New York City Retirement Systems...New York Retirement Systems 2 Background Bolton Partners, Inc. was retained by the New York City Comptroller’s Office to serve as Independent Actuary

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New York City Retirement

Systems

Experience Study Portion

June 4, 2019

Submitted by:

Colin England, FSA, EA, MAAA Kevin Binder, FSA, MAAA

443.703.2512 443.573.3906

[email protected] [email protected]

New York Retirement Systems

Table of Contents

Page Transmittal Letter ................................................................................................................. 1

Section I Background and Summary of Results ........................................................... 2

Section II Experience Study – Background of the Study ............................................. 10

Section III Experience Study – Detailed Results ........................................................... 48

Inflation Assumption ..................................................................................... 49

Investment Return Assumption .................................................................... 54

Results, including confidence intervals, for NYCERS

a. NYCERS Experience Analysis ....................................................... 64

b. Issues unique to the groups ........................................................... 64

c. Mandated and Elected Retirement ................................................ 65

d. NYCERS – GENERAL Members ................................................... 66

e. NYCERS – TRANSIT and TBTA Members ................................ 105

f. NYCERS – SANITATION ............................................................ 144

g. NYCERS – CORRECTIONS Members ....................................... 173

Results, including confidence intervals for TRS

a. TRS Experience Analysis ............................................................ 207

b. Issues unique to TRS ................................................................... 207

c. TRS Members .............................................................................. 207

Results, including confidence intervals, for BERS

a. BERS Experience Analysis .......................................................... 246

b. Issues unique to BERS ................................................................ 246

Results, including confidence intervals, for POLICE

a. POLICE Experience Analysis ...................................................... 285

b. Issues unique to POLICE ............................................................. 285

c. POLICE Members ........................................................................ 285

Results, including confidence intervals, for FIRE

a. FIRE Experience Analysis ........................................................... 322

b. Issues unique to FIRE .................................................................. 322

c. FIRE Members ............................................................................. 323

Section IV Cost Impact of Suggested Revisions ......................................................... 358

Section V Actuarial Certification ............................................................................... 363

Appendix ................................................................................................................... 364

1. Acknowledgements ................................................................................ 364

New York Retirement Systems

2. Hypothesis Testing ................................................................................ 365

3. Confidence Intervals .............................................................................. 366

4. Experience Table Results ...................................................................... 369

NYCERS .......................................................................................... 371

TRS .................................................................................................. 675

BERS ............................................................................................... 765

POLICE ............................................................................................ 855

FIRE ................................................................................................. 952

5.Current and Suggested Assumptions ............................................... 1006

NYCERS ........................................................................................ 1008

TRS ................................................................................................ 1042

BERS ............................................................................................. 1049

POLICE .......................................................................................... 1057

FIRE ............................................................................................... 1066

BoltonUSA.com | 410.547.0500 | 36 S. Charles Street, Suite 1000 | Baltimore, MD 21201

June 4, 2019 The Honorable Scott M. Stringer New York City Comptroller Office of the New York City Comptroller One Centre Street New York, NY 10007 Re: New York City Retirement Systems – Experience Study Dear Comptroller Stringer: Bolton Partners, Inc. is pleased to present this Experience Study Report, which is a key deliverable under engagement to serve as Independent Actuary under Section 96 of the New York City Charter. This report summarizes the results of our review, which covered:

• Comparison of the NYCERS experience with Assumptions;

• Comparison of the TRS experience with Assumptions;

• Comparison of the BERS experience with Assumptions;

• Comparison of the POLICE experience with Assumptions;

• Comparison of the FIRE experience with Assumptions; While we are not suggesting changes to the long-term rate of return or to the inflation assumptions, we are suggesting changes to many of the demographic assumptions. The most significant change is due to a change in the methodology. We suggest changing the basis of the retiree mortality experience analysis from focusing on just lives, to weighting those lives by the liabilities associated with those lives. This change in method would have increased the annual contribution for FY2018 suggested for NYCRS by about $255 million. However other changes we suggest reduced, in total, the annual contribution such that the total effect of the suggested changes would have been a net increase of $106 million.

We are available to answer any questions on the material in this report or to provide explanations or further details as appropriate. We are not aware of any direct or material indirect financial interest or relationship, including investments or other services that could create a conflict of interest, which would impair the objectivity of our work. Respectfully submitted, BOLTON PARTNERS, INC. Colin England, FSA, EA, MAAA Kevin Binder, FSA, EA, MAAA

New York City Retirement Systems

Section I: Background and Summary of Results

New York Retirement Systems 2

Background

Bolton Partners, Inc. was retained by the New York City Comptroller’s Office to serve as Independent Actuary under Section 96 of the New York City Charter. The engagement relates to the five pension funds that collectively comprise the New York City Retirement Systems (NYCRS), which are:

• New York City Employees’ Retirement System (NYCERS);

• Teachers’ Retirement System of the City of New York (TRS);

• Board of Education Retirement System of the City of New York (BERS);

• New York City Police Pension Fund (POLICE);

• New York City Fire Pension Fund (FIRE).

This engagement consists of the following projects:

• Biennial Contribution Audits;

• Biennial Experience Studies;

• Two Administrative Reviews;

• Two Independent Actuary’s Statements.

This report summarizes our second Experience Study. The areas covered in the Experience Study include:

• Comparison of the NYCERS experience with Assumptions;

• Comparison of the TRS experience with Assumptions;

• Comparison of the BERS experience with Assumptions;

• Comparison of the POLICE experience with Assumptions;

• Comparison of the FIRE experience with Assumptions.

We received a great deal of assistance from the staffs at the Office of the Actuary (OA) and the Office of the Comptroller. We could not have completed our work without drawing upon their expertise, and the additional information that shed light on certain anomalies in the demographic and economic experience. We are most appreciative of the time and effort spent by these staff members to provide information regarding issues affecting the experience of various groups. The names of those who assisted us are listed in Appendix A.


Summary of Results

NYC Summary of Experience Study Results

We divided our analysis into two sections, Economic Assumptions and Demographic Assumptions. We included inflation, including pay inflation, and investment assumptions in the Economic Assumptions. Demographic assumptions include pay and overtime assumptions along with the typical demographic assumptions, such as mortality, retirement, disability and employee withdrawal prior to retirement or disability.

Economic Experience Results

Recent inflation has been lower than the assumed inflation. Furthermore, there are significant differences among economists about the likely future inflation. While some economists and investment advisors expect inflation to remain below the OA’s current inflation assumption of 2.5% other economists and investment advisors believe that inflation will increase and that 2.5% is a reasonable assumption of future inflation. We concluded that the choice of 2.5% remains within the range of reasonable assumption, particularly in light of the long-term nature of the Systems’ commitments.

OA’s current investment return assumption is 7.0% We concluded that 7.0% remains a reasonable investment return assumption, particularly in combination with the 2.5% inflation assumption, based on the expectations of the current Systems’ investment advisors and other sources.

However, if the OA were to consider revising either the inflation or investment return assumption in the future, we suggest that these be revised in tandem, unless significant information becomes available indicating that future experience is likely to diverge between these assumptions.

Demographic Experience Results

We made several changes to the general structure of the experience study, which affected our analysis of the demographic assumptions.

1. First, we suggested the use of liabilities-based retiree mortality assumptions for pension valuations, since the pension liabilities vary significantly by retiree based on their years of service and final average pay. We thus calculated two sets of mortality rates, by lives and by liabilities. Previous experience studies only analyzed experience based on lives. The change to liabilities-based experience decreased the suggested mortality rates and increased the liabilities and normal cost used to calculate the annual pension contributions. We are still providing suggested mortality rates by lives for use in valuing benefits for which the benefit amounts are not affected by service or salary, such as for measuring OPEB liabilities.

2. Because of the decreasing number of employees in the TBTA group, we merged the TBTA group into Transit. We chose to merge the experience of the TBTA group with Transit because Transit was the most similar of the NYCERS groups to TBTA in both assumptions and experience.


