State of Oklahoma Public Employees Retirement System actuarial valuation report

              State of Oklahoma
Public Employees Retirement System
Actuarial Valuation Report
as of July 1, 2011
October 14, 2011
Board of Trustees
Oklahoma Public Employees Retirement System
5801 N. Broadway Extension, Suite 400
P.O. Box 53007
Oklahoma City, OK 73152-3007
Members of the Board:
In this report are submitted the results of the annual valuation of the assets and liabilities of the State of
Oklahoma Public Employees Retirement System, prepared as of July 1, 2011.
The purpose of this report is to provide a summary of the funded status of the System as of
July 1, 2011, to provide the Annual Required Contribution (ARC) and the accounting information under
Governmental Accounting Standards Board Statements No. 25 and 27 (GASB 25 and 27). While not
verifying the data at source, the actuary performed tests for consistency and reasonability.
The promised benefits of the System are included in the actuarially calculated contribution rates which are
developed using the Entry Age Normal cost method. A five-year market related value of assets is used for
actuarial valuation purposes. Gains and losses are reflected in the unfunded actuarial accrued liability
(UAAL) that is being amortized by regular annual contributions as a level percentage of payroll, on the
assumption that payroll will increase by 4.00% annually. Since the previous valuation, the rates of real wage
growth, withdrawal, disability, and the probability of electing a vested benefit have been revised due to the
three-year experience study for the period ending June 30, 2010. The assumptions recommended by the
actuary and adopted by the Board are, in the aggregate, reasonably related to the experience under the Fund
and to reasonable expectations of anticipated experience under the Fund and meet the parameters for the
disclosures under GASB 25 and 27.
Also, since the last valuation, the plan provisions of the System have been amended by House Bill 2132.
Under this legislation, COLAs are removed from the definition of “non-fiscal retirement bills” in the
Oklahoma Pension Legislation Actuarial Analysis Act (“OPLAAA”). The effect of these amendments
makes any COLA bill subject to all of the requirements of OPLAAA including the requirement that such
bills provide adequate funding to pay the cost. Therefore, as of July 1, 2011, liabilities have been calculated
without considering future COLAs, and the COLA reserve has been removed.
We have prepared the Schedule of Funding Progress and Employer Contribution Trend Information shown
in the Comprehensive Annual Financial Report. All historical information that references a valuation date
prior to July 1, 2010 was prepared by the previous actuarial firm.
This is to certify that the independent consulting actuary is a member of the American Academy of
Actuaries and has experience in performing valuations for public retirement systems, that the valuation was
Off
Cavanaugh Macdonald
C O N S U L T I N G, L L C
The experience and dedication you deserve
3550 Busbee Pkwy, Suite 250, Kennesaw, GA 30144
Phone (678) 388-1700 • Fax (678) 388-1730
www.CavMacConsulting.com
Offices in Englewood, CO • Kennesaw, GA • Bellevue, NE • Hilton Head Island, SC
October 14, 2011
OPERS Board
Page 2
prepared in accordance with principles of practice prescribed by the Actuarial Standards Board, and that the
actuarial calculations were performed by qualified actuaries in accordance with accepted actuarial
procedures, based on the current provisions of the retirement system and on actuarial assumptions that are
internally consistent and reasonably based on the actual experience of the System.
Future actuarial results may differ significantly from the current results 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; increases or decreases
expected as part of the natural operation of the methodology used for these measurements (such as the
end of an amortization period or additional cost or contribution requirements based on the plan’s funded
status); and changes in plan provisions or applicable law. Because the potential impact of such factors is
outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not
presented herein.
We have also reviewed the supplemental medical benefits provided by the System under Section 401(h)
of the Internal Revenue Code and have determined that these benefits are subordinate to the retirement
benefits as required.
In our opinion, in order for the System to operate in an actuarially-sound manner, contributions equal to at
least the ARC are necessary for future fiscal years. Assuming that these contributions are made to the
System, from year to year in the future at the rates recommended on the basis of the successive actuarial
valuations, the continued sufficiency of the retirement fund to provide the benefits called for under the
System may be safely anticipated. Because the statutory contribution exceeds the ARC in this valuation, we
recommend the statutory contribution be contributed in order to protect against future investment and
experience losses, or, in the absence of such losses, to pay the UAAL down faster than under the current
schedule.
The Table of Contents, which immediately follows, outlines the material contained in the report.
Respectfully submitted,
Alisa Bennett, FSA, EA, FCA, MAAA Patrice Beckham, FSA, EA, FCA, MAAA
Principal and Consulting Actuary Consulting Actuary
Brent Banister, PhD, FSA, EA, FCA, MAAA
Senior Actuary
TABLE OF CONTENTS
Section Page
Executive Summary .......................................................................................................................................... 1
Section 1 Summary of Findings ...................................................................................................................... 10
Section 2 Assets ............................................................................................................................................. 11
Section 3 System Liabilities ............................................................................................................................ 15
Section 4 Employer Contributions .................................................................................................................. 19
Section 5 Accounting and Other Information…………………………………………….. ............................ 25
Appendix A Summary of System Provisions ................................................................................................. 31
Appendix B Actuarial Assumptions and Methods .......................................................................................... 44
Appendix C Data ............................................................................................................................................ 54
Appendix D Glossary ..................................................................................................................................... 64
EXECUTIVE SUMMARY
1
OVERVIEW
The Oklahoma Public Employees Retirement System provides retirement benefits for most employees of the State
of Oklahoma, for most County employees, and for employees of Local Employers who have elected to participate
in OPERS. This report presents the results of the July 1, 2011 actuarial valuation for the System.
The primary purposes of performing an actuarial valuation are to:
• Determine the employer contribution rate required to fund the System on an actuarial basis;
• Evaluate the sufficiency of the statutory contribution rate;
• Disclose asset and liability measures as of the valuation date;
• Determine the experience of the System since the last valuation date; and
• Analyze and report on trends in System contributions, assets, and liabilities.
Since the previous valuation, the rates of real wage growth, withdrawal, disability, and the probability of electing a
vested benefit have been revised due to the three-year experience study for the period ending June 30, 2010. Also,
since the last valuation, the plan provisions of the System have been amended by House Bill 2132. Under this
legislation, COLAs are removed from the definition of “non-fiscal retirement bills” in the Oklahoma Pension
Legislation Actuarial Analysis Act (“OPLAAA”). The effect of these amendments makes any COLA bill subject
to all of the requirements of OPLAAA including the requirement that such bills provide adequate funding to pay
the cost. Therefore, as of July 1, 2011, liabilities have been calculated without considering future COLAs, and the
COLA reserve has been removed.
In addition, there were several bills passed by the 2011 Oklahoma Legislature and signed by the Governor that will
impact only future OPERS members or that otherwise have no fiscal impact on the current valuation. They
include:
• SB794 - OPERS Reform Bill
This bill became the vehicle to increase the retirement age for all OPERS members. The final bill
creates a specific retirement age of 65 for all new OPERS members joining on or after November 1,
2011. Members will still be eligible to retire at age 60 if they meet the “Rule of 90.” Elected officials
elected or appointed on or after November 1, 2011 will have the same benefit formula and contribution
rate as regular OPERS members. They will also have a retirement age of 65 or 62 with 10 years of
service. The vesting is increased to 8 years from the current 6 years. Early retirement options will begin
at age 60 instead of the current age 55 for both regular and elected officials.
• SB347 - Municipal Employees/Officers
Municipal employees and officers will forfeit retirement benefits upon final conviction, guilty plea or
nolo contendere to specified crimes.
• SB782 - OPLAAA Date Change
Amends 62 O.S. § 3109 to move the deadline for completion of an actuarial investigation from
November 1 to December 1. The final bill deletes the requirement that the state pension systems submit
reports annually to the Pension Commission using standard actuarial assumptions.
• SB840 - OPERS Request Bill
All administrative appeals from OPERS board actions are to be brought in Oklahoma County. Deadlines
related to hearing procedures were cleaned up and specific authority to use hearing examiners was put
EXECUTIVE SUMMARY
2
into law. The new law specifically gives the Board jurisdiction over all disputes involving members and
participating employers. When local employers collect contributions from members the new law
provides that they are trust funds. The late charge for paying contributions was increased.
The valuation results provide a snapshot view of the System’s financial condition on July 1, 2011. The unfunded
actuarial accrued liability for the System decreased by $1,693 million due to various factors, the largest being the
removal of the COLA assumption. A detailed analysis of the change in the unfunded actuarial accrued liability
from July 1, 2010 to July 1, 2011 is shown on page 5.
The highlights of the valuation are shown below:
Actuarial Valuation Date
Funded Status $(millions) July 1, 2011 July 1, 2010
Actuarial Accrued Liability $8,180 $9,623
Actuarial Value of Assets $6,599 $6,348
Unfunded Actuarial Accrued Liability $1,581 $3,274
Funded Ratio (Actuarial Value) 80.7% 66.0%
Market Value of Assets $6,841 $5,774
Funded Ratio (Market Value) 83.6% 60.0%
There was a liability decrease of $35.9 million due to the revised assumptions based on the experience study and a
liability decrease of $1,702.7 million due to the elimination of the COLA assumption and reserve. In addition,
there was a liability gain of $153.1 from other factors which resulted in an actuarial accrued liability that was lower
than expected (1.8% of expected liability). The components of this net liability gain are identified on page 5 of this
report.
The net return on the market value of assets was 21.5% for the year ended June 30, 2011. The actuarial value of
assets is determined using a method to smooth gains and losses in order to develop more stable contribution rates.
The return on the actuarial value of assets was approximately 6.5% which resulted in an actuarial loss of $60.0
million.
The actuarial contribution rate for the employer decreased from 2010 to 2011:
Actuarial Valuation Date
Contribution Rate July 1, 2011 July 1, 2010
Normal Cost 10.66% 12.56%
Amortization of UAAL 8.27% 14.99%
Budgeted Expenses 0.45% 0.39%
Actuarial Contribution Rate 19.38% 27.94%
Less Estimated Member Contribution Rate (4.09)% (4.07)%
Employer Actuarial Contribution Rate 15.29% 23.87%
Less State Statutory Contribution Rate (16.50)% (15.50)%
Contribution Shortfall (1.21)% 8.37%
Primarily due to the removal of the COLA assumption and reserve, the actuarial contribution rate is less than the
statutory contribution rate. This will decrease the unfunded actuarial accrued liability and accelerate progress on
reaching long term funding goals.
EXECUTIVE SUMMARY
3
EXPERIENCE: July 1, 2010 to July 1, 2011
In many respects, an actuarial valuation can be thought of as an inventory process. The inventory is taken as of the
actuarial valuation date, which for this valuation is July 1, 2011. On that date, the assets available for the payment
of benefits are appraised. The assets are compared with the liabilities of the System, which are generally in excess
of assets. The actuarial process leads to a method of determining the contributions needed by members and
employers in the future to balance the System assets and liabilities.
Changes in the System’s assets and liabilities impacted the change in the actuarial contribution rates between
July 1, 2010 and July 1, 2011. Each component is examined in the following discussion.
ASSETS
As of July 1, 2011, the System had total funds when measured on a market value basis of $6.8 billion. This was an
increase of $1.0 billion from the July 1, 2010 figure of $5.8 billion. The market value of assets is not used directly
in the calculation of contribution rates. An asset valuation method, which smoothes the effect of market
fluctuations, is used to determine the value of assets used in the valuation, called the “actuarial value of assets”.
Differences between the actual return on the market value of assets and the assumed return on the actuarial value
of assets are phased in over a five-year period. The resulting value must be no less than 80% of the market value
and no more than 120% of market value, referred to as “the corridor”. See Table 3 for the detailed development of
the actuarial value of assets as of July 1, 2011.
The actuarial value of assets as of July 1, 2011 was $6.599 billion. The annualized dollar-weighted rate of return
for FY2011, measured on the actuarial value of assets, was approximately 6.5%. Measured on the market value of
assets, the rate of return was 21.5%, net of investment expenses.
The components of the change in the market and actuarial value of assets for the System are set forth below:
Market Value
$(millions)
Actuarial Value
$(millions)
Net Assets, July 1, 2010 $5,774 $6,348
• Employer and Member Contributions 319 319
• Benefit Payments and Expenses (479) (479)
• Investment Income/(Loss) 1,227 411
Preliminary Value, July 1, 2011 6,841 6,599
Application of Corridor
N/A
N/A
Final Net Assets, July 1, 2011
$6,841
$6,599
Estimated Rate of Return 21.5% 6.5%
Due to the use of an asset smoothing method, there is about $242 million of deferred investment gain that has
not yet been recognized. This deferred investment experience will be reflected in the actuarial value of assets
over the next few years.
