.75% 6.00% 5.50% (116,167,664) 39,817,437 1,990,872 332,237

2029 7.75% 6.00% 5.50% (169,861,125) 37,573,917 1,878,696 192,159

2030 7.75% 6.00% 5.50% (225,328,501) 34,249,508 1,712,475 85,116

2031 7.75% 6.00% 5.50% (281,448,785) 27,543,114 1,377,156 48,415

2032 7.75% 6.00% 5.50% (334,370,490) 20,856,319 1,042,816 30,097

2033 7.75% 6.00% 5.50% (383,848,091) 13,353,212 667,661 15,059

2034 7.75% 6.00% 5.50% (428,687,583) 7,141,327 357,066 1,106

2035 7.75% 6.00% 5.50% (469,989,198) 1,431,951 71,598 -

2036 7.75% 6.00% 5.50% (508,033,434) 284,078 14,204 -

2037 7.75% 6.00% 5.50% (547,727,425) - - -

2038 7.75% 6.00% 5.50% (590,176,300) - - -



Investment Returns

306,085,437$

100,607,284$

7.75%

76.39%

2025

Input



426,046,760$

19,354,039$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 INVESTMENT RETURN -100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 5.75% n/a n/a 306,085,437$ 32,959,084$ 1,647,954$ 4,351,200$

2018 5.75% 6.00% 5.50% 276,839,360 36,356,964 1,817,848 4,001,293

2019 5.75% 6.00% 5.50% 246,519,173 40,931,861 2,046,593 3,487,966

2020 5.75% 6.00% 5.50% 218,932,836 45,877,580 2,293,879 2,975,289

2021 5.75% 6.00% 5.50% 183,726,524 48,990,024 2,449,501 2,419,639

2022 5.75% 6.00% 5.50% 142,452,268 48,422,332 2,421,117 1,891,512

2023 5.75% 6.00% 5.50% 98,876,601 49,255,723 2,462,786 1,440,536

2024 5.75% 6.00% 5.50% 51,393,049 49,178,722 2,458,936 1,168,770

2025 5.75% 6.00% 5.50% 977,301 47,744,961 2,387,248 893,903

2026 5.75% 6.00% 5.50% (51,036,013) 47,627,209 2,381,360 697,531

2027 5.75% 6.00% 5.50% (106,117,007) 41,977,707 2,098,885 502,604

2028 5.75% 6.00% 5.50% (158,298,228) 40,125,870 2,006,293 335,364

2029 5.75% 6.00% 5.50% (211,600,491) 37,864,927 1,893,246 193,968

2030 5.75% 6.00% 5.50% (265,606,667) 34,514,394 1,725,720 85,917

2031 5.75% 6.00% 5.50% (319,112,112) 27,755,506 1,387,775 48,870

2032 5.75% 6.00% 5.50% (368,228,399) 21,016,980 1,050,849 30,381

2033 5.75% 6.00% 5.50% (412,706,133) 13,454,239 672,712 15,201

2034 5.75% 6.00% 5.50% (451,359,911) 7,194,831 359,742 1,116

2035 5.75% 6.00% 5.50% (485,300,886) 1,441,042 72,052 -

2036 5.75% 6.00% 5.50% (514,805,784) 285,189 14,259 -

2037 5.75% 6.00% 5.50% (544,723,783) - - -

2038 5.75% 6.00% 5.50% (576,045,401) - - -



Investment Returns

306,085,437$

154,986,560$

5.75%

67.82%

2025

Input



481,671,807$

20,599,810$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 TUITION INCREASES +100 BASIS POINTS & INVESTMENT

RETURN -100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 5.75% n/a n/a 306,085,437$ 32,959,084$ 1,647,954$ 4,351,200$

