As mentioned in our August 28th Retirement Blog, an exposure draft of mortality tables based on public retirement plan experience has been released by the Society of Actuaries and the Retirement Plans Experience Committee (“RPEC”). We have completed our review of the draft and will summarize our findings in this post.
Highlights
The study was based on data gathered from 35 public pension systems (covering 78 plans) from across the United States. The data provided included approximately 46 million life-years and 580,000 deaths from the period 2008 to 2013. The RPEC found clear differences among three major job categories: teachers, safety employees, and general employees. In general, the published tables produce higher annuity factors (based on longer life expectancies) than assumptions currently used in many valuations.
The REPC developed tables incorporating the following variables:
- Gender: male and female
- Employee Group: teachers, public safety, and general employees
- Status: employee, retiree, disabled retiree, and contingent survivor
- Income (for employees): total, above-median, and below-median
- Benefit (for retirees): total, above-median, and below-median
Insights
The following are a few insights to consider in light of the exposure draft:
- This is the first time the Society of Actuaries has released tables that are specifically based on public sector experience. While RPEC collected (and analyzed) the mortality data from a number of large public pension plans in the previous RP-2014 study, only the data collected on uninsured private plans were used in the development of the RP-2014 mortality tables.
- Comments on the Pub-2010 exposure draft will be accepted through October 31, 2018. The Society will issue responses to the comments received and it is uncertain whether any adjustments will be made prior to publishing the tables in final form.
- The impact of these tables on individual valuations will depend on several factors, including plan demographics, current table being used, and new table to be adopted. Should the tables be published in final form, we expect liabilities and required contributions from plan sponsors to increase. For all job categories and ages, Pub-2010 factors exceeded the comparable average annuity factors under mortality assumptions currently used in many valuations. The increase is most impactful for teachers. If you would like to see the impact on your specific plan, please reach out to your Foster & Foster consultant.
- To the extent mortality is not mandated under state law for funding valuations, these tables would apply to both funding and accounting (GASB) valuations. For example, in the State of Florida, funding valuations must use the same tables as the Florida Retirement System (FRS). To the extent FRS adopts these tables, they will automatically apply to municipal plans in Florida.
- Large systems with credible experience may consider developing mortality assumptions based on their own experience.
We will keep you apprised of any updates as they become available. In the meantime, feel free to reach out to your Foster & Foster consultant with any questions you may have.