EXECUTIVE SUMMARY
4
Due to actual investment experience lower
than the assumed rate of return for much of the
last decade, the actuarial value of assets has
been higher than the market value in most
years.
Rate of return on the market value of
assets are very volatile. The return on
the actuarial value of assets illustrates
the advantage of using an asset
smoothing method.
SYSTEM LIABILITIES
The actuarial accrued liability is that portion of the present value of future benefits that will not be paid by future
costs or member contributions. The difference between this liability and the asset values at the same date is
referred to as the unfunded actuarial accrued liability (UAAL). The unfunded actuarial accrued liability will be
reduced if the employer’s contributions exceed the employer’s normal cost for the year, after allowing for
interest earned on the previous balance of the unfunded actuarial accrued liability. Benefit improvements,
experience gains/losses, and changes in the actuarial assumptions and methods will also impact the total
actuarial accrued liability and the unfunded portion thereof.
The unfunded actuarial accrued liability as of July 1, 2011 is:
Actuarial Accrued Liability $8,179,767,661
Actuarial Value of Assets 6,598,627,939
Unfunded Actuarial Accrued Liability $1,581,139,722
0 1
2 3
4
5 6
7 8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$ B illi
o n s
As of 7/1
System Assets
Market Value of Assets Actuarial Value of Assets
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
A n n u a l
re t
u r
n
Year End 6/30
Rates of Return
Market Value Actuarial Value Expected
EXECUTIVE SUMMARY
5
See Table 5 for the detailed development of the Actuarial Accrued Liability and Table 8 for the calculation of
the Unfunded Actuarial Accrued Liability.
Other factors influencing the UAAL from year to year include actual experience versus that expected based on
the actuarial assumptions (both asset and liability), changes in the actuarial assumptions, procedures or methods
and changes in benefit provisions. The actual experience measured in this valuation is that which occurred
during the plan year ending June 30, 2011. There was an experience loss on the actuarial value of assets and an
experience gain on liabilities. The net result was a decrease in the UAAL.
Between July 1, 2010 and July 1, 2011 the change in the unfunded actuarial accrued liability for the System was
as follows (in millions):
$millions
Unfunded Actuarial Accrued Liability, July 1, 2010 $3,274
• effect of contributions less than actuarial rate 146
• expected increase due to amortization (16)
• investment experience 59
• liability experience1
• other experience
(153)
10
• change in actuarial assumptions (36)
• change in COLA assumption/reserve (1,703)
Unfunded Actuarial Accrued Liability, July 1, 2011 $1,581
1 Liability gain is about 1.8% of total actuarial accrued liability
The liability gain for the System can be allocated to experience related to each actuarial assumption as follows:
Liability Source
Impact of AAL
$(millions)
% of Expected
Liability
Salary Increases $ (132.9) (1.59)%
Mortality (19.1) (0.23)%
Termination of Employment (14.5) (0.17)%
Retirements 23.5 0.28%
Disability 4.1 0.05%
New entrants and rehires 17.1 0.21%
Miscellaneous/data changes (31.3) (0.38)%
Total (gain)/loss $ (153.1) (1.83)%
A detailed summary of the change in the UAAL is shown in Table 10.
EXECUTIVE SUMMARY
6
An evaluation of the unfunded actuarial accrued liability on a pure dollar basis may not provide a complete
analysis because only the difference between the assets and liabilities (which are both very large numbers) is
reflected. Another way to evaluate the unfunded actuarial accrued liability and the progress made in its funding
is to track the funded status, which is the ratio of the actuarial value of assets to the actuarial accrued liability.
The funded status information, on both an actuarial and market value basis, is shown below (in $million).
7/1/06 7/1/07 7/1/08 7/1/09 7/1/10 7/1/11
Using Actuarial Value of Assets:
Funded Ratio 71.4% 72.6% 73.0% 66.8% 66.0% 80.7%
Unfunded Actuarial Accrued Liability
(UAAL)
$2,260 $2,303 $2,402 $3,083 $3,274 $1,581
Using Market Value of Assets:
Funded Ratio 73.5% 78.9% 70.3% 55.7% 60.0% 83.6%
Unfunded Actuarial Accrued Liability
(UAAL)
$2,097 $1,773 $2,639 $4,118 $3,848 $1,339
Before the removal of the COLA assumption
and reserve , the System’s funded ratio had
decreased significantly over the last 10 years.
Numerous factors have contributed to the
decline, including: changes in the benefit
provisions, contributions less than the
actuarial rate, demographic experience and
investment experience less favorable than
expected based on the assumptions.
Removing the COLA assumption and reserve
has decreased liabilities and the funded ratio
has increased to 80.7% as of July 1, 2011.
CONTRIBUTION RATES
The funding objective of the System is to pay the normal cost rate plus an amount that will pay off the unfunded
actuarial accrued liability over a 20-year period commencing July 1, 2007.
Under the Entry Age Normal cost method, the actuarial contribution rate consists of:
• A “normal cost” for the portion of projected liabilities allocated by the actuarial cost method to service
of members during the year following the valuation date;
• An “unfunded actuarial accrued liability contribution” for the excess of the portion of projected
liabilities allocated to service to date over the actuarial value of assets.
Contributions to the System are made by the members and their employers. Most State employees pay 3.5% of
compensation. Local government employees contribute from 3.5% to 8.5% of compensation, depending on the
82.6% 79.8% 76.8% 76.1% 72.0% 71.4% 72.6% 73.1% 66.8% 66.0% 80.7%
-150.0%
-50.0%
50.0%
150.0%
250.0%
350.0%
450.0%
50.0%
650.0%
750.0%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
As of 7/1
Funded Ratio
EXECUTIVE SUMMARY
7
rate chosen by their employer. Starting in 2004, most participants were eligible to make an election to
contribute an additional 2.91% of pay and to increase their benefit accrual multiplier for future years of service
to 2.5%. Elected officials and Hazardous Duty employees have a different required contribution rate (see
Summary of Provisions section of this report).
Effective July 1, 1999, the State’s contribution rate was reduced from 12.5% to 10.0% of payroll and stayed at
that level until 2005. For the same period, the combined employer and employee contribution rates for the
county and local employees were 13.5% of payroll. As of July 1, 2005, the State’s contribution rate increased to
11.5% of payroll with additional increases of 1.0% each July until reaching 16.5%. The 1.0% increase that was
supposed to be effective July 1, 2010 was delayed one year by the 2010 Legislature and was effective July 1,
2011. For county and local employees, the contribution rate increased to 15.0% on July 1, 2005 and increased
an additional 1.0% of payroll each year beginning July 1, 2006 until it reached 20.0% on July 1, 2010. The
ultimate contribution rate of 16.5% for the State is now greater than the employer actuarial contribution rate for
fiscal year 2011 developed in this valuation. When contributions to the System are greater than the actuarial
rate, the UAAL is expected to decrease and be paid down faster. As of the July 1, 2011 valuation, if the System
pays the statutory rate it is projected the UAAL will be paid off in 14 years.
The following graph shows the total required employer contribution compared to the amount actually received
in each year. The funding policy contribution equals the System’s normal cost, budgeted expenses, and an
amortization of the unfunded actuarial accrued liability. For July 1, 1998 and prior years, the unfunded actuarial
accrued liability was amortized over 25 years from July 1, 1987. For the July 1, 1999 valuation, the
amortization period was changed to 40 years from July 1, 1987. For the July 1, 2008 valuation, the amortization
period was changed to 20 years from July 1, 2007 (no change in the number of years remaining). As of July 1,
2011, 16 years remain in the amortization period.
0
100
200
300
400
500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
$ M illi
o n s
As of 7/1
Employer Contribution Comparison
Required Contribution Actual Contribution
EXECUTIVE SUMMARY
8
MEMBER INFORMATION
The number of active members included in the valuation decreased by nearly 4% from the 2009 to the 2010
valuation and by 8% from the 2010 to the 2011 valuation. This appears to be the result of new retirees and
terminations not being replaced with new hires. Historically, the size of the active group has remained fairly
stable.
Retired member counts and average retirement benefit amounts continue to increase steadily. There were
29,418 retirees and beneficiaries in the 2011 valuation, with an average benefit of $1,269 per month. This
represents about a 2% increase in the average monthly benefit from the previous year.
The number of active members has been
fairly stable for most of the period with a
slight decline over the last two years.
The number of terminated vested and
retirees has increased which is to be
expected in an ongoing retirement
system.
The average benefit for retirees has
climbed steadily over the past 10 years as
new retirees leave with higher salaries
and, therefore, higher benefits than those
already retired. In addition, most of the
members who die are older with smaller
benefits. Ad hoc COLAs granted by the
Legislature have also increased the
average benefit during this period.
0
2
4
6
8
10
12
14
16
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Annual Benefit
($thousands)
Year End 6/30
Average Benefit for Members in Pay
0
20,000
40,000
60,000
80,000
100,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
As of 7/1
System Membership
Actives Deferred Vesteds Retirees
EXECUTIVE SUMMARY
9
General Comments
The economy and financial markets have experienced significant volatility over the last three years. The
valuation results presented as of July 1, 2009 reflected the large loss on the market value of assets and noted that
the asset smoothing mechanism would recognize this over the coming years. The valuation results this year do
indeed reflect the continued recognition of past losses and the accompanying increase in the unfunded actuarial
accrued liability and actuarial contribution rate. The losses of 2008 and 2009 were so large that their recognition
in the actuarial value of assets surpass the portion of the 2007, 2010 and 2011 gains being recognized, resulting
in a net loss recognized as of July 1, 2011. In the absence of new losses in future years, the smoothing method
is projected to start recognizing net gains in 2012.
The employer contribution rate has been increasing according to a schedule with an ultimate rate of 16.50%
being reached as of July 1, 2011. As noted earlier in the report, mainly due to the removal of the COLA
assumption and reserve, the actuarial contribution rate of 15.29% is less than what is currently being funded.
Absent future investment or experience losses, this will serve to decrease the UAAL and cause it to be paid
down faster. As of the July 1, 2011 valuation, if the System pays the statutory rate it is projected that the UAAL
will be paid off in 14 years. Paying the statutory rate also helps to protect against future investment and
experience losses that may be more frequent and/or severe in this time of economic uncertainty.
SECTION 1 - SUMMARY OF FINDINGS
10
COMPARISON OF PRINCIPAL VALUATION RESULTS
7/1/2011 7/1/2010 %
Valuation Valuation Change
1. PARTICIPANT DATA
Number of:
Active Members 40,551 43,934 (7.7)
Retired and Disabled Members and Beneficiaries 29,418 28,009 5.0
Inactive Members 5,522 5,560 (0.7)
Total Members 75,491 77,503 (2.6)
Projected Annual Salaries of Active Members $ 1,570,500,148 $ 1,683,697,139 (6.7)
Annual Retirement Payments for Retired Members $ 447,919,757 $ 416,699,157 7.5
and Beneficiaries
2. ASSETS AND LIABILITIES
Total Actuarial Accrued Liability $ 8,179,767,661 $ 9,622,627,833 (15.0)
Market Value of Assets $ 6,841,001,769 $ 5,774,379,263 18.5
Actuarial Value of Assets $ 6,598,627,939 $ 6,348,416,407 3.9
Unfunded Actuarial Accrued Liability $ 1,581,139,722 $ 3,274,211,426 (51.7)
Funded Ratio 80.7% 66.0% 22.3
3. EMPLOYER CONTRIBUTION RATES AS A
PERCENT OF PAYROLL
Normal Cost Rate 10.66% 12.56%
Amortization of Unfunded Actuarial Accrued Liability 8.27% 14.99%
Budgeted Expenses 0.45% 0.39%
Total Actuarial Required Contribution Rate 19.38% 27.94%
Less Estimated Member Contribution Rate 4.09% 4.07%
Employer Actuarial Required Contribution Rate 15.29% 23.87%
Less Statutory State Employer Contribution Rate 16.50% 15.50%
Contribution Shortfall/(Surplus) (1.21%) 8.37%
.