Summary of Results


3. We consolidated the unreduced retirement assumption from a three-tiered structure, first year of retirement eligibility, second year of retirement eligibility, and after the second year of retirement eligibility to a simpler two-tiered structure, the first year of retirement eligibility and after the first year of retirement eligibility. This change simplifies OA coding and the analyses with only a minor change to the liabilities.

4. We have extended many of the retirement tables by increasing the ultimate retirement age (the age when it is assumed that 100 percent retire) from age 70 to age 80 for NYCERS General and Transit, TRS and BERS. We have extended the maximum retirement age for Tier II Fire from age 62 to age 65.

5. We added confidence interval graphs to analyze the differences between assumptions and experience. We generally assumed that if the experience was outside of a 95% confidence interval then the assumption should be revised, so as to bring the assumption either within the confidence interval or at least much closer to the actual experience. Our graphs show where the experience is outside of the 95 percent confidence by coloring experience line red for the portions of the experience outside of the confidence interval to allow the reader to readily determine the reasonability of the assumptions. Below each confidence interval graph we have added in total the confidence interval range as well as the actual and expected experience. Actual experience within the range is colored green. Since, it is possible for a confidence interval graph to be within the confidence intervals for each individual age but be outside the confidence interval in total, the bars at the bottom of the graph show whether the experience in total is within or outside of the 95% confidence interval.

We made some minor revisions in the measurement of the experience, to better match the measurement of the experience with the application of the assumption in the valuation:

• We determined the overtime percentage based on the average of the beginning and end of the year salary, since this is the salary to which the overtime percentage would apply.

• We determined the average overtime for all those employees who did not retire (either Service Retirement or Disability Retirement) in the succeeding year.

• We used the same approach for determining the overtime for those who did retire in the succeeding year, either as a service retiree or a disability retiree. These are referred to as Dual Overtime.


Summary of Results


Based on the experience for the 4- and 10-year periods ending in 2017 we are suggesting several assumption changes. Some of the assumptions have more of an impact on the appropriations than other. The assumptions with the greatest impact on the cost are retiree mortality, pay increases, retirement and withdrawal. Employee mortality and disability (except for POLICE and FIRE), have a much lower impact. Dual overtime has a much larger impact than overtime more than one year prior to retirement. Finally, some of the assumptions (Elected1 retirement assumptions and the WTC eligibility disability incidence) are diminishing in importance because the impacted groups are closed, and their members are declining in number.

The total effect of the suggested assumption changes, on the 2016 valuation, which would affect the fiscal year 2018 contributions is an increase of about $106 million or 1%. However, the effect varies significantly by System with the largest increase for FIRE and decreases for NYCERS, TRS and BERS. POLICE would also experience an increase. The service retirement mortality assumption was reduced for every group except BERS, because of either lives-based or liabilities-based experience. The disability retirement mortality assumption was similarly reduced for most of the groups. We did not suggest revisions to the BERS retiree assumptions because of concerns regarding the reporting of mortality amongst retirees. We understand that BERS substantially improved their retiree information in the most recent two years, but we were concerned that this was insufficient to be able to accurately identify the ages at which retirees died. These reductions in mortality assumptions were primarily caused by the change from lives- to liability-based experience. We estimate that the mortality changes would increase the annual contributions (cost) by $255.1 million. Increased assumptions for merit pay and overtime (primarily for NYCERS General, POLICE and FIRE) also increased costs, by $229.5 million. These increases were offset by lower costs due to lower retirement rates (primarily for NYCERS) of $250.6 and by lower disability rates for POLICE which lowered the costs by $120.2 million. Section 4 provides more detailed information regarding the impact of the demographic assumption changes. Overall changes

Service and Disability Retirement Mortality We are suggesting lower mortality rates for most of the service and disability mortality assumptions, because of the weighting by liabilities. The only exceptions are for disability retirees for NYCERS General and Sanitation and for women in TRS.

The results are closer to the current assumptions for the lives weighted mortality assumptions. The only lives weighted service retirement assumptions we suggest changing are:

• a 13 percent increase to the Transit mortality assumption for women.

• an 8 percent increase in TRS morality assumption for women.

• a 2 percent decrease in the TRS mortality assumption for men.

1 We use Elected and Mandated retirement to refer to the benefit change in 1995 that allowed certain employees to elect retirement eligibility after 25 years of service at the cost of a higher employee contribution, rather than the 27 years required for new employees and those who did not elect the earlier retirement. We refer to those who either did not elect the earlier retirement or who were not eligible to so elect as Mandated.


Summary of Results


For the lives-weighted mortality rates for disability retirees, we are suggesting mortality assumption changes of:

• a 4 percent increase in mortality rates for men in NYCERS General.

• a 2 percent increase in mortality rates for men in NYCERS Transit.

• a 4 percent increase in mortality rates for women in the TRS System.

• a 15 percent reduction in mortality rates for men in NYCERS Corrections.

• a 3 percent reduction in mortality rates for men and women retirees in the POLICE System.

As previously mention due to concerns regarding retiree data we do not suggest any changes in the BERS retiree mortality assumptions.

Employee Mortality The number of deaths in service for virtually every group were significantly lower than the expected number of deaths. The only exception was for women in TRS.

Retirement The number of normal retirements (that is, retirement with an unreduced benefit) for many groups was lower than anticipated. We have experienced this with many of our clients since the “Great Recession” in 2007, 2008 and the first quarter of 2009. This was most noticeable in the experience for plans with Mandated retirement benefits. We anticipate that this is because those employees most interested in early retirement elect to pay the additional employee contributions required to be eligible for Elected retirement to be eligible for retirement at an earlier age.

Early Retirement The number of retirements with reduced retirement benefits, which we refer to as Early Retirements, for virtually all groups for whom this was an option was higher than anticipated.

Withdrawal The withdrawal (that is, employee departures other than for retirement, death or disability) experience for the NYCERS General, Transit/TBTA and Correction groups, as well as BERS and POLICE was higher than anticipated.

Ordinary Disability The number of ordinary disabilities was generally lower than the expected number of ordinary disabilities.

Accidental Disability The number of accidental disabilities was less than half the expected number of accidental disabilities for nearly all groups. This assumption has very little effect on cost, except for POLICE and FIRE. POLICE experienced fewer accidental disabilities than anticipated for both the WTC and Non-WTC eligible groups. FIRE experienced more accidental disabilities than anticipated for both the WTC eligible and Non-WTC eligible groups.


Summary of Results


Salary Increases We suggest merit increases in the NYCERS Transit plan as well as the POLICE and FIRE Systems. Our suggestions are based on the 10-year experience. NYCERS General and TRS recent merit pay experience is higher than anticipated and so future studies may suggest an increase in the merit pay assumption, although we do not currently suggest any revision. We are suggesting a lower merit salary scale for the NYCERS Sanitation plan.

Overtime The Overtime experience was higher than anticipated for NYCERS General and Corrections employees and POLICE and FIRE employees.

Summary of Suggested Revisions to Assumptions The following table summarizes the suggested assumption changes for NYCERS. Appendix 5 compares the current and proposed assumptions, on a year-by-year basis, except for retiree mortality. Retiree mortality assumptions use generational mortality tables (the rates decrease automatically each year, for each age) making it impractical to provide tables comparing the current to suggested revised tables.

Please note that the changes shown in the tables below sometimes approximate the actual

suggested revisions shown in Section III, due to space limitations.