2018 5.75% 7.00% 6.50% 276,839,360 36,695,084 1,834,754 4,001,293

2019 5.75% 7.00% 6.50% 246,143,733 41,696,638 2,084,832 3,487,966

2020 5.75% 7.00% 6.50% 217,686,618 47,165,046 2,358,252 2,975,289

2021 5.75% 7.00% 6.50% 180,979,078 50,822,993 2,541,150 2,419,639

2022 5.75% 7.00% 6.50% 137,511,562 50,683,917 2,534,196 1,891,512

2023 5.75% 7.00% 6.50% 91,140,596 52,026,960 2,601,348 1,440,536

2024 5.75% 7.00% 6.50% 40,135,111 52,382,907 2,619,145 1,168,770

2025 5.75% 7.00% 6.50% (14,485,815) 51,284,437 2,564,222 893,903

2026 5.75% 7.00% 6.50% (71,318,404) 51,442,359 2,572,118 697,531

2027 5.75% 7.00% 6.50% (131,801,883) 46,111,295 2,305,565 502,604

2028 5.75% 7.00% 6.50% (190,049,817) 44,492,951 2,224,648 335,364

2029 5.75% 7.00% 6.50% (250,026,895) 42,382,062 2,119,103 193,968

2030 5.75% 7.00% 6.50% (311,258,303) 38,996,285 1,949,814 85,917

2031 5.75% 7.00% 6.50% (372,365,297) 31,655,384 1,582,769 48,870

2032 5.75% 7.00% 6.50% (428,873,969) 24,195,932 1,209,797 30,381

2033 5.75% 7.00% 6.50% (480,368,653) 15,635,282 781,764 15,201

2034 5.75% 7.00% 6.50% (525,334,802) 8,440,051 422,003 1,116

2035 5.75% 7.00% 6.50% (564,911,995) 1,706,393 85,320 -

2036 5.75% 7.00% 6.50% (599,289,171) 340,889 17,044 -

2037 5.75% 7.00% 6.50% (634,126,813) - - -

2038 5.75% 7.00% 6.50% (670,589,105) - - -



Investment Returns

306,085,437$

184,210,900$

5.75%

63.94%

2024

Input



510,896,147$

20,599,810$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 TUITION INCREASES -100 BASIS POINTS & INVESTMENT

RETURN +100 BASIS POINTS





Funded Status

Year Insolvent



Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 7.75% n/a n/a 306,085,437$ 32,712,293$ 1,635,615$ 4,310,628$

2018 7.75% 5.00% 4.50% 282,591,451 35,750,659 1,787,533 3,963,985

2019 7.75% 5.00% 4.50% 258,216,125 39,874,175 1,993,709 3,455,444

2020 7.75% 5.00% 4.50% 236,838,471 44,280,068 2,214,003 2,947,547

2021 7.75% 5.00% 4.50% 208,272,073 46,852,735 2,342,637 2,397,078

2022 7.75% 5.00% 4.50% 173,987,996 45,897,839 2,294,892 1,873,875

2023 7.75% 5.00% 4.50% 137,563,498 46,263,722 2,313,186 1,427,104

2024 7.75% 5.00% 4.50% 97,420,755 45,810,722 2,290,536 1,157,873

2025 7.75% 5.00% 4.50% 54,389,366 44,108,492 2,205,425 885,568

2026 7.75% 5.00% 4.50% 9,655,495 43,784,706 2,189,235 691,027

2027 7.75% 5.00% 4.50% (38,388,544) 37,887,252 1,894,363 497,917

2028 7.75% 5.00% 4.50% (83,691,839) 35,874,112 1,793,706 332,237

2029 7.75% 5.00% 4.50% (130,407,045) 33,533,391 1,676,670 192,159

2030 7.75% 5.00% 4.50% (178,245,380) 30,278,103 1,513,905 85,116

2031 7.75% 5.00% 4.50% (226,223,573) 24,119,778 1,205,989 48,415

2032 7.75% 5.00% 4.50% (270,992,247) 18,091,965 904,598 30,097

2033 7.75% 5.00% 4.50% (312,430,512) 11,474,155 573,708 15,059

2034 7.75% 5.00% 4.50% (349,609,223) 6,078,512 303,926 1,106

2035 7.75% 5.00% 4.50% (383,579,823) 1,207,341 60,367 -

2036 7.75% 5.00% 4.50% (414,673,215) 237,259 11,863 -

2037 7.75% 5.00% 4.50% (447,078,818) - - -

2038 7.75% 5.00% 4.50% (481,727,427) - - -



Investment Returns

306,085,437$

77,988,868$

7.75%

80.67%

2026

Input



403,428,344$

19,354,039$



LEGACY PLAN

PROJECTION BASED ON JUNE 30, 2016 CASH INFUSION PROJECTION

Present Value of Future Tuition and Fees^




Funded Status

Year Insolvent


or Other Outside Source 15,300,000$

Fiscal Year

Actual

Investment

Return During

Year

Actual Tuition

Increase for

Universities

Actual Tuition

Increase for

Junior

Colleges/CC

Actuarial Value

of Assets at BOY

Projected

Tuition

Payments

(BOY)*

Projected

Administrative

Expenses Plus Cash

Contributions

Projected

Contract

Payments (BOY)

