Published: May 11, 2015
On May 7, 2015, the SCERA Retirement Board adopted the SCERA Actuarial Valuation and Review as of December 31, 2014 presented by its actuary, The Segal Company. There were many highlights in the valuation; chief among them is that the funded ratio of the plan, improved from 81.8% to 86.3% on an actuarial basis (from 90.1% to 91.4% on a market value basis). This is a reflection of the fact that the unfunded liability of the plan decreased from $449.4 million the prior year to $343.0 million as of December 31, 2014. A key factor in the reduction in unfunded liability is higher than expected investment return over the last five years.
The actuarial valuation report was supplemented by a staff presentation covering SCERA's key metrics related to the actuarial valuation over time, and by Segal's forward modeling of retirement contribution rates in different scenarios. See links below.
The main purpose of the actuarial valuation is to determine the employer and employee contribution rates that will sufficiently fund the plan. The contribution rates determined by this valuation will serve as the basis for employer and employee contributions in the 2016-17 fiscal year. The Retirement Board will consider and approve contribution rates for the 2015-16 fiscal year at its meeting on May 28, 2015.
Although the actuarial news was good and the pension fund is healthy, the necessary conditions to recommend a COLA benefit increase are still not present. Because SCERA does not have an automatic COLA funded by employer and employee benefits, to recommend a COLA under SCERA's Ad Hoc COLA Policy, certain pension fund reserves need to be restored and the amount necessary for the COLA increase needs to be funded. Each year the Retirement Board considers whether it can recommend a COLA, but despite concern for the economic well-being of SCERA retirees, because of a lack of funding it is unable to do so.
The following documents provide the full detail of the Actuarial Valuation as of December 31, 2014.
You may view a description of SCERA's COLA policy and status of its reserves as of the December 31, 2013 Actuarial Valuation. SCERA will next consider a COLA in January or February of 2016.