Summary of Results


General TRA/TBTA Sanitation Corrections

Service Retirement Mortality Male Lives No Change No Change No Change No Change Male Liabilities Decrease 11% Decrease 5% Decrease 6% Decrease 11% Female Lives Increase 2% Increase 13% No Change No Change Female Liabilities Decrease 3% Increase 12% Decrease 6% Decrease 11% Disabled Retirement Mortality Male Lives Increase 4% Increase 2% No Change Decrease 15% Male Liabilities No Change Increase 3% No Change Decrease 29% Female Lives No Change No Change No Change No Change Female Liabilities No Change Decrease 10% No Change Decrease 23% Employee Mortality Ordinary Decrease 40% Decrease 40% No Change Reduce 50% Accidental N/A Decrease 40% No Change Reduce 50% Unreduced Retirement Elected First Year No Change No Change No Change No Change After First Year No Change No Change No Change No Change Unreduced Retirement Mandated

First Year Decrease 60% Ages

Less than 62 Increase 10% <age 62

Decrease 50% age 62-69 Decrease 25% No Change

After First Year Decrease 50% Ages

Less than 63 Decrease 40% age 64-79 Decrease 50% No Change Early Retirement Increase 75% No Change N/A N/A Withdrawal Increase 40% Increase 10% No Change Increase 50% Disability Ordinary Decrease 30% No Change No Change No Change Accidental Decrease 30% No Change No Change Increase 25% Pay Related Merit No Change Avg. 58% increase Avg. Decrease by 27% No Change Overtime Increase 75% No Change No Change Increase 50% Dual Retirement Increase 25% No Change No Change Increase 50% Dual Disability Increase 25% No Change No Change No Change


Summary of Results


The following table summarizes the suggested assumption changes for NYCRS sans NYCERS

TRS BERS Police2 Fire2

Service Retirement Mortality Male Lives Decrease 2% No Change No Change No Change Male Liabilities Decrease 11% No Change Decrease 9% Decrease 9% Female Lives Increase 8% No Change No Change No Change Female Liabilities Increase 2% No Change Decrease 9% Decrease 9% Disabled Retirement Mortality Male Lives No Change No Change Decrease 3% No Change Male Liabilities Decrease 6% No Change Decrease 15% Decrease 17% Female Lives Increase 4% No Change Decrease 3% No Change Female Liabilities No Change No Change Decrease 15% Decrease 17% Employee Mortality

Ordinary Increase 25% Women Only Decrease 33% No Change Decrease 50%

Accidental N/A N/A No Change Decrease 50% Unreduced Retirement Elected First Year Increase 25% Decrease 15% N/A N/A After First Year Increase 10% Decrease 25% N/A N/A Unreduced Retirement Mandated (Everyone for Police and Fire) First Year Decrease 10% Decrease 33% Decrease 30% Decrease 50% After First Year Set to 20% Decrease 35% No Change Decrease 25% Early Retirement Increase 25% Increase 25% N/A N/A Withdrawal No Change Increase 40% Decrease 25% No Change Disability Ordinary No Change No Change Decrease 20% Reduce 75%

Accidental No Change Decrease 25% for men

Increase 25% for women Decrease 30% Non-WTC

Decrease 40% WTC Increase non-WTC

15% Pay Related

Merit No Change No Change Increase 15% Avg. Increase

33% Overtime N/A N/A Increase 15% Increase 33% Dual Retirement N/A N/A Increase 15% Increase 33% Dual Disability N/A N/A No Change Increase 33%

2 Most current employees are in Tier II, virtually no Tier III employees are eligible to retire.


Section II: Experience Study - Background of the Study

New York City Retirement Systems 10

Section II. Experience Study – Background of the Study

Process of preparing data and combining with Historical Data

a. Nature of Data

We received the following for the demographic analysis.

• Summary historical participant data prepared by the prior independent actuary, Gabriel Roeder Smith & Company (GRS). We will refer to this as the Historical Data.

• 2014 to 2017 participant data from the OA that was initially provided to Conduent HR Consulting (Buck), for purposes of preparing the June 30, 2014 to June 30, 2017 actuarial valuations.

• 2014 to 2017 Transmittal letters from the OA to Buck.

Historical Data The Historical Data was not the original data that was provided to GRS or Buck. Rather it was a subset of the original data that had been prepared by GRS, for purposes of their experience study. We received separate files for the 5 retirement systems, NYCERS, TRS, BERS, POLICE and FIRE. These files included the following fields for the fiscal years ending in 2001 to 2013:

• SSN

• Member number

• Pension Number

• Date of Birth

• Date of Birth of Beneficiary

• Date of Hire

• Date of Termination

• Date of Retirement

• Annual Base3 Pay

• Annual Overtime

• Annual Status Code

• Annual Tier

• Annual Service Field

• Annual WTC Status (FIRE and POLICE)

• Annual Group (NYCERS only)

• Annual Plan (NYCERS, TRS, BERS)

• Physically Taxing Employment Annual Code (NYCERS Only)

• Improved Plan Code (NYCERS Only) The Historical Data does not include pension amounts and thus cannot be used to study retiree mortality experience by liabilities.

3 Base pay included estimated OT for some groups.




a. Nature of Data (cont.) The status codes (Annual Status Code and Annual WTC Status Code) had been adjusted by GRS to reflect information from later years. For example, if a participant had initially been reported as a service retiree in the 2009 data, but reported as a disability retiree in 2010, the 2009 status code was changed from service retiree to disability retiree. Another common adjustment was the treatment of employees who were on leave of absence. If the employee on leave of absence later left, their status was retroactively changed to termination, while if they returned to service their status was changed to employee. There is detailed documentation of the status codes adjustment in the GRS Report4. 2014 to 2017 Data We received more than one participant data file for each system from the OA. For NYCERS and TRS we received 3 files.

• Actives, Active/Inactives and Terminated Vesteds

• Retirees

• Designated Annuitants The BERS data included only the Active and Retirees files, and did not include a separate Designated Annuitants file. For each of POLICE and FIRE we received 4 files:

• Actives, Active/Inactives

• Terminated Vesteds

• Retirees Sub Chapter 1

• Retirees Sub Chapter 2 The data was complete and included certain fields that are not needed for the study (e.g. OPEB code). The documentation provided with the transmittal letter by the OA to Buck5 included the following:

• Appendix A containing a record layout, which provides a key to some of the codes (e.g. MSTATC, is the current status and a description of each number that populated that field, e.g. 10 for Active).

• Appendix B containing flowcharts showing the process followed in the development of each set of files.

• Appendix C contains metrics for each Employee Group.

• Appendix D reconciles each Employee Group from the prior year to the current year.

4 New York City Retirement Systems Actuarial Audit and Related Review Services Independent Actuary’s Statement prepared by GRS and dated October 2015. We will refer to this as the GRS Report. 5 As noted above, Buck, now known as Conduent, assists the OA with the preparation of the annual actuarial valuations.




a. Nature of Data (cont.) 2014 to 2017 Data

• Appendix E lists data issues researched by the OA and explains the actions taken by the OA to prepare the data for the valuation.

In processing the data, we noted that there were duplicate Social Security Numbers (SSNs) particularly for records included in both the active and retiree files. In general, we noted that these duplicate records were for participants who had retired and should be reflected as retirees and we only considered the retiree record. When retirees die, and are replaced by a beneficiary, the SSN used is generally the beneficiary’s, and not the participant’s. However, in many cases the participant’s (retiree’s) Pension ID is not present in the beneficiary information, thus we are unable to easily associate beneficiaries with prior retirees. Other characteristics of the data will be noted as we discuss the preparation of the experience tables.

b. Merging the Data

Process to Merge New Year Data to Historical Data Base The general process is as follows: First, we updated the Historical Data records that match with the 2014 or 2015 data to append the new information. The new information that was updated includes the following:

• Annual Base Pay

• Annual Overtime Pay

• Annual Status Code

• Annual Tier

• Annual Service Field

• Annual WTC Status (FIRE and POLICE Only)

• Annual Group (NYCERS only)

• Annual Plan (NYCERS, TRS, BERS)

• Physically Taxing Employment Annual Code (NYCERS Only) Improved Plan Code (NYCERS Only)

• We added pension amounts for annuitants to study amount-based mortality experience




b. Merging the Data (cont.) Process to Merge New Year Data to Historical Data Base The following table summarizes the status of the 2015 data that was not found in the 2016 data by plan.