SECTION 2 - ASSETS
11
Oklahoma Public Employees Retirement System
Market Value of Assets
The current market value represents the "snapshot" or "cash-out" value of System assets as of the
valuation date. In addition, market values of assets provide a basis for measuring investment performance
from time to time. At July 1, 2011 the market value of assets for the System was $6.8 billion. Table 1 is a
comparison, at market values, of System assets as of July 1, 2011, and July 1, 2010, in total and by
investment category. Table 2 summarizes the change in the market value of assets from July 1, 2010 to
June 30, 2011.
Actuarial Value of Assets
Neither the market value of assets, representing a "cash-out" value of System assets, nor the book value of
assets, representing the cost of investments, may be the best measure of the System's ongoing ability to
meet its obligations.
To arrive at a suitable value for the actuarial valuation, a technique for determining the actuarial value of
assets is used, which dampens swings in the market value while still indirectly recognizing market values.
The actuarial value of assets is based on a five-year moving average of expected and actual market values
determined as follows:
• at the beginning of each fiscal year, a preliminary expected actuarial asset value is calculated as
the sum of the previous year’s actuarial value increased with a year’s interest at the System
valuation rate plus net cash flow adjusted for interest (at the same rate) to the end of the previous
fiscal year;
• the expected actuarial asset value is set equal to the preliminary expected actuarial value plus the
unrecognized investment gains and losses as of the beginning of the previous fiscal year;
• the difference between the expected actuarial asset value and the market value is the investment
gain or loss for the previous fiscal year;
• the (final) actuarial asset value is the preliminary value plus 20% of the investment gains and
losses for each of the five previous fiscal years, but in no case more than 120% of the market
value or less than 80% of the market value.
Table 3 shows the development of the actuarial value of assets (AVA) as of the valuation date.
SECTION 2 - ASSETS
12
Oklahoma Public Employees Retirement System
Table 1
Analysis of Net Assets at Market Value
June 30, 2011 June 30, 2010
Amount % of Amount % of
$(millions) Total $(millions) Total
Cash & Equivalents $ 174.9 2.5% $ 157.3 2.7%
Short-term Investments 39.6 0.6% 24.8 0.4%
Government Obligations 1,435.4 20.3% 1,321.2 22.3%
Corporate Bonds 854.5 12.1% 924.1 15.6%
Domestic Equity 2,859.8 40.6% 2,197.5 37.1%
International Equity 1,686.6 23.9% 1,299.3 21.9%
Subtotal $ 7,050.8 100.0% $ 5,924.2 100.0%
Property (net) 0.8 0.7
Other Assets 0.2 0.3
Net Receivables/(payables) (210.8) (150.8)
Net Assets $ 6,841.0 $ 5,774.4
SECTION 2 - ASSETS
13
Oklahoma Public Employees Retirement System
Table 2
Statement of Changes in Net Assets
Fiscal Year Ended June 30
2011 2010
1. Market Value of Net Assets at Beginning of Year $ 5,774,379,263 $ 5,173,537,778
2. Contributions
a. Members $ 66,431,434 $ 69,041,436
b. State and Local Agencies 252,904,579 259,779,236
c. Total Contributions (2a) + (2b) 319,336,013 328,820,672
3. Net Investment Income
a. Net appreciation (depreciation) in fair value of investments $ 1,122,811,032 $ 610,499,166
b. Interest 69,039,631 76,143,014
c. Dividends 40,475,599 35,222,195
d. Securities lending activities 1,826,242 1,537,491
e. Other 0 36,966
f. Total investment income/(loss) $ 1,234,152,504 $ 723,438,832
(3a) + (3b) + (3c) + (3d) + (3e)
g. Investment expenses (7,466,011) (6,543,751)
h. Net investment income/(loss) (3f) + (3g) 1,226,686,493 716,895,081
i. Total additions/(subtractions) (2c) + (3h) $ 1,546,022,506 $ 1,045,715,753
4. Deductions
a. Retirement, death, and survivor benefits $ 462,062,563 $ 429,260,056
b. Refunds and withdrawals 12,656,758 11,058,379
c. Administrative expenses 4,680,679 4,555,833
d. Total deductions (4a) + (4b) + (4c) $ 479,400,000 $ 444,874,268
5. Net Change in Assets (3i) - (4d) 1,066,622,506 600,841,485
6. Market Value of Net Assets at End of Year $ 6,841,001,769 $ 5,774,379,263
(1) + (5)
SECTION 2 - ASSETS
14
Oklahoma Public Employees Retirement System
Table 3
Determination of Actuarial Value of Assets
Schedule of Asset Gains/(Losses)
Recognized in Recognized in Recognized in
Year End Original Amount Prior Years This Year Future Years
2007 $ 518,970,886 $ 415,176,709 $ 103,794,177 $ 0
2008 (730,915,087) (438,549,052) (146,183,017) (146,183,018)
2009 (1,449,929,882) (579,971,953) (289,985,976) (579,971,953)
2010 605,615,805 121,123,161 121,123,161 363,369,483
2011 756,449,148 0 151,289,830 605,159,318
Total $ (299,809,130) $ (482,221,135) $ (59,961,825) $ 242,373,830
Development of Actuarial Value of Assets
1. Actuarial Value as of July 1, 2010 $ 6,348,416,407
2. Contributions
a. Member $ 66,431,434
b. Employer 252,904,579
c. Total (a) + (b) $ 319,336,013
3. Decreases during year
a. Benefit payments $ (462,062,563)
b. Refunds and withdrawals (12,656,758)
c. Administrative expenses (4,680,679)
d. Total (a) + (b) + (c) $ (479,400,000)
4. Expected return at 7.5% on:
a. Item 1 $ 476,131,231
b. Item 2 (one-half year) 11,758,612
c. Item 3 (one-half year) (17,652,499)
d. Total (a) + (b) + (c) $ 470,237,344
5. Expected actuarial value as of June 30, 2011 (1) + (2c) + (3d) + (4d) $ 6,658,589,764
6. Unrecognized asset gain/(loss) as of July 1, 2010 $ (574,037,143)
7. Expected actuarial value as of June 30, 2011, plus previous year's $ 6,084,552,621
unrecognized gain/(loss) (5) + (6)
8. Market Value as of June 30, 2011 $ 6,841,001,769
9. Year end 2011 asset gain/(loss) (8) - (7) $ 756,449,148
10. Asset gain/(loss) to be recognized as of June 30, 2011 $ (59,961,825)
11. Initial Actuarial Value as of June 30, 2011 (5) + (10) $ 6,598,627,939
12. Constraining values:
a. 80% of market value (8) x 0.8 $ 5,472,801,415
b. 120% of market value (8) x 1.2 $ 8,209,202,123
13. Actuarial Value as of June 30, 2011 $ 6,598,627,939
(11), but not less than (12a), nor greater than (12b)
SECTION 3 - SYSTEM LIABILITIES
15
Oklahoma Public Employees Retirement System
In the previous section, an actuarial valuation was compared with an inventory process, and an analysis
was given of the inventory of assets of the System as of the valuation date, July 1, 2011. In this section,
the discussion will focus on the commitments of the System, which are referred to as its liabilities.
Table 4 contains an analysis of the actuarial present value of all future benefits (PVFB) for contributing
members, inactive members, retirees and their beneficiaries. The analysis is provided for each group.
The liabilities summarized in Table 4 include the actuarial present value of all future benefits expected to
be paid with respect to each member. For an active member, this value includes measures of both benefits
already earned and future benefits expected to be earned. For all members, active and retired, the value
extends over benefits earnable and payable for the rest of their lives and, if an optional benefit is chosen,
for the lives of the surviving beneficiaries.
The actuarial assumptions used to determine liabilities are based on the results of an experience study
based on the three-year period ended June 30, 2010. This set of assumptions, as shown in Appendix C, is
first used for this July 1, 2011 valuation.
Actuarial Liabilities
A fundamental principle in financing the liabilities of a retirement program is that the cost of its benefits
should be related to the period in which benefits are earned, rather than to the period of benefit
distribution. An actuarial cost method is a mathematical technique that allocates the present value of
future benefits into annual costs. In order to do this allocation, it is necessary for the funding method to
“break down” the present value of future benefits into two components:
(1) that which is attributable to the past; and
(2) that which is attributable to the future.
Actuarial terminology calls the part attributable to the past the “past service liability” or the “actuarial
accrued liability”. The portion allocated to the future is known as the present value of future normal costs,
with the specific piece of it allocated to the current year being called the “normal cost”. Table 5 contains
the calculation of actuarial liabilities for all groups.
In prior valuations, the System used an assumption of a 2% annual COLA each year in developing
liabilities and contribution rates. The System did not have an automatic COLA provision, but ad hoc
COLAs had historically been granted by the Legislature every other year. In order to avoid actuarial
gains in the year in which a COLA is not granted and an actuarial loss in the years in which a COLA is
granted, the System’s liabilities included a “COLA Reserve.”
Since the last valuation, the plan provisions of the System have been amended by House Bill 2132. Under
this legislation, COLAs are removed from the definition of “non-fiscal retirement bills” in the Oklahoma
Pension Legislation Actuarial Analysis Act (“OPLAAA”). The effect of these amendments makes any
COLA bill subject to all of the requirements of OPLAAA including the requirement that such bills provide
adequate funding to pay the cost. Therefore, as of July 1, 2011, liabilities have been calculated without
considering future COLAs, and the COLA reserve has been removed.
SECTION 3 – SYSTEM LIABILITIES
16
Oklahoma Public Employees Retirement System
Table 4
Present Value of Future Benefits
As of July 1, 2011
Regular Elected Officials Hazardous Duty Total
1. Active Employees
a. Retirement Benefit $ 3,555,532,032 $ 223,045,739 $ 196,745,254 $ 3,975,323,025
b. Withdrawal Benefit 187,607,681 9,270,846 9,761,017 206,639,544
c. Pre-Retirement Death Benefit 102,701,641 2,639,080 4,163,331 109,504,052
d. Disability Benefit 126,955,425 6,109,370 4,876,812 137,941,607
e. Return of Member Contributions 34,113,447 402,547 3,110,855 37,626,849
f. Supplemental Medical Benefit 181,098,120 5,276,585 9,018,601 195,393,306
g. Subtotal $ 4,188,008,346 $ 246,744,167 $ 227,675,870 $ 4,662,428,383
2. Inactive Nonvested Members $ 27,045,737
3. Inactive Vested Members 313,447,560
4. Return of Excess Contributions 849,207
5. Disabled Members 113,161,534
6. Retirees 3,788,344,228
7. Beneficiaries 252,488,993
8. Supplemental Medical Benefit for Retirees 182,423,076
and Inactive Vested Members
9. COLA Reserve 0
10. Total PVFB $ 9,340,188,718
SECTION 3 – SYSTEM LIABILITIES
17
Oklahoma Public Employees Retirement System
Table 5
Actuarial Accrued Liability
As of July 1, 2011
Regular Elected Officials Hazardous Duty Total
1. Present Value of Future Benefits for Active Members
a. Retirement Benefit $ 3,555,532,032 $ 223,045,739 $ 196,745,254 $ 3,975,323,025
b. Withdrawal Benefit 187,607,681 9,270,846 9,761,017 206,639,544
c. Pre-Retirement Death Benefit 102,701,641 2,639,080 4,163,331 109,504,052
d. Disability Benefit 126,955,425 6,109,370 4,876,812 137,941,607
e. Return of Member Contributions 34,113,447 402,547 3,110,855 37,626,849
f. Supplemental Medical Benefit 181,098,120 5,276,585 9,018,601 195,393,306
g. Subtotal $ 4,188,008,346 $ 246,744,167 $ 227,675,870 $ 4,662,428,383
2. Present Value of Future Normal Costs for Active Members
a. Retirement Benefit $ 727,428,480 $ 31,605,297 $ 52,392,474 $ 811,426,251
b. Withdrawal Benefit 105,169,945 5,929,952 5,360,898 116,460,795
c. Pre-Retirement Death Benefit 26,049,877 532,237 1,344,486 27,926,600
d. Disability Benefit 42,021,043 1,591,334 1,753,926 45,366,303
e. Return of Member Contributions 92,638,449 2,383,730 10,061,383 105,083,562
f. Supplemental Medical Benefit 50,191,910 1,260,782 2,704,854 54,157,546
g. Subtotal $ 1,043,499,704 $ 43,303,332 $ 73,618,021 $ 1,160,421,057
3. Present Value of Future Benefits for Inactive Members 4,677,760,335
4. Total Actuarial Accrued Liability (1g) - (2g) + (3) $ 8,179,767,661
SECTION 3 – SYSTEM LIABILITIES
18
Oklahoma Public Employees Retirement System
Table 6
Development of COLA Reserve
1. Reserve as of July 1, 2010 $ 218,696,496
2. Interest at 7.5% 16,402,237
3. Reserve increment 83,079,895
4. Expected reserve as of July 1, 2011 318,178,628
(1) + (2) + (3)
5. Change in law (318,178,628)
6. Actual reserve as of July 1, 2011 $ 0
SECTION 4 – EMPLOYER CONTRIBUTIONS
19
Oklahoma Public Employees Retirement System
In the previous two sections, attention has been focused on the assets and the present value of all future
benefits of the System. A comparison of Tables 3 and 4 indicates that there is a shortfall in current
actuarial assets to meet the present value of all future benefits for current members and beneficiaries.