2017 6.75% n/a n/a 306,085,437$ 32,834,815$ 1,641,741$ 4,330,771$

2018 6.75% 6.00% 5.50% 279,715,140 36,220,635 (13,488,968) 3,982,508

2019 6.75% 6.00% 5.50% 268,481,230 40,777,859 (13,261,107) 3,471,591

2020 6.75% 6.00% 5.50% 260,935,504 45,704,482 (13,014,776) 2,961,320

2021 6.75% 6.00% 5.50% 246,813,598 48,804,099 (12,859,795) 2,408,279

2022 6.75% 6.00% 5.50% 227,673,809 48,239,282 (12,888,036) 1,882,631

2023 6.75% 6.00% 5.50% 207,314,045 49,069,973 (12,846,501) 1,433,773

2024 6.75% 6.00% 5.50% 184,169,740 48,995,666 (12,850,217) 1,163,283

2025 6.75% 6.00% 5.50% 159,257,735 47,569,374 (12,921,531) 889,706

2026 6.75% 6.00% 5.50% 133,970,821 47,460,085 (12,926,996) 694,256

2027 6.75% 6.00% 5.50% 106,890,898 41,815,270 (13,209,237) 500,244

2028 6.75% 6.00% 5.50% 84,103,104 39,970,557 (13,301,472) 333,789

2029 6.75% 6.00% 5.50% 61,667,135 37,718,388 (13,414,081) 193,057

2030 6.75% 6.00% 5.50% 40,090,907 34,381,010 (13,580,949) 85,514

2031 6.75% 6.00% 5.50% 20,684,264 27,648,556 (13,917,572) 48,641

2032 6.75% 6.00% 5.50% 7,474,550 20,936,079 (14,253,196) 30,238

2033 6.75% 6.00% 5.50% 877,384 13,403,368 (14,629,832) 15,129

2034 6.75% 6.00% 5.50% 2,262,007 7,167,890 (14,941,606) 1,111

2035 6.75% 6.00% 5.50% 10,714,320 1,436,466 (15,228,177) -

2036 6.75% 6.00% 5.50% 26,160,188 284,630 (15,285,768) -

2037 6.75% 6.00% 5.50% 43,939,716 - (15,300,000) -

2038 6.75% 6.00% 5.50% 63,238,396 - (15,300,000) -


^ Net of additional annual cash contribution.


Investment Returns

306,085,437$

(42,697,558)$

6.75%

115.07%

Never

Input



283,345,583$

19,957,703$

SECTION H

F U N D IN G P O LIC Y

of 3

Mississippi Prepaid Affordable College Tuition Program

Funding Policy

Introduction

The purpose of this Funding Policy is to record the funding objectives and policy set by the

Board of Trustees (Board) for the Mississippi Prepaid Affordable College Tuition Program

(MPACT). The Board establishes this Funding Policy to:

1) ensure that the trust will have sufficient funds to pay benefits when due;

2) provide guidance with establishing risk reserves for pricing of future contracts;

3) provide the Board with established guidelines for requesting funds from the State

under the full faith and credit backing of the State of Mississippi for benefits

associated with Legacy contracts.

In 2012, the College Savings Plans of Mississippi Board chose to close the Program to new

participants, pending a review of methods and assumptions used to price contracts and

perform actuarial valuations. After a completion of this review, the Board in 2013/2014

decided to re-open the program to new participants under new terms and using updated

methods and assumptions. New contracts are to start selling effective with the 2014/2015

academic year. The program will be bifurcated in the following manner:

1) The program in place when MPACT was closed in 2013, including all contracts sold

prior to that time and all benefits/liabilities associated with such contracts, will be

referred to as the Legacy MPACT Program (or Legacy);

2) The new program, including all contracts sold after the program is re-opened and all

benefits/liabilities associated with such contracts will be referred to as the Horizon

MPACT Program (or Horizon);

3) Pricing for the Horizon program will be determined in a manner that all benefits

promised to contract holders will be included in the determination of the pricing of

such contracts;

4) Pricing for the Horizon program will include a surcharge for risk reserving associated

with Horizon contracts;

5) Pricing of Horizon contracts will not include a surcharge for paying off the Legacy

unfunded liabilities.

Funding Goals

1. The unfunded liability attributable to existing contracts (Legacy) will not be paid by

future contract purchases (Horizon); and

2. The pricing of future contracts (Horizon) will be reflective of future expected costs for

each participant purchasing a new contract with a reserve for adverse experience.