NYCERS TRS BERS POLICE FIRE

Active 1 1 2 1 Beneficiary 1 207 396 Death 4,492 1,616 1,015 486 Termination 4,104 3,473 1,334 231 23 Retirement 16 4 3 55 Vested 123 1

New Records Employees that were not found in the historical data were added to the database. In some cases, there were two new records for the same employee. This generally occurred when there were separate records in the Active and Inactive file. When this occurred, we retained the active record and did not include the inactive record. The following table summarizes the duplicate records by Plan.

2016 Active/Inactive

Duplicates

Retirees and Surviving Spouse

Duplicates Other Duplicates Total

Duplicates

NYCERS 2 859 861

TRS 0 556 556 BERS 0 36 36

POLICE 0 35 35

FIRE 0 24 Pairs 430 Active & Pension Pairs, 9 Active & Vested Pairs, 4 Pension and Vested Pairs

467 Pairs

2017 Active/Inactive

Duplicates

Retirees and Surviving Spouse

Duplicates Other Duplicates Total

Duplicates

NYCERS 0 908 908 TRS 0 501 501 BERS 0 35 35

POLICE 0 33 33

FIRE 3 20 442 Active & Pension 7 Active & Vested3 Pension and Vested

475




b. Merging the Data (cont.) New Records In general, we retained the active record and did not work with the other duplicate record. For retirees and surviving spouses, we retained the retiree record and did not consider the surviving spouse. Other Duplicate Records There were a handful of duplicate records, other than those mentioned above. For example, consider the case of two retirees married to each other included in the data in year x. During year x, retiree 2 dies. Retiree 1, in addition to receiving their retirement benefit, is the beneficiary of retiree 2. The member number of retiree 2 was changed to the member number of retiree 1 (the surviving spouse.) However, while the member number changes when a beneficiary receives the benefit instead of the retiree, the employee number does follow the retiree even after he or she dies. In these cases, we could use the employee number to determine that retiree 2 had died and that retiree 1 was receiving two checks, one as a retiree and one as a beneficiary of his or her spouse. In such cases we discarded the beneficiary record (in this case of retiree 2) and kept the retiree record (of retiree 1.) There was also a handful of other duplicate records but they were not material to the results Assigning a Status Code There were multiple OA status codes that we did not need for the analysis. For example, there are 4 OA retiree codes in the data, (1) early retirement, (2) retired in the first year of eligibility, (3) retired in the second year of eligibility and (4) retired after the second year of eligibility. We assigned a smaller number of codes for our analysis. The following table maps the OA codes to the codes used for our analysis.

Mapping of Status Codes End of Year OA Codes Study Codes Comments

10 A Active 20 C Leave of Absence – See discussion below 60 D1 Ordinary Death 61 D2 Accidental Death 70 I Ordinary Disability 71 J Accidental Disability 80 T Terminated 81 V Terminated Vested 90 R Retired 91 R Retired 92 R Retired 93 R Retired




c. Updating the Data Data Adjustments We performed two data adjustments, one for leave of absence employees and a second for disability retirees, as described below. Leave of Absence There are two possible outcomes for each employee on a leave of absence.

• The employee could return to active employee status

• The employee could not return, due to retirement, termination, disability or death.

Consistent with the GRS Report, if an employee was on a leave of absence status for more than two years we assumed that the employee would not return and treated them as having withdrawn from the plan. Employees on a leave of absence are initially assigned a status of C. If the employee returns to active status the C code is changed to a B, retroactive to when the leave of absence started. For example, if an employee was active in 2012, on a leave of absence in 2013 and active in 2014, the 2013 code was changed from C to B. Employees with the B code in their record are not counted as a termination and are included as an employee exposure for the withdrawal decrement. If the employee becomes a terminated or terminated vested employee in the year following the leave of absence or if the employee remains in the Leave of Absence code for more than 2 years, then the C code is changed to an F retroactive to the commencement of the leave of absence. Employees with an F code are treated as terminations. In the last two years of the employee data included in the study, when it is not clear whether the employee in leave of absence will return or not return the employee’s status code remains a C code. Employees with a C code are counted as exposures for withdrawal, but not as having terminated.




c. Updating the Data (cont.) Data Adjustments

The following Table Summarizes the Status of the Employees in Leave of Absence in 2014 -2017 for the NYCRS Systems.

LOA Code Change (NYCERS) 2014

Status 2015 Status 2016 Status 2017

Status Number

B LOA Active

B (Active6) LOA LOA Active 334

F LOA Term or Blank

F LOA LOA Term or Blank 243

B (Active4) LOA Active 2,454

B LOA LOA Active 789

F (T, or V, depending on the termination type.) LOA Term or Blank 720

B (Active*) LOA Active 2,733

F (T, or V, depending on the termination type.) LOA Term 2,812

C (Or F if on LOA for more than 2 years.) LOA LOA 11,655

C LOA 7,214

LOA Code Change (TRS) 2014

Status 2015 Status 2016 Status 2017

Status Number

B LOA Active

B (active) LOA LOA Active 203

F LOA Term or Blank


B (active) LOA Active 697

B LOA LOA Active 296

F (T, or V, depending on the termination type.) LOA Term or Blank 2,109

B (active) LOA Active 759

F (T, or V) LOA Term 2,680


C LOA 4,315

6 Anything not F, T, V or Blank, i.e. A, I, J, D, R, or S.




c. Updating the Data (cont.)

LOA Code Change (BERS) 2014 Status 2015 Status 2016 Status 2017 Status Number

B LOA Active

B LOA LOA Active 57

F LOA Term or Blank

F LOA LOA Term or Blank

B LOA Active 253

B LOA LOA Active 60

F (B1, D1, I, J, R, S, T, V or WR) LOA Term or Blank 617

B LOA Active 153

F (D1, I, J, R, S, T or V) LOA Term 1,317


C LOA 1,519

LOA Code Change (Police) 2014 Status 2015 Status 2016 Status 2017

Status Number

B LOA Active

B LOA LOA Active

F LOA Term or Blank


B LOA Active 71

B LOA LOA Active 4

F (J, T, R or V, depending on the trmn type.) LOA Term or Blank 80

B LOA Active 74

F (T, R or V, depending on the trmn type.) LOA Term 155


C LOA 408

LOA Code Change (Fire) 2014 Status 2015 Status 2016 Status 2017 Status Number

B LOA Active 1

B LOA LOA Active 0

F LOA Term or Blank 0


B LOA Term or Blank 6

B LOA LOA Active 3

F LOA Term or Blank 0

B LOA Active 9

F LOA Term 3

C LOA LOA 6

C LOA 8




c. Updating the Data (cont.) Data Adjustments Disability Retirement A retired employee could be approved for disability retirement benefits one or more years after the initial service retirement. In these cases, these participants are initially reported as one of the retirement codes, 90-93. However, in subsequent years they are reported as a disability retirement. Consider the following example:

Year Status Code Updated Code

2009 A – Active A – Active

2010 R – Retired J – Accidental Disability

2011 R – Retired J – Accidental Disability

2012 J – Accidental Disability J – Accidental Disability In this case, the participant’s status in 2010 appeared to be a service retirement. However, by 2012 the retirement was reclassified as an Accidental Disability. Thus, we edited the 2010 status so that the retirement is treated as an accidental disability instead of a service retirement. Disability Retirement The following table summarizes the retiree records that were corrected retroactively to disability because of the 2016 and 2017 data.

Year

System 2011 2012 2013 2014 2015 2016

NYCERS7 13 18 23 37 24 1

TRS 6 9 13 14 11 1

BERS 0 0 0 0 1 0

POLICE 80 88 95 111 139 72

FIRE 25 25 30 39 55 25 The flowchart summarizes the steps taken to merge and adjust the FIRE data. The process was similar for the other groups.

7 The amount of affected records for NYCERS was immaterial and therefore not corrected retroactively.


Updating Historical Data with New Experience Data (FIRE)

Data is complete.

Start with GRS

Historical Data.

Add 2014 data

for active

members in

the GRS table.