In an active system, there will always be a difference between the assets and the present value of all future
benefits. An actuarial valuation sets a schedule of future contributions that will deal with this funding in
an orderly fashion.
The method used to determine the incidence of the contributions in various years is called the actuarial
cost method. Under an actuarial cost method, the contributions required to meet the difference between
current assets and current liabilities are allocated each year between two elements: (1) the normal cost and
(2) the payment on the unfunded actuarial accrued liability.
The term “fully funded” is often applied to a system in which contributions at the normal cost rate are
sufficient to pay for the benefits of existing employees as well as for those of new employees. More often
than not, systems are not fully funded, either because of past benefit improvements that have not been
completely funded and/or because of actuarial deficiencies that have occurred because experience has not
been as favorable as anticipated. Under these circumstances, an unfunded actuarial accrued liability
(UAAL) exists.
Description of Rate Components
The actuarial cost method used by the System is the traditional Entry Age Normal (EAN) – level percent
of pay cost method. Under the EAN cost method, the actuarial present value of each member’s projected
benefit is allocated on a level basis over the member’s compensation between the entry age of the
member and the assumed exit ages. The portion of the actuarial present value allocated to the valuation
year is called the normal cost. The actuarial present value of benefits allocated to prior years of service is
called the actuarial accrued liability. The unfunded actuarial accrued liability represents the difference
between the actuarial accrued liability and the actuarial value of assets as of the valuation date. The
unfunded actuarial accrued liability is calculated each year and reflects experience gains/losses.
Effective with the July 1, 2008 valuation, the UAAL is amortized as a level percent of payroll over a
closed 20-year period commencing July 1, 2007. Prior to 2008, the unfunded actuarial accrued liability
was amortized as a level dollar amount over a 40-year period from July 1, 1987. Given a stable active
workforce, the level percent of payroll amortization method is expected to produce a payment stream that
is constant as a percent of covered payroll.
Contribution Rate Summary
The normal cost rate is developed in Table 7. Table 8 develops the contribution rate for amortization of
the unfunded actuarial accrued liability. Table 9 develops the total actuarial contribution rate.
SECTION 4 – EMPLOYER CONTRIBUTIONS
20
Oklahoma Public Employees Retirement System
Table 7
Normal Cost Contribution Rates
As Percentages of Salary
Regular Elected Officials Hazardous Duty Total % of Pay
1. Normal Cost
a. Retirement Benefit $ 105,816,691 $ 6,147,570 $ 7,100,615 $ 119,064,876 7.59%
b. Withdrawal Benefit 13,236,310 1,018,266 706,229 14,960,805 0.95%
c. Pre-Retirement Death Benefit 3,644,724 102,027 188,724 3,935,475 0.25%
d. Disability Benefit 5,531,426 283,813 238,085 6,053,324 0.39%
e. Return of Member Contributions 12,102,710 443,561 1,336,628 13,882,899 0.88%
f. Supplemental Medical Benefit 8,797,089 296,498 400,463 9,494,050 0.60%
g. Total $ 149,128,950 $ 8,291,735 $ 9,970,744 $ 167,391,429 10.66%
2. Estimated Payroll for the Year $ 1,464,978,079 $ 35,522,499 $ 69,999,570 $ 1,570,500,148
3. Normal Cost Rate (1g)/(2) 10.18% 23.34% 14.24% 10.66%
SECTION 4 – EMPLOYER CONTRIBUTIONS
21
Oklahoma Public Employees Retirement System
Table 8
Unfunded Actuarial Accrued Liability Contribution Rate
1. Actuarial Present Value of Future Benefits $ 9,340,188,718
2. Actuarial Present Value of Future Normal Costs 1,160,421,057
3. Actuarial Accrued Liability (1) - (2) $ 8,179,767,661
4. Actuarial Value of Assets 6,598,627,939
5. Unfunded Actuarial Accrued Liability (UAAL) $ 1,581,139,722
(3) - (4)
6. Amortization of UAAL over 20 years 129,814,798
from July 1, 2007 (assumed mid-year) *
7. Total Estimated Payroll for Year Ending June 30, 2012 $ 1,570,500,148
8. Amortization as a Percent of Payroll 8.27%
*The UAAL is amortized as a level percent of payroll, assuming payroll increases 4.0% per year
SECTION 4 – EMPLOYER CONTRIBUTIONS
22
Oklahoma Public Employees Retirement System
Table 9
Actuarial Contribution Rate
July 1
2011 2010
1. Total Normal Cost Rate 10.66% 12.56%
2. Amortization of UAAL1 8.27% 14.99%
3. Budgeted Expenses2 0.45% 0.39%
4. Total Actuarial Contribution Rate 19.38% 27.94%
(1) + (2) + (3)
5. Estimated Member Contribution Rate 4.09% 4.07%
6. Employer Actuarial Contribution Rate 15.29% 23.87%
(4) - (5)
1 Amortization of UAAL is a level percent of payroll
2 Provided by the system
SECTION 4 – EMPLOYER CONTRIBUTIONS
23
Oklahoma Public Employees Retirement System
Table 10
Calculation of Actuarial Gain/(Loss)
1. Expected actuarial accrued liability
a. Actuarial accrued liability at July 1, 2010 $ 9,622,627,833
b. Normal cost at mid-year 211,556,327
c. Benefit payments for fiscal year ending June 30, 2011 (474,719,321)
d. Interest on (a), (b), and (c) 712,006,882
e. Change in assumptions (35,855,677)
f. Change in COLA assumption/reserve (1,702,746,611)
g. Expected actuarial accrued liability as of July 1, 2011 $ 8,332,869,433
(a) + (b) + (c) + (d) + (e) + (f)
2. Actuarial accrued liability at July 1, 2011 $ 8,179,767,661
3. Actuarial accrued liability gain/(loss) (1g) - (2) $ 153,101,772
4. Expected actuarial value of assets
a. Actuarial value of assets at July 1, 2010 $ 6,348,416,407
b. Contributions for fiscal year ending June 30, 2011 319,336,013
c. Benefit payment and administrative expenses for (479,400,000)
fiscal year ending June 30, 2011
d. Interest on (a), (b), and (c) 470,237,344
e. Expected actuarial value of assets as of July 1, 2011 $ 6,658,589,764
(a) + (b) + (c) + (d)
5. Actuarial value of assets at July 1, 2011 $ 6,598,627,939
6. Actuarial value of assets gain/(loss) (5) - (4e) $ (59,961,825)
7. Net actuarial gain/(loss) (3) + (6) $ 93,139,947
SECTION 4 – EMPLOYER CONTRIBUTIONS
24
Oklahoma Public Employees Retirement System
Table 11
Summary of Contribution Requirements
Actuarial Valuation as of
Percent
July 1, 2011 July 1, 2010 Change
1. Expected annual payroll $ 1,570,500,148 $ 1,683,697,139 (6.7%)
2. Total normal cost $ 167,391,429 $ 211,556,327 (20.9%)
3. Unfunded actuarial accrued liability $ 1,581,139,722 $ 3,274,211,426 (51.7%)
4. Amortization of unfunded actuarial $ 129,814,798 $ 252,418,324 (48.6%)
accrued liability over 20 years
from July 1, 2007*
5. Budgeted expenses (provided $ 7,084,709 $ 6,607,489 7.2%
by the System)
6. Total required contribution $ 304,290,936 $ 470,582,140 (35.3%)
(2) + (4) + (5)
7. Estimated member contributions $ 64,159,198 $ 68,570,507 (6.4%)
8. Required employer contribution $ 240,131,738 $ 402,011,633 (40.3%)
(6) - (7)
9. Previous year's actual contribution
a. Member $ 66,431,434 $ 69,041,436 (3.8%)
b. Employer 252,904,579 259,779,236 (2.6%)
c. Total $ 319,336,013 $ 328,820,672 (2.9%)
*Amortization of UAAL is a level percent of payroll
SECTION 5– ACCOUNTING AND OTHER INFORMATION
25
Oklahoma Public Employees Retirement System
Governmental Accounting Standards Board Statement No. 25, Financial Reporting for Defined Benefit
Pension Plans as amended by GASB 50, (referred to as GASB 25), establishes financial reporting
standards for defined benefit pension plans. In addition to the two required statements regarding plan
assets, the statement requires two schedules and accompanying notes disclosing information relative to
the funded status of the plan and historical contribution patterns.
• The Schedule of Funding Progress provides information about whether the financial strength of
the Plan is improving or deteriorating over time.
• The Schedule of Employer Contributions provides historical information about the annual
required contribution (ARC) and the percentage of the ARC that was actually contributed.
In addition to information required by GASB, we also provide an exhibit showing the present value of
accumulated benefits under FASB Statement No. 35 and an exhibit showing the expected benefit
payments for the System.
SECTION 5– ACCOUNTING AND OTHER INFORMATION
26
Oklahoma Public Employees Retirement System
Table 12
Accounting Information for GASB 25
Schedule of Funding Progress
Actuarial Actuarial Actuarial Accrued Unfunded Funded Covered UAAL as a Percent of
Valuation Value of Assets Liability (AAL) AAL (UAAL) Ratio Payroll Covered Payroll
Date (a) (b) (b)-(a) (a)/(b) (c) ((b) - (a))/(c)
7/1/2006 $5,654,276,043 $7,914,657,886 $2,260,381,843 71.4% $1,568,350,023 144.1%
7/1/2007 6,110,230,058 8,413,248,130 2,303,018,072 72.6% 1,626,737,832 141.6%
7/1/2008 6,491,928,362 8,894,287,254 2,402,358,892 73.0% 1,682,663,413 142.8%
7/1/2009 6,208,245,334 9,291,457,837 3,083,212,503 66.8% 1,732,975,532 177.9%
7/1/2010 6,348,416,407 9,622,627,833 3,274,211,426 66.0% 1,683,697,139 194.5%
7/1/2011 6,598,627,939 8,179,767,661 1,581,139,722 80.7% 1,570,500,148 100.7%
Valuation Date July 1, 2011
Actuarial Cost Method Entry Age
Normal
Amortization Method Level Percent of Pay, Closed
Remaining Amortization Period 16 Years
Asset Valuation Method 5 Year Moving Average (see
Appendix C)
Actuarial
Assumptions:
Investment Rate of Return 7.5%
Projected Salary Increases 4.9% - 8.8%
Cost of Living Adjustment 0%
SECTION 5– ACCOUNTING AND OTHER INFORMATION
27
Oklahoma Public Employees Retirement System
Table 13
Accounting Information for GASB 25
Schedule of Employer Contributions
For Fiscal Year Ended June 30
Year Annual Required Percentage
End Contribution Contributed
2006 $ 309,980,339 55.3%
2007 338,550,016 58.4%
2008 363,914,352 60.5%
2009 323,104,773 75.2%
2010 389,155,339 66.8%
2011 402,011,633 62.9%
SECTION 5– ACCOUNTING AND OTHER INFORMATION
28
Oklahoma Public Employees Retirement System
Table 14
Actuarial Present Value of Accumulated Benefits
The actuarial present value of vested and nonvested accumulated System benefits is computed on an
ongoing System basis in order to provide information on benefit liabilities calculated in accordance with
Financial Accounting Standards Board Statement No. 35. In this calculation, a determination is made of
all benefits earned by current participants as of the valuation date; the actuarial present value is then
computed using demographic assumptions and an assumed interest rate. Assumptions regarding future
salary and accrual of future benefit service are not necessary for this purpose. Only System liabilities
accrued (and in statute) as of the valuation date are included.