Funding Target

1. Legacy

a. The Board has established a funding target of 100% for the Legacy program.

2. Horizon

a. The Board has established a funding target of 115% for the Horizon program.

of 3

Board Actions if Target is Not Met

1. Legacy

a. In any year that the funded status falls below the funding target (100%), the College

Savings Plans of Mississippi Board will request 10% of the unfunded amount as a

special appropriation from the legislature; and/or

b. If the program is projected to be insolvent in less than 5 years, the Board will

increase the appropriation request to 20%.

2. Horizon

a. In any year that the funded target is not met, but is within 200 basis points, then the

explicit risk premium for new contracts will be 3% for 4-year institutions and 0% for

2-year institutions.

b. If the funded target is not met by at least 200 basis points but less than 500 basis

points, then the explicit risk premium for new contracts will be increased to 5% for

4-year institutions and 2% for 2-year institutions.

c. If the funded target is not met by at least 500 basis points, then the explicit risk

premium for new contracts will be increased to 10% for 4-year institutions and 7%

for 2-year institutions.

3. Full Faith and Credit

a. Both Legacy and Horizon Programs are backed by Full Faith and Credit of the state of

Mississippi. It is the responsibility of the Mississippi Legislature to address funding

shortfalls existing in either program.

Board Actions if Target is Exceeded

1. Legacy

a. In any year that the funded status exceeds the target by 1500 basis points (in

excess of 115% funded), a portion of previous state contributions will be returned to

the General Fund. The portion returned will not exceed the amounts contributed and

will be further limited so that the funded status does not fall below 115%.

2. Horizon

a. In any year that the funded target is exceeded by less than 200 basis points, then

the explicit risk premium for new contracts will be 3% for 4-year institutions and 0%

for 2-year institutions.

b. If the funded target is exceeded by at least 200 basis points but less than 500 basis

points, then the explicit risk premium for new contracts will be set to 1% for 4-year

institutions. The implicit premium for 2-year institutions will be reviewed and may

be lowered.

c. If the funded target is exceeded by at least 500 basis points, then the explicit risk

premium for new contracts will be set to 0% for 4-year institutions. The implicit

premium for 2-year institutions will be reviewed and may be lowered.

d. If the funded target is exceeded by at least 1000 basis points, then the implicit risk

premium (if any) will be reviewed and possibly lowered for both 4-year and 2-year

institutions.

Board Review of Funding Policy

The Board will informally review this policy annually. The Board will formally review this

policy every two years until 2020 and every five years, thereafter.

of 3

Measurement of Funding Target

The Board will measure the funding target in an annual valuation. The target will be the

funding status, determined as follows:

The funded status will be a fraction, whose numerator is the actuarial value of assets

plus the present value of future contract payments for contracts already sold as of

the valuation date;

The denominator will be the present value of future expected benefit payments and

expenses.

Present values and expected payments will be based on the actuarial assumptions adopted

by the Board for purposes of the annual actuarial valuation.

For this purpose, the actuarial value of assets will be a market related value that recognizes

investment return above or below the assumed investment return over a 3 year period. In

no event will the actuarial value of assets be less than 80% of market or more than 120%

of market.

Glossary

1. Actuarial Liability (AL): The actuarial present value of future expected plan benefits

and expenses.

2. Actuarial Assumptions: Estimates of future plan experience with respect to rates of

mortality, disability, turnover, retirement, rate or rates of investment income and salary

increases. Decrement assumptions (rates of mortality, disability, turnover and

retirement) are generally based on past experience, often modified for projected

changes in conditions. Economic assumptions (salary increases and investment income)

consist of an underlying rate in an inflation-free environment plus a provision for a long-

term average rate of inflation.

3. Actuarial Value of Assets: The value of current plan assets recognized for valuation

purposes (generally based on a phased-in recognition of all or a portion of market

related investment return) plus the present value of future contract payments for

contract already initiated as of the valuation date. Sometimes referred to as Funding

Value of Assets.

4. Market Value of Assets: The fair value of plan assets as reported in the plan’s audited

financial statements.

5. Unfunded Actuarial Liability (UAL): The positive difference, if any, between the

actuarial liability and valuation assets. Sometimes referred to as “unfunded accrued

liability.”

MISSISSIPPI PREPAID AFFORDABLE COLLEGE …...Prepaid Affordable College Tuition Plan (“MPACT”)...

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