Add records

and 2014 data

for active

members not

in GRS table.

Add 2014 data

for pension

members in

the GRS table.

Add records

and 2014 data

for pension

members not

in GRS table.

Remove less

relevant

duplicates

from table.

Remove

duplicates

from 2014

Sub-Chapter 1

Add 2014

experience

for Sub-

chapter 1.

Add 2014

experience

for term -

vested.

Add 2015 data

for active

members in

the GRS table.

Add records

and 2015 data

for active

members not

in GRS table.

Add 2015 data

for pension

members in

the GRS table.

Add records

and 2015 data

for pension

members not

in GRS table.

Create list of

2015 pension

duplicates.

Remove

duplicates

from 2015

pension

Add 2015

experience

for Sub-

chapter 1.

Add 2015

experience

for term -

vested.

Add dates

and genders

for new

records.

Make a table

for new SSNs

with all field.

Add GRS

status codes.

Add fields to Sub

– Chapter 1 to

determine

status.

Add GRS status

codes to Sub –

Chapter 1.

Pick most

relevant status

(if more than

one).

Add the 2014

& 2015 GRS

fields to the

historical data.

Add pension

amounts to

GRS data.

Manually

update

vested status

when

necessary.

Add

WTC_Elig for

vested

members to

Ensure data is

in correct

format.

Update LOA

codes.

Change Status

“R” to “J” when

applicable.

Update

inconsistent status.




c. Updating the Data (cont.) Processing the Data After we merged and updated the participant data, we processed the data to prepare the experience analysis. Our guiding principal in deciding on how to process the participant data and prepare tables comparing assumptions to actual experience was to ensure that the methods used to process the data to determine the experience for that decrement are consistent with how the decrement assumption was used in the valuation programming, whether for decrements, salary improvement or overtime assumptions. Dividing the Database into Years The initial database we prepared includes the status for each participant from 2003 to 2015. Where applicable the database also includes pay, overtime and other relevant information. The first step of the data processing is to create separate records for each exposure year. For example, consider an employee born in 1970 hired in 2005 and who terminated in 2009. Our software created the following 5 records from the one summary record.

Year Age Service Status at Beginning

of Year Status at End of Year

2005 35 0 Active Active




2009 39 4 Active Terminated Consistent with the valuation coding the age assigned was age nearest birthday on the valuation date, and the service assigned was similarly service nearest year on the valuation date. For example, if a member was age 34 and 10 months, with 5 months of service on the valuation date, they would be categorized as age 35 with 0 years of service. Creating Traces A Trace is the term we use for a date reconciliation. Once the original source records were divided into separate records by year, all of the records extracted for a given year (e.g. the 2012 records that included the 2012 and 2013 statuses), were collated based on status as of the beginning of the year and status as of the end of the year. The Traces for the most recent two years were compared to the data reconciliations prepared by the OA. This provided an important check of our coding.




d. Creating Experience Tables General Information for NYCRS The experience tables created varied by plan, generally because of differences in the assumptions between plans based on the differences in plan provisions, as determined by the OA in choosing assumptions. The following table summarizes the tables created, by plan.


Retiree Mortality x x x x x Disability Mortality x x x x x Ordinary Employee Mortality x x x x x Accidental Employee Mortality x x x x x Retirement First Year of Elig. x x x x x Retirement After First Year of Elig. x x x x x Early Retirement x x x Withdrawal x x x x x Ordinary Disability x x x x x Accidental Disability x x x x x Total Salary Increases x x x x x Real Salary Increases x x x x x Overtime x x x Dual Overtime Retirement x x x Dual Overtime Disability x x x

We created early retirement experience tables for all groups except POLICE and FIRE because these plans do not provide early retirement benefits. We did not analyze overtime experience for TRS and BERS because these plans do not include overtime in the average pay computation used to determine the retirement or other benefits. In this section, we document the general method we used to create these experience tables. Plan specific information will be provided later in the report. Mortality Lives Versus Liabilities We compiled the retiree and disabled mortality results by lives and liabilities. Liabilities

based mortality has not been studied previously, so we only have 4 years of liabilities-

based experience. The liabilities-based results are appropriate for measuring the liability

for benefits that vary by salary and service, such as the retirement and disability benefits.

The lives-based results are appropriate to measure liabilities that are for benefits which

are the same for all participants (e.g., OPEB Benefits.) The SOA RP2014 report released

two different tables, one by lives and one by liabilities.




d. Creating Experience Tables (cont.) Mortality Lives Versus Liabilities

Retiree Mortality: The exposures are the number of retirees, and the deaths include retirees who change to a beneficiary status in addition to those who change to a deceased status. Note that we did not study Beneficiary mortality, because we cannot easily tell retired participants from beneficiaries, as noted above. Disability Mortality: The exposures are the accidental or ordinary disability retirees; the deaths include those who became beneficiaries in addition to those who change to a deceased status. Employee Mortality: All employees were eligible for accidental death benefits. Accordingly, all employees were included in exposures for accidental deaths, the deaths included those who had the OA code 61 or D2 in the Historical Data. Some of the plans had service requirements to receive ordinary death benefits. In this case, we generally included only those with sufficient years of service to be eligible for the ordinary death benefits in our analysis. However, we had the same issues with rounding and data irregularities that we had with the number of retirements discussed in the Retirement decrement paragraph below and addressed this problem in the same fashion as we did for the Retirement decrement. Retirement: The use of the age nearest or service nearest convention has implications for determining the exposures for eligibility for retirement. For example, suppose employees are eligible for retirement with 20 years of service. Employees with 18.50 to 19.49 years of service are treated as having 19.0 years of service. Employees with 18.5 to 18.99 years of service would not be eligible to retire within the year. However, employees with 19.0 to 19.49 would become eligible to retire within the year.

We included in the number of exposed employees only those employees who met the age and service criteria as eligible to retire. In the example immediately above we included those with 20 years of service as eligible to retire. There were employees who retired who did not appear to meet the retirement eligibility requirements. We reviewed samples and determined that most of these retirees could have met the age and or service requirement but due to the rounding convention (nearest on the valuation date) used in the pension valuation had their service rounded down (e.g. an employee with 19.2 years of service with a 20-year service retirement requirement would have been eligible to retire at the end of the year, but could not be separated in the valuation program from an employee with 18.6 years of service who was also rounded to 19 years of service at the beginning of the year) to an age or service which would not be retirement eligible. Thus, we added these employees to the other employees eligible to retire based on their age and years of service as both exposures and retirements.




d. Creating Experience Tables (cont.) There were also some new retirees, who based on the data available should not have been eligible to retire. We assumed that there was additional information in the plan’s records that corrected the data present in the database for these participants. The new retirees who did not appear to meet the age and service requirements were added to both the exposures and the retirements. For example, if there were 1,000 employees who appeared eligible to retire and 100 of the 1,000 employees retired, and there were an additional 18 employees who retired but who did not appear to meet the eligibility requirements due to rounding of either age or service and there were 2 new retirees who appeared to have had more complete data available to the plan than was in the Historical Database, then our experience tables showed (i) 100 plus 18 plus 2 (or 120) retirements, and (ii) 1,000 plus 18 plus 2 employees eligible to retire (or 1,020 exposures.)

The following table compares the number of employees who retired in 2016 and 2017 who did not meet the retiree eligibility criteria, to the number of retirees who were first eligible to retire and to the total number of retirees.

Employees Retiring in 2016


1. Not Eligible based on Data 546 135 50 7 5 2. First Year of Eligibility 1,094 604 98 204 11 3. After First Year of Eligibility 5,299 2,477 712 942 85

Employees Retiring in 2017


1. Not Eligible based on Data 488 60 43 187 5 2. First Year of Eligibility 889 548 93 270 12 3. After First Year of Eligibility 4,672 2,158 651 1,145 120

Withdrawal: Employees who were not eligible to retire were included in withdrawal exposures. We included leave of absence employees with a B (returned to work) or C (not yet determined if they will return to work) as exposures. Participants with an OA Status code of 80 (terminated) or 81 (vested) as well as those with a F code (leave of absence employees who never returned to work) were treated as withdrawals. Because the data was not totally mature we excluded 2016 and 2017 data from the withdrawal experience for all of the Systems except POLICE and FIRE. POLICE and FIRE have a substantially lower percentage of employees on leave of absence who do not return to service. This approach was also taken by the prior actuary. Disability Incidence: All employees were eligible for accidental disability benefits. Accordingly, all employees were included in exposures, the disabilities included those who had the OA status code 71 or J in the historical data.