July 1
2011 2010
Vested benefits
Active members $ 1,934,805,510 $ 2,027,413,498
Terminated vested members 313,447,560 294,919,268
Unclaimed contributions 27,045,737 23,145,785
Limited benefit 849,207 922,082
Retirees and beneficiaries 4,153,994,755 3,848,499,349
Supplemental medical insurance premiums 320,999,786 323,200,890
Total vested benefits $ 6,751,142,555 $ 6,518,100,872
Nonvested benefits for active members $ 343,433,050 $ 363,361,313
Total accumulated benefits $ 7,094,575,605 $ 6,881,462,185
Market value of assets available for benefits $ 6,841,001,769 $ 5,774,379,263
Funded ratio 96.4% 83.9%
Number of members
Vested members
Active members 21,057 22,255
Terminated vested members 5,522 5,560
Retirees and beneficiaries 29,418 28,009
Total vested members 55,997 55,824
Nonvested active members 19,494 21,679
Total members 75,491 77,503
SECTION 5– ACCOUNTING AND OTHER INFORMATION
29
Oklahoma Public Employees Retirement System
Table 14 (continued)
Actuarial Present Value of Accumulated Benefits
A statement of changes in the actuarial present value of accumulated System benefits follows. This
statement shows the effect of certain events on the actuarial present value shown on the previous page.
Present value of accrued benefit as of July 1, 2010 $ 6,881,462,185
Increase/(decrease) during the year attributable to:
Benefits accrued and (gains)/losses 189,203,224
Increase due to interest 498,629,517
Benefits paid (474,719,321)
Plan provision change 0
Net increase/(decrease) $ 213,113,420
Present value of accrued benefit as of July 1, 2011 $ 7,094,575,605
SECTION 5– ACCOUNTING AND OTHER INFORMATION
30
Oklahoma Public Employees Retirement System
Table 15
Projected Benefit Payments
The chart below shows estimated benefits expected to be paid over the next ten years, based on the
assumptions used in this valuation. The “Actives” column shows the benefits expected to be paid to
members currently active on July 1, 2011. The “Retirees” column shows benefits expected to be paid to
members receiving benefit payments as of July 1, 2011 or to members who have terminated employment
and are entitled to a deferred vested benefit.
Retirement, Survivor, and Withdrawal Benefits
Year Ending
June 30 Actives Retirees Total
2012 $31,630,000 $450,828,000 $482,458,000
2013 60,736,000 443,695,000 504,431,000
2014 91,085,000 436,149,000 527,234,000
2015 122,484,000 428,610,000 551,094,000
2016 154,719,000 420,269,000 574,988,000
2017 187,514,000 411,845,000 599,359,000
2018 221,084,000 402,938,000 624,022,000
2019 254,052,000 393,829,000 647,881,000
2020 287,048,000 384,840,000 671,888,000
2021 318,699,000 375,098,000 693,797,000
Supplemental Medical Premium Benefits
Year Ending
June 30 Actives Retirees Total
2012 $1,561,000 $18,049,000 $19,610,000
2013 3,443,000 17,716,000 21,159,000
2014 5,349,000 17,374,000 22,723,000
2015 7,217,000 17,043,000 24,260,000
2016 9,045,000 16,663,000 25,708,000
2017 10,834,000 16,341,000 27,175,000
2018 12,547,000 16,003,000 28,550,000
2019 14,136,000 15,696,000 29,832,000
2020 15,607,000 15,392,000 30,999,000
2021 16,939,000 15,087,000 32,026,000
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
31
Oklahoma Public Employees Retirement System
Following is a summary of the major System provisions used in the actuarial valuation of the System.
Effective date and fiscal year The System became effective January 1, 1964. The
fiscal year is July 1 to June 30.
Administration The System is administered by a 13-member Oklahoma
Public Employees Retirement System Board of Trustees.
The Board acts as the fiduciary for the investment and
administration of the System.
Employees included All permanent employees of the State of Oklahoma, and
any other employer such as a county, county hospital,
city or town, conservation districts, circuit engineering
districts, and any trust in which a county, city or town
participates and is the primary beneficiary, are eligible to
join if:
a) the employee is not eligible for or participating in
another retirement system authorized under
Oklahoma law, is covered by Social Security and is
not participating in the U.S. Civil Service
Retirement System.
b) the employee is scheduled for 1,000 hours per year
and salary is not less than the hourly rate of the
monthly minimum wage for State employees (for
employees of local government employers, not less
than the hourly rate of the monthly minimum wage
for such employees).
Membership is mandatory for new eligible employees on
the first of the month following employment.
Employer and employee contributions Most State employees except elected officials and
Hazardous Duty employees:
Employee: 3.5%
Employer: 16.5%
Total: 20.0%
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
32
Oklahoma Public Employees Retirement System
Employer and employee contributions Prior to July 1, 2006 the employee contribution rate
(continued) varied on pay above/below $25,000 as shown in the
chart at the end of this section. This plan provision was
changed by the 2006 Legislature.
Before November 1, 2010, elected officials selected a
contribution rate of 4.5%, 6%, 7.5%, 8.5%, 9% or 10%
which determines the computation factor used in
calculating their benefit. Elected officials elected or
appointed on or after November 1, 2010 were limited to
selecting either the 4.5% contribution rate or the 10%
contribution rate.
Contributions for Hazardous Duty employees are
summarized at the end of this appendix.
Local government employees contribute from 3.5% to
8.5% of pay, depending on the rate chosen by their
employers.
Starting in 2004, regular members may make an election
to contribute an additional 2.91% of pay and increase
their accrual rate for future years of service to 2.5%
(referred to as Step-Up Option).
Contributions are based on compensation defined by the
Board.
Contribution Summary: Regular State Contributions (By Statute)
For Pay Under $25,000
Fiscal
Year
Employer
Contribution
Employee
Contribution
Total
Contribution
Applicable
Salary Cap
1994-1995 11.5% 2.0% 13.5% $50,000
1995-1996 11.5% 2.0% 13.5% $60,000
1996-1997 12.0% 2.5% 14.5% $70,000
1997-1998 12.5% 3.0% 15.5% $80,000
1998-1999 12.5% 3.0% 16.0% No Cap
1999-2005 10.0% 3.0% 13.0% No Cap
2005-2006 11.5% 3.0% 14.5% No Cap
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
33
Oklahoma Public Employees Retirement System
Employer and employee contributions
(continued)
For Pay Between $25,000 and Cap
Fiscal
Year
Employer
Contribution
Employee
Contribution
Total
Contribution
Applicable
Salary Cap
1994-1995 11.5% 3.5% 15.0% $50,000
1995-1996 11.5% 3.5% 15.0% $60,000
1996-1997 12.0% 3.5% 15.5% $70,000
1997-1998 12.5% 3.5% 16.0% $80,000
1998-1999 12.5% 3.5% 16.0% No Cap
1999-2005 10.0% 3.5% 13.5% No Cap
2005-2006 11.5% 3.5% 15.0% No Cap
For All Pay
Fiscal
Year
Employer
Contribution
Employee
Contribution
Total
Contribution
2006-2007 12.5% 3.5% 16.0%
2007-2008 13.5% 3.5% 17.0%
2008-2009 14.5% 3.5% 18.0%
2009-2010 15.5% 3.5% 19.0%
2010-2011 15.5% 3.5% 19.0%
2011-2012 16.5% 3.5% 20.0%
Years of Service
Prior Service All service of the employee prior to the employer’s entry
date is credited prior service providing the participating
employer joined on or before January 1, 1975. Prior service
for employees of employers who join after January 1, 1975,
may be purchased by the employee. Prior service is allowed
for certain active wartime military service (maximum 5 years
credit) for members employed prior to July 1, 2000 and for
employment with public schools or Board of Regents for
Higher Education prior to July, 1943. Service need not be
continuous employment to be credited.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
34
Oklahoma Public Employees Retirement System
Years of Service
Participating Service After the employer’s entry date, a member’s participating service
is credited for all periods of employment for which required
contributions are made. Service is prorated according to hours
worked per month on and after July 1, 1979. Certain active
wartime military service is credited, provided the contribution
accumulation is not withdrawn. Active and retired members are
credited with additional participating service based on their
accumulated contributions prior to June 30, 1977 (if not
withdrawn prior to retirement), according to the following:
Member Accumulation Additional Years
$ 1 to $ 500 1
501 to 1,000 2
1,001 to 1,500 3
1,501 to 2,000 4
2,001 to More 5
A member who has withdrawn his or her contributions and later
returns to membership may repay the amount withdrawn plus
interest as determined by the Board to reinstate participating
service which was canceled by his or her withdrawal.
A member may receive credit for those years of service as an
elected official if the member is not receiving credit for that
service in any other public retirement system. The member must
pay an amount equal to the actuarial cost to fund the difference
between the member’s projected benefits with and without the
additional service credit.
The total participating service of a member who retires or
terminates employment and elects a vested benefit shall include
up to one hundred thirty (130) days of unused sick leave
accumulated subsequent to August 1, 1959, during the member’s
employment with any participating employer. Such credit shall
be added in terms of whole months. If unused sick leave entitles
the member to an additional year of service, the additional cost is
borne by the employer.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
35
Oklahoma Public Employees Retirement System
Years of Service
Participating Service
(continued) A member may receive credit for those years of credited
service accumulated by the member while a member of the
Oklahoma Firefighters Pension and Retirement System, the
Oklahoma Police Pension and Retirement System, the
Uniform Retirement System for Justices and Judges, the
Oklahoma Law Enforcement Retirement System, or the
Teachers’ Retirement System of Oklahoma, if the member is
not receiving or eligible to receive retirement credit or
benefits from this service in any other public retirement
system. The member may receive credit for this service by
paying the amount actuarially determined to cover the cost
of the previous service.
Credited Service Credited service equals prior service plus participating
service. The result is rounded up to the next year if the
number of remaining months is equal to or greater than six.
Compensation The member’s basic salary and wages as defined by the
Board of Trustees, including amounts contributed to deferred
compensation plans. Overtime and moving expenses are
excluded.
Final average compensation The average of the thirty-six (36) highest months of
compensation earned within the last ten (10) years of
participating service, subject to any applicable salary caps
and on which contributions have been made.
For all members hired prior to July 1, 1995, the minimum
final average compensation is $13,800. For members hired
on or after July 1, 1995, no minimum is applied until the
member has fifteen (15) years of service. For members with
between fifteen (15) and twenty (20) years of service, the
minimum final average compensation is $6,900. For
member with more than twenty (20) years of service, the
minimum is $13,800.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
36
Oklahoma Public Employees Retirement System
Normal retirement date Normal retirement is the earliest of: (1) first day of the
month coinciding with or next following the 62nd birthday;
or, (2) the first day of the month coinciding with or
following the date at which the sum of a member’s age and
number of years of credited service total eighty (80) if the
member was hired prior to July 1, 1992; or (3) following the
date at which the sum of member’s age and number of years
of credited service total ninety (90) if the member was hired
after July 1, 1992. Members employed after January 1, 1983
must complete at least six (6) years of full-time equivalent
employment with a participating employer before receiving
any retirement benefits.
For regular employees hired on or after November 1, 2011,
the retirement age will be age 65. Alternatively, they may
retire under the “Rule of 90” if they are age 60.
The normal retirement date for elected officials is the first of
the month coinciding with or following the official’s 60th
birthday or the first day of the month coinciding with or
following the date at which the sum of the member’s age and
years of credited service total eighty (80). For regular
employees hired on or after November 1, 2011, the
retirement age will be age 65. Alternatively, they may retire
under the “Rule of 90” if they are age 60.
For elected officials appointed or elected on or after
November 1, 2011, the retirement age will be 65 with a
minimum of 8 years of elected service, or age 62 if they have
10 years of elected service.
Normal retirement benefit The benefit on or after normal retirement, payable monthly
for life to non-elected members, is as follows:
2% of final average compensation multiplied by years of
credited service.
For members who have elected the Step-Up Option, a 2.5%
multiplier is applied to the “stepped-up” full years.