Section II. Experience Study – Background of the

Study


d. Creating Experience Tables (cont.) Total Salary Increases: For all plans, other than TRS and BERS, the pay used in determining benefits includes assumed overtime. For NYCERS, POLICE and FIRE the “base salary” field provided by the OA is the sum of the actual base salary as of the last pay period and the expected amount of overtime. To obtain the “adjusted base salary” we divided the “base salary” by one plus the expected overtime percentage. The adjusted base salary was used to determine salary increases. Merit Salary Increases: The Merit Salary Increases are equal to the Total Salary Increases divided by the recent inflation rate. Based on recent CPI increases, recent inflation was assumed to be 1.5 percent per annum over the last four years. Overtime Experience There are three types of overtime table (OT)

1. Dual Retirement – the OT in the year prior to retirement 2. Dual Disability - the OT in the year prior to disability 3. All Other OT experience8

The adjusted base salary is as of the last pay period, that is the beginning last day of the plan year (e.g., the 2015 pay is the pay rate as of June 30, 2015.) Because overtime is paid throughout the year we determined overtime as a percentage of pay by dividing overtime pay by the average of the prior year’s and current year’s adjusted base pay. We considered only employees with overtime in the experience study. There are a relatively small number of POLICE and FIRE employees who are not eligible for overtime. We assumed that all POLICE and FIRE employees with zero overtime were not eligible for overtime and excluded them from determining the average overtime increase.

8 Note that in the 2017 participant data we do not yet know who will retire (either service retirement or disability retirement) so we have included all employees in the All Other OT experience.




d. Creating Experience Tables (cont.) Overtime Experience Some NYCERS employees are not eligible for OT. The OA supplied us with a file of 31 CBA codes used for employees who are not eligible for OT. These employees were excluded from the experience used to analyze the NYCERS overtime experience. The process to exclude employees from the overtime analyses is described in more detail in the NYCERS sections.

The compiled overtime experience only considered employees who had a complete year of service. In other words, we only considered employees who had an adjusted base pay and a prior year adjusted base pay. We studied overtime, for dual overtime (retired and disable), excluding dual overtime (i.e. general OT experience), and all participants. It is not known until the following year whether the participant should be included in the dual retirement category or excluding dual retirement. Accordingly, we looked at the Overtime experience for the 4-year and 9-year periods ending June 30, 2016.

e. Plan Specific Method NYCERS – Specific Information NYCERS has separate assumptions for 4 groups of employees.

• General

• Transit/TBTA

• Sanitation

• Correction




e. Plan Specific Method (cont.) NYCERS – Specific Information Because of its smaller size and because it is shrinking, we have combined TBTA with Transit in the study. The combined plan will be valued using the Transit assumptions. Accordingly, we studied each group separately, and it was necessary to divide the data into 4 separate groups.

Assigning Participants by Groups However, in the Historical Data the Group codes varied from year to year. The following table provides the Group codes provided by year.

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

COF COF COF COF COR COR DAI COR DAI COR

Cor Cor CAP CAP DAI EMT Gen DAI Gen DAI

Gen Gen Cor Cor EMT GEN SDA GEN SDA GEN

Tra San OTH OTH FAD SAN TRA TRN TRA TRN

San Tra SPO SPO GEN SDA TRN SAN TRN SAN

SPO SPO SAN SAN SAN TBT COR TRA COR TRA

AUT AUT TOP TOP SDA TRN EMT SDA EMT SDA

DAI DAI PCT PCT TRN DAI TBT TBT TBT TBT

TBT TBT AUT AUT CAP FAD SAN EMT SAN EMT

EMT EMT Gen Gen TOP CAP FAD FAD FAD FAD

OTH OTH DAI DAI COF TOP HPTP HPTP HPTP HPTP

TOP TOP DSH DSH SPO COF TBTA TBTA TBTA TBTA

HPT HPT EMT EMT TBT SPO

FAD FAD FAD FAD OTH OTH

TBT TBT PCT PCT

Tra Tra Tra Tra

COP HPT AUT AUT

HPT COP DSH DSH

HPT HPT

COP COP




e. Plan Specific Method (cont.) NYCERS – Specific Information

Assigning Participants by Groups In general, we used the mapping shown in the following table to assign the participants by NYCERS group.

Data Base Group Code Bolton Code Group Comments

AUT Gen General Auto Mechanics

DAI Gen General District Attorney Investigators

DSH Gen General Deputy Sheriffs

EMT Gen General Emergency Medical Technicians

FAD Gen General Fire Alarm Dispatchers

Gen Gen General

OTH Gen General Others from tbt and gen

PCT Gen General Police Communication Technicians

SDA Gen General Special Officers, Auto Mechanics,

Deputy Sheriffs and Police Communication Technicians

SPO Gen General Special Officers

COP TRA Transit Capital Project-Operating

TOP TRA Transit Transit Operating

Tra TRA Transit

TRN TRA Transit Transit Authority

TBT TRA Transit Former TBTA Group

TBTA TRA Transit Former TBTA Group San SAN Sanitation Sanitation

CAP Cor Correction Correction Captains

COF COR Correction Correction Officers

Cor Cor Correction Corrections Most participants with an OTH code were placed in the General group. However, we noticed that there were a substantial decrease in TBTA (now part of Transit) employees in 2009 and 2010 and determined that the missing TBTA employees were assigned an OTH Code. There were 722 Participants with a TBTA code in 2009 and an OTH code in 2010, and there were 660 participants with an OTH code in 2011 and a TBTA code in 2012. Thus, we switched the OTH codes to Transit for these participants. All other OTH participants were assigned to the General plan. Participants with a blank code were also put in the General group.




e. Plan Specific Method (cont.)

NYCERS – Specific Information Assigning Participants by Groups The following table summarizes the number of participants with a blank Group code by status and year.

NYCERS Participants with No Group Code by Year and Status

2010 2011 2012 2013

Active 8,576 16,431 - - Leave of Absence - 155 - - Ordinary Disability - - 8,786 9,038 Accidental Disability - - 4,281 4,267 Retired - - 99,276 110,680 Beneficiary - - 3,292 3,701

Transfers Between Groups A small number of participants transferred between groups. For example, the following table shows the number of Active Employees who transferred between 2014 to 2017 as well as the total number of employees.

Number of NYCERS Employees Who Transferred between 2014 to 2015

Group Number of Transfers Total Number of Employees

General 242 132,455 Transit/TBTA 61 36,655 Sanitation 1 7,043 Correction 24 8,612

Number of NYCERS Employees Who Transferred between 2016 to 2017

Group Number of Transfers Total Number of Employees

General 421 132,267 Transit/TBTA 110 37,061 Sanitation 4 7,338 Correction 57 8,815

No adjustments were made for transfers. For example, an employee who transferred from Sanitation to General in 2010, would be a Sanitation employee exposure in years prior to 2010 and a General employee exposure after 2009. Because of the relatively small numbers of transfers, the impact of transfers is not material to the results of this study.





Plan Codes Within each group there are tiers of employees and there can be more than one Retirement Plan within the Tiers and Groups. The Retirement Plans have different service retirement eligibility provisions and different ordinary disability eligibility provisions. The following tables summarizes NYCRS provisions by Group, Tier and the retirement and ordinary disability age and service requirements.

NYCERS Plan Codes

Retirement Eligibility

Unreduced Unreduced Reduced Ordinary Disability

Plan

Description in Data Key CAFR description Age Svc Age Svc Age Svc

A CPP (Plan “A”) 55 25 10

B ISF (Plan “B”) 55 0 10

C Modified CPP (Plan “C”) MODIFIED CAREER PENSION

PLAN (PLAN C) 62 25 55 25 10

D Modified ISF (Plan “D”)

MODIFIED INCREASED SERVICE FRACTION PLAN (PLAN D)

62 5 55 5 10

E Original Tier 3 Plan RETIREMENT PLAN FOR

GENERAL MEMBERS 62 5 55 5 5

F Basic 62/5 BASIC 62/5 PLAN 62 5 55 5 10

G

Fire Alarm Dispatchers DISPATCHER 25-YEAR RETIREMENT PLAN (DIS-25)

0 25 10

H

Correction Capt. – Imp Plan

CORRECTION CAPTAIN 20-YEAR RETIREMENT PLAN (CC-20)

0 20 5

I 57/5 Plan 57/5 PLAN – CHAPTER 96 OF

THE LAWS OF 1995 57 5 10

J

Emergency Medical Technicians

EMERGENCY MEDICAL TECHNICIAN 25-YEAR RETIREMENT PLAN (EMT-25)

0 25 10

K

DA Investigators - 25 Year Plan

25-YEAR RETIREMENT PLAN FOR DISTRICT ATTORNEY INVESTIGATORS (25IDA)

0 25 10

L Special Officer SPECIAL OFFICER 25-YEAR

RETIREMENT PLAN (SPO-25) 0 25 10


NYCERS Plan Codes

Retirement Eligibility

Unreduced Unreduced Reduced Ordinary Disability

Plan

Description in Data Key CAFR description Age Svc Age Svc Age Svc

M

Sanitation - Improved Plan

UNIFORMED SANITATION 20-YEAR RETIREMENT PLAN (SA-20)

0 20 10

N 55/25 Plan 55/25 PLAN – CHAPTER 96 OF

THE LAWS OF 1995 55 25 62 5 10

O POLICE

0 0 10

P

Correction Off. – 25 Year Plan

UNIFORMED CORRECTION FORCE 25-YEAR PLAN

0 25 62 5 5

Q

Correction Off. – Imp Plan

UNIFORMED CORRECTION OFFICER 20-YEAR RETIREMENT PLAN (CO-20)

0 20 5

R

TBTA - 50/20 Plan

TRIBOROUGH BRIDGE AND TUNNEL AUTHORITY 20-YEAR / AGE-50 RETIREMENT PLAN (TBTA-20/50)

50 20 10

S

Deputy Sheriffs NYC DEPUTY SHERIFFS 25-YEAR RETIREMENT PLAN (DSH-25)

0 25 10

T

Auto Workers AUTOMOTIVE SERVICE WORKERS 25-YEAR / AGE-50 RETIREMENT PLAN (AUT-25)

50 25 10

U Transit - Improved Plan TRANSIT 25-YEAR / AGE-55

RETIREMENT PLAN (T2555) 55 25 62 5 10

V

Police Communications Techs

POLICE COMMUNICATIONS (911) TECHNICIANS 25-YEAR RETIREMENT PLAN (PCT-25)

0 25 10

W

DA Investigators - 20 Year Plan

20-YEAR RETIREMENT PLAN FOR DISTRICT ATTORNEY INVESTIGATORS (20IDA)

0 20 10

X Correction - 20 Year Plan

UNIFORMED CORRECTION FORCE 20-YEAR RETIREMENT PLAN (CF-20)

0 20 5

Y 63/10 Plan 63 10 10

Z

Assumed 62/5 or 57/5 Plan for

57 5 10




e. Plan Specific Method (cont.) NYCERS – Specific Information The Following summarize the number of employees by plan and Tier for each group

NYCERS General Employees 2017 Data

PLAN Tier 1 Tier 2 Tier 4 Tier 6

6 1

A 318

B 30

C 165

D 19

E 18

F 28,710 1

G 114 33

I 6 61,393 27

J 1 1,732 2,158

K 13

L 2,587 1,693

M 4 2

N 40 3,675

P 2

Q 4

R 2

S 65 25

T 830 556

U 389 346

V 394 500

W 42 39

X 12 36

Y 26,287

Grand Total 349 286 99,929 31,705





NYCERS Transit & TBTA Employees 2017 Data


1 1

6 20 13

A 2

F 282

I 257

L 10 3

N 21

Q 1

R 641 134

T 10 1

U 26,588 9,807

V 2

X 3 1

Y 11

Grand Total 23 13 27,813 9,959

NYCERS Sanitation Employees 2017 Data


7 4 1 F 43 M 3 5,409 1,954

Grand Total 4 4 5,452 1,954





NYCERS Corrections Employees 2017 Data


F 1 1

H 446

I 29 46

J 1 10

K 1

L 25 100

O 2

P 96

Q 1,925

T 1

U 1 5

V 7 12

X 3,278 3,340

Y 79

Grand Total 2 1 5,809 3,594

Chapter 96 of the laws of 1995 gave employees the option of selecting to join potentially more valuable retirement plans in return for higher employee contributions. For purposes of valuing plan liabilities, different retirement assumptions apply to the employees that elected the improved retirement benefits than those who stayed in the old Plans. The NYCERS data field “Improved Plan Code” was used to distinguish between employees who did not elect the new plans (Mandated) and those who elected the new plans (Elected). Employees hired after 1995 were not given a choice of plans and receive Mandated retirement benefits. The terms Mandated and Elected are used throughout our report to distinguish between these two groups of employees. For the Transit, Sanitation, Corrections and TBTA both the Mandated and Elected have the same retirement eligibility. NYCERS General employees have different retirement eligibility for Mandated and Elected retirement. Mandated and Elective retirement was studied separately. The NYCERS data field “Improved Plan Code” was used to distinguish between Mandated and Elected retirement.




e. Plan Specific Method (cont.) NYCERS – Specific Information The following summarize the number of Mandated and Elected employees in 2017.

Mandated Elected

General 127,309 4,960

Transit 32,289 5,519

Sanitation 5,445 1,969

Correction 9,086 320

Overtime Experience Some NYCERS employees are not eligible for OT. The OA supplied us with a file of 31 CBA codes used for employees who are not eligible for OT. In preparing the data for Buck, the OA loads the base pay by the OT assumption for the OT eligible employees but does not apply the OT percentage load to the employees not eligible for OT. The following summarize the number of Overtime Eligible and not Eligible employees in 2017.

Eligible Not Eligible

General 118,641 13,628 Transit 36,569 Sanitation 7,402 12 Correction 9,381 25 TBTA 1,239 The 2015 NYCERS file included 13,692 employees with those codes. We note that 693 of these employees did in fact receive OT in 2015, leaving 12,999 employees with zero OT who we understood to not be eligible for OT.

For years prior to 2014 we assumed that 2014 employees with a non-eligible for Overtime Union code were also not eligible for Overtime in prior years. The table below summarizes the number of NYCERS employees by year that were excluded in determining the OT experience.

Year # of employees removed removed employees that had OT $ of OT removed

2008 9,595 1,294 $8,283,444

2009 10,270 1,150 $6,814,363

2010 10,909 1,115 $6,578,324

2011 11,504 1,035 $5,446,071

2012 12,078 1,024 $4,965,647

2013 14,198 981 $4,297,893





Pension Amounts We added pension amounts data from the following fields.

Field Description

PAYANN Portion of benefit attributed to employee contributions PAYPRF1 Portion of benefit attributed to employer contributions PAYPRF2 Portion of benefit attributed to employer contributions PAYSUP Cost of Living Increases added VSFE Additional benefit of $12,000 per year if there is code

NYCERS – Specific Information Pension Amounts We did not include the lump sum value of the annuity reserve fund because it is paid as a lump sum similar to a life insurance benefit. The following table summarizes the amounts paid in addition to the pension and annuity amounts.