The benefit payable monthly for life to elected officials is
the greater of 1) the preceding benefit, or 2) the benefit
calculated using highest annual compensation as an elected
official times credited service multiplied by the following
applicable computation factor:
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
37
Oklahoma Public Employees Retirement System
Normal retirement benefit
(continued)
% of Compensation
Contributed
% of Highest
Annual Compensation
4.5% 1.9%
6.0% 2.5%
7.5% 3.0%
8.5% 3.4%
9.0% 3.6%
10.0% 4.0%
Elected officials who became members after July 1, 1990
must participate in the System as an elected official for at
least six (6) years to qualify for the elected official benefit
formula on all years of participating service. For elected
officials elected or appointed on or after November 1, 2011,
the vesting period will be eight (8) years.
OPERS members who are elected after August 21, 2008
have a benefit cap of 100% of their highest annual salary.
Elected officials who become members after August 21,
2008 receive a benefit that consists of two separate
calculations. Their non-elected years are multiplied by 2%
and their elected years are multiplied by the applicable
percentage selected and paid for by the members.
Elected officials who were appointed or elected on or after
November 1, 2010 have two benefit multiplier options: 1.9%
or 4.0%.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
38
Oklahoma Public Employees Retirement System
Early retirement benefit A member with at least ten (10) years of participating
service may retire as early as age 55. The benefit is
determined by the normal retirement formula based on years
of credited service and Final Average Compensation (highest
annual compensation for elected officials) at termination.
The percentage payable at early retirement age is:
Elected Officials Other Members
Age Percentage Age Percentage
60 100% 62 100.0%
59 94 61 93.3
58 88 60 86.7
57 82 59 80.0
56 76 58 73.3
55 70 57 66.7
56 63.3
55 60.0
The following table applies both to regular employees
employed, or elected officials appointed or elected, on or
after November 1, 2011:
:
Elected Officials and Regular Members
Age Percentage
65 100%
64 93.33
63 86.67
62 80.00
61 73.33
60 66.67
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
39
Oklahoma Public Employees Retirement System
Disability benefit A member with at least eight (8) years of credited service is
eligible for a disability benefit provided the member
qualifies for disability benefits as certified by the Social
Security Administration or the Railroad Retirement Board
and having a date of disability within one year after the date
last physically on the job. The benefit is determined by the
normal retirement formula based on service and salary
history at date of disability. The benefit is payable
immediately without actuarial reduction. Option A is the
only available form of survivor payment for non-elected
members.
Vested benefit A member who terminates after eight (8) years of credited
service (six years for elected officials) is eligible for a vested
benefit determined by the normal retirement formula, based
on service and compensation to date of termination.
The benefit is payable at age 62 (or age 60 if an elected
official), provided the member’s contribution accumulation
is not withdrawn and the member has at least six (6) years of
full time equivalent employment. A member with ten (10)
or more years of service also has the option of reduced
benefits at early retirement age.
Members terminating with less than eight (8) years (or six
years if an elected official) of credited service may elect to
receive a refund of their member contribution accumulation.
A limited additional retirement service benefit of $200 per
month is payable up to the total of excess contributions paid
by the member for those vested members as of July 1, 1998.
This is not applicable for active members who received a
transfer of excess contributions or retired members as of July
1, 1998.
For regular employees employed on or after November 1,
2011, a vested benefit will not be payable for Normal
Retirement until age 65. For elected officials appointed or
elected on or after November 1, 2011, a vested benefit will
require at least eight (8) years of elected service and is not
payable for normal retirement until age 65.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
40
Oklahoma Public Employees Retirement System
Pre-retirement death benefit The spouse of a deceased active member who had met
normal, early or vested retirement provisions may elect a
spouse’s benefit. The spouse’s benefit is the benefit that
would have been paid if the member had retired and elected
the joint and 100% survivor option (Option B). If named as
the designated beneficiary, the spouse may elect a refund of
the member’s contribution accumulation in lieu of the
Option B monthly benefit.
In addition to the provision above, the eligible spouse of a
deceased elected official with at least six (6) years of elected
service and married at least three (3) years immediately
preceding death may elect to receive 50% of the benefit the
member would be eligible to receive. The starting date of
benefits is the date the deceased member would have been
eligible for early or normal retirement. Benefits cease upon
death or remarriage of the surviving spouse.
Any other designated beneficiary of a member other than an
eligible spouse will receive a refund of the member’s
contribution accumulation.
Post-retirement death benefit Upon the death of a retired member, a $5,000 lump-sum
death benefit will be paid to the member’s beneficiary, or
estate if there is no beneficiary.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
41
Oklahoma Public Employees Retirement System
Optional form of retirement benefits The normal form of benefit for a single member other than
an elected official is a single life monthly annuity with a
guaranteed refund of the unpaid contribution accumulation.
The normal form for a married member is a 50% joint and
survivor annuity benefit. Optional forms of payment with
actuarial reduction are available to all members retiring
under the normal retirement, early retirement or vested
retirement provision. These options are:
Option A – Joint and 50% Survivor Annuity with a return to
the unreduced amount if the joint annuitant dies.
Option B – Joint and 100% Survivor Annuity with a return
to the unreduced amount if the joint annuitant dies.
Option C – Life Annuity with a minimum of 120 monthly
payments.
For married members, spousal consent is required for any
option other than Option A.
Medicare Gap Benefit Option allows members under age 65
to receive a higher benefit before age 65 (to help pay health
insurance premiums) and a permanently lower benefit after
age 65.
Post-retirement medical benefit The System will contribute the lesser of $105 per month or
the Medicare Supplement Premium to the Oklahoma State
and Education Employee’s Group Health Insurance Program
(or other eligible employer health plans) for members
receiving retirement benefits.
Expenses The expenses of administering the System are paid from the
retirement trust fund.
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
42
Oklahoma Public Employees Retirement System
Hazardous Duty Members Members covered by the Hazardous Duty Provisions
(Department of Corrections, have the retirement eligibility requirements, contribution
Oklahoma Military Department rates and benefit formula described below.
Firefighters) Benefits
Department of Corrections:
The normal retirement age is the earliest of: Twenty (20)
years of service as a member covered by the Department
of Corrections Hazardous Duty Provisions; or, the first
day of the month coinciding with or next following the
62nd birthday; or, the first day of the month coinciding
with or following the date at which the sum of a
member’s age and number of years of credited service
total eighty (80), if the member was hired prior to July 1,
1992, or following the date at which the sum of a
member’s age and number of years of credited service
total ninety (90) if the member was hired after July 1,
1992. Members employed after January 1, 1983 must
complete at least six (6) years of full-time equivalent
employment with a participating employer before
receiving any retirement benefits. The benefit formula is
2.5% of final average compensation, multiplied by the
number of years of service as an eligible officer for
service, not exceeding twenty (20) years. For service in
excess of twenty (20) years the benefit formula is 2% of
final average compensation.
Members eligible for these benefits with at least five (5)
years of experience in their positions on or after June 30,
2004 remain eligible to retire after twenty (20) years
even if they transfer to positions within DOC that are not
eligible to retire after twenty (20) years.
Special Surviving Spouse and Child benefits for any
member employed by the Department of Corrections
(DOC) killed or mortally wounded during the
performance of duty are equal to 2.5% of final average
monthly compensation multiplied by the greater of the
member’s actual service or twenty (20) years.
In addition, an amount of $400 per month will be paid as
long as a child of the deceased member is under the age
of 18 (or 22 if enrolled full time at an institution of
higher education).
APPENDIX A – SUMMARY OF SYSTEM PROVISIONS
43
Oklahoma Public Employees Retirement System
Hazardous Duty Members Contributions for members covered by the Department of
(Department of Corrections, Corrections Hazardous Duty Provisions are
Oklahoma Military Department
Firefighters) Benefits
(continued) :
Year Up to $25,000 Above $25,000
1994/1995 6.5% 8.0%
1995/1996 6.5% 8.0%
1996/1997 7.0% 8.0%
1997/1998 7.5% 8.0%
First 20
Years of
Service
Service Beyond 20 Years
Up to $25,000 Above $25,000
1998/1999 8.0% 3.0% 0.0%
1999/2000 8.0% 3.0% 0.0%
2000 and on 8.0% 3.0% 3.5%
Oklahoma Military Department Firefighters:
The benefit for Oklahoma Military Department firefighters
who began employment July 1, 2002 and after is based on a
2.5% benefit multiplier. They are also eligible for full
benefits after twenty (20) years as a firefighter and their
employee contribution rate is 8%. Oklahoma Military
Department firefighters employed prior to July 1, 2002 were
given a one-time option to: (a) have their benefit formula,
retirement eligibility, and employee contribution rate remain
unchanged; (b) apply the new provisions (including the new
contribution rate) to service after January 1, 2003; or (c)
apply the new benefit formula and retirement eligibility to all
of the member’s service, apply the 8% contribution rate for
service after July 1, 2002, and make a contribution equal to
the increase in the actuarial value of the member’s retirement
benefit.
In contrast to DOC members, the 2.5% formula and 8%
contribution rate applies to service after twenty (20) years.
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
44
Oklahoma Public Employees Retirement System
Actuarial Cost Method
Liabilities and contributions shown in this report are computed using the Individual Entry Age method of
funding.
Sometimes called the “funding method,” this is a particular technique used by actuaries for establishing
the amount of the annual actuarial cost of pension benefits, or normal cost, and the related unfunded
actuarial accrued liability. Ordinarily the annual contribution to the System is comprised of (1) the
normal cost; and (2) an amortization payment on the unfunded actuarial accrued liability.
Under the Entry Age Actuarial Cost Method, the Normal Cost is computed as the level percentage of pay
which, if paid from the earliest time each member would have been eligible to join the System had it
existed (thus entry age) until his retirement or termination, would accumulate with interest at the rate
assumed in the valuation to a fund sufficient to pay all benefits under the System.
The Actuarial Accrued Liability under this method, at any point in time, is the theoretical amount of the
fund that would have accumulated had annual contributions equal to the normal cost been made in prior
years (it does not represent the liability for benefits accrued to the valuation date). The Unfunded
Actuarial Accrued Liability is the excess of the actuarial accrued liability over the actuarial value of
System assets on the valuation date.
Under this method, experience gains or losses, i.e. decreases or increases in actuarial accrued liabilities
attributable to deviations in experience from the actuarial assumptions, adjust the unfunded actuarial
accrued liability.
Asset Valuation Method
The actuarial value of assets is based on a five-year moving average of expected and actual market values
determined as follows:
• at the beginning of each fiscal year, a preliminary expected actuarial asset value is calculated as
the sum of the previous year’s actuarial value increased with a year’s interest at the System
valuation rate plus net cash flow adjusted for interest (at the same rate) to the end of the previous
fiscal year;
• the expected actuarial asset value is set equal to the preliminary expected actuarial value plus the
unrecognized investment gains and losses as of the beginning of the previous fiscal year;
• the difference between the expected actuarial asset value and the market value is the investment
gain or loss for the previous year;
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
45
Oklahoma Public Employees Retirement System
• the (final) actuarial asset value is the preliminary value plus 20% of the investment gains and
losses for each of the five previous fiscal years, but in no case more than 120% of the market
value or less than 80% of the market value.
Amortization Method
Effective July 1, 2008, the unfunded actuarial accrued liability is amortized as a level percent of payroll
over a 20-year closed period commencing July 1, 2007. Given a stable active workforce, this
amortization method is expected to produce a payment stream that is constant as a percent of covered
payroll.
Valuation Procedures
The actuarial accrued liability held for nonvested, inactive members who have a break in service, or for
nonvested members who have quit or been terminated, even if a break in service has not occurred as of
the valuation date, is equal to the amount of the individual’s unclaimed contributions.
The wages used in the projection of benefits and liabilities are considered earnings for the year ending
June 30, 2011, increased by the salary scale to develop expected earnings for the current valuation year.
Earnings are annualized for members with less than twelve months of reported earnings.
In computing accrued benefits, average earnings are determined using actual pay history provided for
valuation purposes.
The calculations for the required employer contribution are determined as of midyear. This is a
reasonable estimate since contributions are made on a monthly basis throughout the year.
We did not value the 415 limit for active participants. The impact was assumed to be de minimus.
The compensation limitation under IRC Section 401(a)(17) is considered in this valuation.
Liability is included for members who appear to be deferred vested, but who are not in the vested data
provided. An estimated benefit was calculated based on pay and service from prior valuations. A
corrected benefit and status will be provided by the System when the actual benefit and status have been
finalized.
Members who are contributing to the System, but have not yet filled out an enrollment application, are
included as active members. Service for this group was provided by the System.
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
46
Oklahoma Public Employees Retirement System
Valuation Procedures
(continued)
A liability is included for contribution amounts due to be refunded to terminated vested members who
made voluntary contributions to increase the maximum compensation limit prior to July 1, 1998. The
System supplied the included amounts.
In prior valuations, the System used an assumption of a 2% annual COLA each year in developing liabilities
and contribution rates. The System did not have an automatic COLA provision, but ad hoc COLAs had
historically been granted on a regular basis by the Legislature. In order to avoid actuarial gains in the year in
which a COLA is not granted and an actuarial loss in the years in which a COLA is granted, the System’s
liabilities included a “COLA Reserve”.
Since the last valuation, the plan provisions of the System have been amended by House Bill 2132. Under this
legislation, COLAs are removed from the definition of “non-fiscal retirement bills” in the Oklahoma Pension
Legislation Actuarial Analysis Act (“OPLAAA”). The effect of these amendments makes any COLA bill
subject to all of the requirements of OPLAAA including the requirement that such bills provide adequate
funding to pay the cost. Therefore, as of July 1, 2011, liabilities have been calculated without considering
future COLAs, and the COLA reserve has been removed.
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
47
Oklahoma Public Employees Retirement System
SUMMARY OF ACTUARIAL ASSUMPTIONS
Economic Assumptions
Investment Return: 7.5% net of investment expenses per annum, compounded
annually
Salary Increases: Sample rates below (midpoint of range shown):
Nearest Age % Increase
20 - 24 8.75
25 - 29 7.75
30 – 34 6.45
35 – 39 5.85
40 – 44 5.55
45 – 49 5.15
50 – 54 4.85
55 – 59 4.85
60 – 64 4.85
65+ 4.85
Payroll Growth: 4.00% per year
Ad hoc benefit increase assumptions
Monthly Benefits
Because of the passage of House Bill 2132, 0%
Medical Supplement No increases assumed
Projection of 401(a)(17)
compensation limit: Projected with inflation at 3.0%
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
48
Oklahoma Public Employees Retirement System
Demographic Assumptions
Retirement age: Annual Rates of Retirement
Non-elected members Per 100 Eligible Members
Nearest Age
Those Eligible
For Unreduced
Retirement
Those Eligible
For Reduced
Retirement
50 20 N/A
51 20 N/A
52 20 N/A
53 20 N/A
54 20 N/A
55 10 4
56 10 5
57 11 5
58 12 6
59 13 7
60 14 7
61 20 20
62 30 N/A
63 15 N/A
64 15 N/A
65 30 N/A
66 20 N/A
67 20 N/A
68 20 N/A
69 25 N/A
70 100 N/A
.
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
49
Oklahoma Public Employees Retirement System
Demographic Assumptions (continued)
Retirement age (continued): Annual Rates of Retirement
Elected members Per 100 Eligible Members
Nearest Age
Those Eligible
For Unreduced
Retirement
Those Eligible
For Reduced
Retirement
50 30 N/A
51 30 N/A
52 30 N/A
53 30 N/A
54 30 N/A
55 10 10
56 10 10
57 20 10
58 20 10
59 20 10
60 20 N/A
61 20 N/A
62 20 N/A
63 20 N/A
64 20 N/A
65 20 N/A
66 40 N/A
67 40 N/A
68 40 N/A
69 40 N/A
70 100 N/A
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
50
Oklahoma Public Employees Retirement System
Demographic Assumptions (continued)
Retirement age (continued): Annual Rates of Retirement
Hazardous Duty Per 100 Eligible Members
Service
Rate
Nearest Age
Less than 20
Years of
Service
20 20 50 N/A
21 - 24 15 51 N/A
25 – 29 20 52 N/A
30 – 34 25 53 N/A
35+ 100 54 N/A
55 4
56 5
57 5
58 6
59 7
60 7
61 20
62 40
63 22
64 25
65 40
66 25
67 23
68 22
69 21
70 100
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
51
Oklahoma Public Employees Retirement System
Demographic Assumptions (continued)
Mortality Rates
Active participants and
nondisabled pensioners RP-2000 Combined Active/Retiree Healthy Mortality
Table projected to 2010 using Scale AA.
Disabled pensioners RP-2000 Combined Active/Retiree Healthy Mortality
Table projected to 2010 using Scale AA set forward 15
years for disabled experience.
Hazardous Duty members For Department of Corrections officers, we assumed the
mortality rate is 10% higher than the above table while
the participant is active. This 10% is assumed to be in-line-
of-duty.
Disability Rates: Graduated rates
Disabled rates per 100 members
Nearest
Age
Male
Female
20 0.01 0.01
30 0.02 0.03
40 0.08 0.10
50 0.25 0.29
60 0.75 0.45
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
52
Oklahoma Public Employees Retirement System
Withdrawal Rates:
0 - 2 2 – 3 3 - 4 4 - 5 5 – 6 6 – 7 7 – 8 8 – 9 9 – 10 Over 10
Age Years Years Years Years Years Years Years Years Years Years
25 0.2600 0.2000 0.1709 0.1369 0.1426 0.1426 0.1426 0.1426 0.1426 0.0700
30 0.2400 0.1750 0.1554 0.1268 0.1050 0.1050 0.1050 0.1050 0.1004 0.0700
35 0.2150 0.1590 0.1365 0.1215 0.0870 0.0860 0.0850 0.0850 0.0769 0.0580
40 0.1930 0.1400 0.1208 0.1094 0.0770 0.0748 0.0725 0.0725 0.0589 0.0440
45 0.1880 0.1200 0.1132 0.0945 0.0670 0.0635 0.0600 0.0600 0.0468 0.0320
50 0.1830 0.0970 0.1030 0.0835 0.0650 0.0575 0.0500 0.0500 0.0436 0.0300
55 0.1800 0.0900 0.0869 0.0705 0.0650 0.0575 0.0500 0.0500 0.0436 0.0300
Probability of Electing Vested Benefit:
Marital Status:
Percentage Married 85%
Age difference Males are assumed to be four years older than spouses.
Children: Special death benefits are provided upon the in-line-of-duty
death of Department of Corrections employees who
have young children. We have assumed the average age
of the youngest child of such employees is nine and that
50% of such children will attend an institution of higher
education to age 22.
Form of Payment: Participants are assumed to elect a life-only form of
payment.
Regular Members Only
Age Rate
Under 34 70%
34- 38 75%
39 – 46 80%
47 85%
48 90%
49 95%
50+ 100%
APPENDIX B – ACTUARIAL ASSUMPTIONS AND METHODS
53
Assumed age for commencement
of deferred benefits: Current active members assumed to terminate in the
future prior to retirement eligibility are assumed to
commence benefits at age 62 (non-elected members) or
age 60 (elected members). Current inactive members
with deferred benefits are assumed to commence
benefits on a date provided by OPERS.
Provision for expenses: Administrative expenses, as budgeted by the Oklahoma
Public Employees Retirement System.
APPENDIX C – DATA
54
Oklahoma Public Employees Retirement System
Valuation Data Distribution – Actives – Regular Membership
Years of Service
Age
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & Up Total
Under 25 759 26 785
Avg. Pay $22,560 $30,610 $22,827
25 to 29 2,147 548 13 2,708
Avg. Pay $28,008 $30,664 $33,392 $28,571
30 to 34 1,673 1,347 300 3 3,323
Avg. Pay $29,420 $35,395 $35,629 $35,167 $32,408
35 to 39 1,396 1,220 878 171 5 3,670
Avg. Pay $29,881 $35,868 $40,264 $40,905 $40,732 $34,884
40 to 44 1,234 1,166 978 573 298 9 4,258
Avg. Pay $29,801 $35,670 $39,589 $42,309 $44,343 $49,722 $36,399
45 to 49 1,091 1,119 982 647 840 454 65 5,198
Avg. Pay $29,987 $34,887 $37,399 $39,902 $46,095 $47,298 $46,667 $38,000
50 to 54 1,082 1,216 997 710 969 834 441 1 6,250
Avg. Pay $30,693 $35,227 $37,715 $40,241 $44,381 $49,408 $46,630 $54,065 $39,527
55 to 59 965 1,118 976 722 928 548 634 9 1 5,901
Avg. Pay $31,742 $35,809 $38,063 $40,194 $44,535 $48,026 $49,706 $47,707 $59,316 $40,075
60 to 64 574 799 700 560 505 345 397 43 2 3,925
Avg. Pay $32,009 $36,482 $37,370 $39,990 $43,666 $46,970 $50,208 $54,945 $69,836 $39,940
65 to 69 188 302 264 167 169 87 89 21 2 1,289
Avg. Pay $32,405 $35,323 $37,953 $41,436 $42,329 $45,202 $49,639 $71,461 $65,409 $39,437
70 & up 88 112 86 68 84 32 28 5 4 507
Avg. Pay $28,965 $29,404 $35,784 $41,711 $38,627 $62,766 $38,439 $54,257 $34,483 $36,479
Total 11,197 8,973 6,174 3,621 3,798 2,309 1,654 79 9 37,814
Avg. Pay $29,341 $35,177 $38,213 $40,570 $44,476 $48,329 $48,693 $58,456 $51,971 $36,842
APPENDIX C – DATA
55
Oklahoma Public Employees Retirement System
Valuation Data Distribution – Actives – Elected Membership
Years of Service
Age
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & Up Total
Under 25 2 2
Avg. Pay $19,741 $19,741
25 to 29 2 2 4
Avg. Pay $38,400 $31,710 $35,055
30 to 34 14 5 3 22
Avg. Pay $38,496 $39,960 $37,966 $38,756
35 to 39 12 14 9 6 41
Avg. Pay $37,539 $38,929 $60,820 $45,837 $44,338
40 to 44 17 20 27 12 5 81
Avg. Pay $44,427 $42,170 $47,841 $52,217 $50,983 $46,566
45 to 49 13 17 11 15 19 16 1 92
Avg. Pay $43,005 $42,566 $35,093 $55,570 $46,297 $47,595 $56,712 $45,654
50 to 54 20 24 22 11 28 25 12 142
Avg. Pay $39,273 $48,085 $52,708 $46,013 $45,538 $54,711 $57,514 $48,861
55 to 59 24 24 18 20 29 29 10 154
Avg. Pay $45,056 $44,705 $42,949 $45,643 $47,012 $52,965 $46,355 $46,773
60 to 64 13 16 13 18 16 12 9 1 98
Avg. Pay $42,331 $42,582 $44,980 $41,989 $52,776 $44,416 $53,549 $34,619 $45,573
65 to 69 6 16 16 6 9 2 6 2 63
Avg. Pay $48,048 $42,055 $44,537 $46,127 $44,918 $46,212 $47,507 $50,117 $44,960
70 & up 2 10 7 5 5 3 2 1 1 36
Avg. Pay $41,142 $41,095 $46,422 $46,598 $48,802 $46,522 $62,694 $46,200 $43,200 $45,821
Total 125 148 126 93 111 87 40 4 1 735
Avg. Pay $41,661 $43,023 $46,777 $47,524 $47,438 $50,923 $52,570 $45,263 $43,200 $46,138
APPENDIX C – DATA
56
Oklahoma Public Employees Retirement System
Valuation Data Distribution – Actives – Hazardous Duty Membership
Years of Service
Age
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & Up Total
Under 25 56 56
Avg. Pay $25,542 $25,542
25 to 29 192 62 254
Avg. Pay $27,189 $30,063 $27,891
30 to 34 118 137 49 304
Avg. Pay $26,995 $31,963 $35,460 $30,599
35 to 39 98 117 122 21 358
Avg. Pay $26,432 $31,274 $37,456 $40,474 $32,595
40 to 44 43 77 111 84 23 338
Avg. Pay $25,561 $31,536 $36,715 $41,319 $45,561 $35,862
45 to 49 41 56 67 62 37 3 266
Avg. Pay $25,529 $31,239 $35,656 $42,353 $47,000 $41,833 $36,374
50 to 54 32 30 48 39 23 6 178
Avg. Pay $27,551 $30,194 $36,293 $39,417 $41,910 $39,502 $35,212
55 to 59 24 37 46 36 21 3 167
Avg. Pay $26,984 $31,177 $35,299 $38,906 $40,711 $46,187 $34,844
60 to 64 7 16 20 18 6 2 1 70
Avg. Pay $28,380 $30,361 $35,881 $38,911 $43,080 $45,860 $45,352 $35,686
65 to 69 2 2 1 2 7
Avg. Pay $34,447 $36,431 $46,202 $42,776 $39,073
70 & up 1 3 4
Avg. Pay $27,701 $35,990 $33,918
Total 612 534 468 261 112 14 1 2,002
Avg. Pay $26,680 $31,262 $36,401 $40,732 $44,195 $42,342 $45,352 $33,105
APPENDIX C – DATA
57
Oklahoma Public Employees Retirement System
Valuation Data Distribution – Actives – All Membership Groups
Years of Service
Age
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 & Up Total
Under 25 817 26 843
Avg. Pay $22,758 $30,610 $23,000
25 to 29 2,341 612 13 2,966
Avg. Pay $27,949 $30,607 $33,392 $28,521
30 to 34 1,805 1,489 352 3 3,649
Avg. Pay $29,332 $35,094 $35,626 $35,167 $32,295
35 to 39 1,506 1,351 1,009 198 5 4,069
Avg. Pay $29,717 $35,502 $40,108 $41,009 $40,732 $34,778
40 to 44 1,294 1,263 1,116 669 326 9 4,677
Avg. Pay $29,853 $35,521 $39,503 $42,363 $44,531 $49,722 $36,537
45 to 49 1,145 1,192 1,060 724 896 473 66 5,556
Avg. Pay $29,976 $34,825 $37,265 $40,437 $46,137 $47,273 $46,819 $38,049
50 to 54 1,134 1,270 1,067 760 1,020 865 453 1 6,570
Avg. Pay $30,755 $35,351 $37,960 $40,283 $44,357 $49,492 $46,919 $54,065 $39,612
55 to 59 1,013 1,179 1,040 778 978 580 644 9 1 6,222
Avg. Pay $31,945 $35,845 $38,026 $40,274 $44,527 $48,264 $49,654 $47,707 $59,316 $40,101
60 to 64 594 831 733 596 527 359 407 44 2 4,093
Avg. Pay $32,192 $36,481 $37,464 $40,018 $43,936 $46,879 $50,270 $54,483 $69,836 $40,002
65 to 69 194 320 282 174 180 89 95 23 2 1,359
Avg. Pay $32,889 $35,654 $38,316 $41,625 $42,463 $45,225 $49,504 $69,605 $65,409 $39,691
70 & up 91 122 96 73 89 35 30 6 5 547
Avg. Pay $29,219 $30,362 $36,566 $42,046 $39,199 $61,374 $40,056 $52,914 $36,227 $37,075
Total 11,934 9,655 6,768 3,975 4,021 2,410 1,695 83 10 40,551
Avg. Pay $29,334 $35,081 $38,247 $40,743 $44,550 $48,388 $48,782 $57,820 $51,094 $36,826
APPENDIX C – DATA
58
Oklahoma Public Employees Retirement System
Number Annual Benefits
Age Male Female Total Male Female Total
Under 50 178 145 323 2,910,231 1,879,151 $4,789,382
50-55 355 559 914 7,678,101 11,322,033 19,000,134
55-60 1,143 1,663 2,806 22,544,036 30,429,231 52,973,267
60-65 2,497 3,184 5,681 45,059,054 51,204,466 96,263,520
65-70 2,716 3,441 6,157 45,950,827 49,081,233 95,032,060
70-75 2,260 2,739 4,999 35,946,486 36,631,587 72,578,073
75-80 1,645 2,331 3,976 24,395,448 28,367,302 52,762,750
80-85 985 1,620 2,605 13,478,657 18,769,896 32,248,553
85-90 474 904 1,378 6,667,564 9,792,532 16,460,096
90-95 138 339 477 1,541,438 3,311,951 4,853,389
95-100 17 72 89 138,694 680,915 819,609
Over 100 1 12 13 16,875 122,049 138,924
Total 12,409 17,009 29,418 $206,327,411 $241,592,346 $447,919,757
0
2,000
4,000
6,000
8,000
Under 50 50-55 55-60 60-65 65-70 70-75 75-80 80-85 85-90 90-95 95-100 Over 100
Age Distribution
0
5,000
10,000
15,000
20,000
25,000
Under 50 50-55 55-60 60-65 65-70 70-75 75-80 80-85 85-90 90-95 95-100 Over 100
Average Annual Benefit Distribution
APPENDIX C – DATA
59
Oklahoma Public Employees Retirement System
Actuarial Valuation as of
7/1/2011 7/1/2010 % Change
1. Active members
a. Number 40,551 43,934 (7.7%)
b. Annual compensation $ 1,570,500,148 $ 1,683,697,139 (6.7%)
c. Average annual compensation 38,729 38,323 1.1%
d. Average age 47.0 46.5 1.0%
e. Average service 11.1 10.7 3.9%
2. Accumulated member contributions
a. Active members $ 488,417,672 $ 487,979,877 0.1%
b. Unclaimed contribution amounts 27,045,737 23,145,785 16.8%
c. Total $ 515,463,409 $ 511,125,662 0.8%
3. Vested terminated members
a. Number 3,501 3,534 (0.9%)
b. Annual deferred benefits $ 32,372,954 $ 31,071,644 4.2%
c. Average annual deferred benefit 9,247 8,792 5.2%
d. Annual supplemental medical $ 4,411,260 $ 4,452,840 (0.9%)
insurance premiums
4. Assumed deferred vested - count 2,021 2,026 (0.2%)
5. Retired members
a. Number 24,804 23,563 5.3%
b. Annual retirement benefits $ 402,371,482 $ 373,584,819 7.7%
c. Average annual retirement benefit 16,222 15,855 2.3%
d. Annual supplemental medical $ 17,033,940 $ 16,523,640 3.1%
insurance premiums
6. Beneficiaries
a. Number 3,107 2,959 5.0%
b. Annual retirement benefits $ 31,259,175 $ 29,133,234 7.3%
c. Average annual retirement benefit 10,061 9,846 2.2%
7. Disabled members
a. Number 1,507 1,487 1.3%
b. Annual retirement benefits $ 14,289,100 $ 13,981,104 2.2%
c. Average annual retirement benefit 9,482 9,402 0.8%
d. Annual supplemental medical $ 981,540 $ 992,880 (1.1%)
insurance premiums
8. Total members included in valuation 75,491 77,503 (2.6%)
APPENDIX C – DATA
60
Oklahoma Public Employees Retirement System
Actuarial Valuation as of
7/1/2011 7/1/2010
Regular Members
Number 37,814 40,822
Average annual compensation $ 36,842 $ 36,309
Average age 47.2 46.7
Average service 11.2 10.7
Elected officials
Number 735 765
Average annual compensation $ 46,138 $ 47,856
Average age 53.4 54.1
Average service 14.5 14.9
Hazardous Duty
Number 2,002 2,347
Average annual compensation $ 33,105 $ 34,104
Average age 40.8 40.8
Average service 9.0 9.2
Total
Number 40,551 43,934
Average annual compensation $ 36,826 $ 36,392
Average age 47.0 46.5
Average service 11.1 10.7
APPENDIX C – DATA
61
Oklahoma Public Employees Retirement System
Actuarial Valuation as of
7/1/2011 7/1/2010
Retirees
Number 24,804 23,563
Average annual benefit $ 16,222 $ 15,855
Average age 70.6 70.8
Disability Retirees
Number 1,507 1,487
Average annual benefit $ 9,482 $ 9,402
Average age 62.3 61.9
Beneficiaries
Number 3,107 2,959
Average annual benefit $ 10,061 $ 9,846
Average age 72.6 72.2
Total
Number 29,418 28,009
Average annual benefit $ 15,226 $ 14,877
Average age 70.4 70.5
Vested Members
Number 5,522 5,560
Average annual benefit $ 10,037 $ 9,625
Average age 51.4 51.1
APPENDIX C – DATA
62
Receiving Benefits
Active Vested Disability Benefici- Total
Members Terminated Retirees Retirees aries Members
As of July 1, 2010 43,934 5,560 23,563 1,487 2,959 77,503
Age retirements (1,763) (333) 2,096 0 0 0
Disability retirements (46) (26) 0 72 0 0
Deaths without payments continuing (67) (18) (661) (43) (117) (906)
Deaths with payments continuing (30) (14) (206) (15) 265 0
Nonvested terminations/refund (3,683) (129) 0 0 0 (3,812)
of contributions
Vested terminations (624) 624 0 0 0 0
Transfers (6) (14) 0 0 0 (20)
Data adjustments 0 9 12 6 0 27
Rehires 619 (137) 0 0 0 482
New entrants during the year 2,217 0 0 0 0 2,217
Net change (3,383) (38) 1,241 20 148 (2,012)
As of July 1, 2011 40,551 5,522 24,804 1,507 3,107 75,491
APPENDIX C – DATA
63
Terminated
Active Retired Vested Total
Records submitted on data file 40,280 49,307 3,513 93,100
Remove deceased retirees 0 (19,887) 0 (19,887)
Remove unusable data (96) 0 (12) (108)
Remove those with another status (120) (2) 0 (122)
Add those with no application 487 0 0 487
Add assumed vesteds 0 0 2,021 2,021
Total valued 40,551 29,418 5,522 75,491
APPENDIX D - GLOSSARY
64
Oklahoma Public Employees Retirement System
Accrued Benefit
The amount of an individual's benefit (whether or not vested) as of a specific date, determined in accordance
with the terms of a pension plan and based on compensation and service to that date.
Actuarial Accrued Liability
That portion, as determined by a particular Actuarial Cost Method, of the Actuarial Present Value of pension
plan benefits and expenses which is not provided for by future Normal Costs.
Actuarial Assumptions
Assumptions as to the occurrence of future events affecting pension costs, such as: mortality, withdrawal,
disablement, and retirement; changes in compensation, rates of investment earnings, and asset appreciation or
depreciation; procedures used to determine the Actuarial Value of Assets; and other relevant items.
Actuarial Cost Method
A procedure for determining the Actuarial Present Value of pension plan benefits and expenses and for
developing an actuarially equivalent allocation of such value to time periods, usually in the form of a Normal
Cost and an Actuarial Accrued Liability.
Actuarial Gain (Loss)
A measure of the difference between actual experience and that expected based upon a set of Actuarial
Assumptions during the period between two Actuarial Valuation dates, as determined in accordance with a
particular Actuarial Cost Method.
Actuarial Present Value
The value of an amount or series of amounts payable or receivable at various times, determined as of a given
date by the application of a particular set of Actuarial Assumptions.
Actuarial Valuation
The determination, as of a valuation date, of the Normal Cost, Actuarial Accrued Liability, Actuarial Value of
Assets, and related Actuarial Present Values for a pension plan.
Actuarial Value of Assets
The value of cash, investments and other property belonging to a pension plan, as used by the actuary for the
purpose of an Actuarial Valuation.
65
Actuarially Equivalent
Of equal Actuarial Present Value, determined as of a given date with each value based on the same set of
Actuarial Assumptions.
Amortization Payment
That portion of the pension plan contribution which is designed to pay interest on and to amortize the Unfunded
Actuarial Accrued Liability.
Deferred Vested Participant
A vested member who has terminated employment prior to early or normal retirement age who does not
withdraw his or her contributions and is, therefore, due a retirement benefit at a later date.
Entry Age Actuarial Cost Method
A method under which the Actuarial Present Value of the Projected Benefits of each individual included in an
Actuarial Valuation is allocated on a level basis over the earnings of the individual between entry age and
assumed exit ages. The portion of this Actuarial Present Value allocated to a valuation year is called the Normal
Cost. The portion of this Actuarial Present Value not provided for at a valuation date by the Actuarial Present
Value of future Normal Costs is called the Actuarial Accrued Liability.
Market Value of Assets
The fair value of cash, investments and other property belonging to a pension plan that could be acquired by
exchanging them on the open market.
Normal Cost
That portion of the Actuarial Present Value of pension plan benefits and expenses which is allocated to a
valuation year by the Actuarial Cost Method Projected Benefits
Projected Benefits
Those pension plan benefit amounts which are expected to be paid at various future times under a particular set
of Actuarial Assumptions, taking into account such items as the effect of advancement in age and past and
anticipated future compensation and service credits.
Unaccrued Benefit
The excess of an individual's Projected Benefits over the Accrued Benefits as of a specified date.
Unfunded Actuarial Accrued Liability
The excess of the Actuarial Accrued Liability over the Actuarial Value of Assets.
Withdrawal Liability
The liability due to an active member terminating employment with a deferred vested benefit.