2016 2017

COLA Amount: $ 292,791,489 $ 290,697,142

VSFE Amount $ 97,800,000 $ 102,432,000





TRS – Specific Information As with NYCERS, TRS has several groups with different retirement eligibility provisions. We studied the retirement experience separately for Mandated9 and Elected groups. Unlike NYCERS, the determination of who is eligible for Mandated retirement is on a group by group basis. We included all groups in the Mandated experience except group G. The following table summarizes the Group Codes and their retirement eligibility.

TRS Summary of Retirement Eligibility by Plan

Plan Name Mandated

Unreduced Retirement


Reduced Retirement

Age Svc Age Svc Age Svc

A CPP Yes 55 5

B ISF Yes 55 5

C Modified CPP Yes 62 25 55 30 55 5

D Modified ISF Yes 62 5 55 5

F Tier IV Yes 62 5 55 30 55 5

G Ch19/08 55/25 Plan No 62 5 55 25 55 5

H Ch19/08 55/27 Plan Yes 62 5 55 27 55 5

I10 Ch504/09 55/27 Plan Yes 62 10 55 27 55 5

J Ch18/12 (Tier 6) Yes 63 10 55 10

O Other Yes 62 5

The Following summarize the number of employees by plan and Tier for each group

TRS - 2017 Employees by Plan and Tier

Tier Plan 1 2 3 4 6

A 263 B 36 C 109 D 23 F 293 41,403 G 19 214 25,603 H 7,202 I 9,974 J 1 33,920 O 71 1,695

Total 299 151 578 85,878 33,920

9 Mandated and Elected Retirement are two categories of benefits provided as an option to employees as part of a significant change in benefits as part of Chapter 96 of the law in 1995. This is explained in Section III Experience Study – Detailed Results, under Results for NYCERS 10 We assumed all members in Plan I are UFT members with 10 years of service required for vesting.




e. Plan Specific Method (cont.) TRS – Specific Information

Pension Amounts There are many pension amount fields in the TRS data and many of the benefits are variable annuities and expressed as unit values. The following table lists the fields, and the unit values from the 2014 valuation.

Field Description Unit Value Fund Unit Value (2014)

ANNPAYA Variable Fund A – Employee UnitValueVarA .81078 ANNPAYB Variable Fund B – Employee UnitValueVarB .18122 ANNPAYC Variable Fund C – Employee UnitValueVarC .11011 ANNPAYD Variable Fund D – Employee UnitValueVarD .11806 ANNPAYE Variable Fund E – Employee UnitValueVarE .14469 ANNPAYF Fixed Annuity - Employee N/A N/A PENPAYA Variable Fund A – Employer UnitValueVarA .81078 PENPAYB Variable Fund B – Employer UnitValueVarB .18122 PENPAYC Variable Fund C – Employer UnitValueVarC .11011 PENPAYD Variable Fund D – Employer UnitValueVarD .11806

PENPAYE Variable Fund E – Employer UnitValueVarE .14469 PENPAYF Fixed Annuity - Employer N/A N/A AMTSUP Cost of Living Increases N/A N/A

We did not include the TDA funds because these are funded by employee contributions. We also did not include the life insurance or the lump sum value of the annuity reserve fund because it is paid as a lump sum similar to a life insurance benefit. The following table summarizes the amounts paid in addition to the pension and annuity amounts in 2016.

EE Contribution ER Contribution (ITHP)

Fixed Funds $ 123,810,535 $ 3,174,921,692

Variable A Funds $ 155,041,046 $ 416,030,091

Variable B Funds $ 4,086,785 $ 9,449,500

Variable C Funds $ 535,439 $ 1,212,007

Variable D Funds $ 159,990 $ 429,649

Variable E Funds $ 301,166 $ 662,592

COLA Amount: $ 183,301,374




e. Plan Specific Method (cont.) BERS – Specific Information As with NYCERS and TRS, we studied the retirement experience separately for “Mandated” and “Elected” Retirement groups. As with TRS, the determination of Mandated or Elected Retirement is on a Plan by Plan basis. BERS has several groups with different retirement eligibility provisions. The following table summarizes the Group Codes and their retirement eligibility. The Mandated column indicates whether we applied the Mandated or Elected categories in the retirement experience.

BERS Summary of Retirement Eligibility By Group

Plan Name Mandated



Reduced Retirement

Age Svc Age Svc Age Svc

A CPP Yes 55 25 B ISF Yes 55 25 C Modified CPP Yes 62 5 55 25 D Modified ISF yes 62 5 F Tier IV yes 62 5 55 5 55 5 G Ch96 – Tier II no 62 5 55 25 H Ch96 – Tier IV no 62 5 55 25 - - I 57/10 yes 62 5 57 5 57 5 J Tier II Ch19/08 55/25 no 62 5 55 25 57 5 K Tier IV Ch19/08 55/25 no 62 5 55 25 - - M Chapter 96 Tier IV yes 62 5 57 5 57 5 P Chapter 19/08 yes 62 5 55 27 - - Q Chapter 504/09 yes 62 10 55 27 - - R Chapter 18/2012 (Tier 6) yes 63 10 55 10 T Special Officers yes - 25 25 - -




e. Plan Specific Method (cont.) BERS – Specific Information The Following summarize the number of employees by plan and Tier for each group

BERS - 2017 Employees by Plan and Tier

Tier Plan 1 2 3 4 6

A 26 C 17 D 1 F 2 5,307 G 2 H 111 I 13,016 K 484 M 12 87 P 1 209 Q 2 481 R 5,993 T 25 18

Total 26 20 17 19,720 6,011

Pension Amounts Like TRS there are variable annuities that are expressed as unit values. The following table lists the fields, and the unit values from the 2014 valuation.

Field Description Unit Value Fund Unit Value (2014)

ANNPAYA Variable Fund A – Employee UnitValueVarA .91093 PENPAYA Variable Fund A – Employer UnitValueVarA .91093 AMTSUP Cost of Living Increases N/A N/A

We did not include the TDA funds because these are funded by employee contributions. We also did not include the lump sum value of the annuity reserve fund because they are paid as a lump sum similar to a life insurance benefit. The variable fund for employee totaled $962,736 in 2016 and for the employer it totaled $1,800,043.





POLICE - Specific Information There were 65 inactive records in the 2016 data that were not found in the 2015 data. By using the member number field we were able to determine that the SSN had been corrected as the number were very close e.g. 222-33-4455 became 222-33-4555. For these inactive records we corrected the SSN in the historical data base. There records had inconsistent SSNs in the office of the actuary data. Using the SSN to match records, there were also 47 retirees from the 2017 data that were not found in the 2016 data. By using the member number, we were able to determine that 43 of the 47 retirees had more than one SSN in the historical records. Four of the 47 had beneficiaries and thus were deaths. The addition of 4 deaths and 47 exposures the 2016 data (538 deaths and 32,011 exposures) was not material to the results, so other retirees that are not found in subsequent years as either death or with a beneficiary code are not considered in the study. There records had inconsistent SSNs in the prior actuary data. There were a smaller number of participants with inconsistent SSNs in the other data bases. The POLICE data included a WTC code. The accidental disability incidence was studied separately for those with and without a WTC code. The WTC code included the following values:

• WT – WTC Disability/Death Benefit Application was filed

• TC – WTC Disability Benefit was approved by the Board of Trustees.

• TD – WTC Death Benefit was approved by the Board of Trustees. The only WTC code found in the employee data was the WT code. The TC and TD codes were only found in the retiree data. The analysis included those who had applied for the designation but who may or may not be approved for the benefit.




e. Plan Specific Method (cont.) POLICE - Specific Information In the 2015 retiree data there were 515 participants with either the TC or TD code indicating that they had been approved for the WTC benefit and 16,061 with the WT code who have applied and have not yet been approved for the WTC benefit. The following table summarizes the maturation of the WTC codes for the POLICE.

Active in Current Year

Inactives in prior year without WT, TC or TD but TC or TD

current year.

Year Not WT to WT Not WT to TC or TC Disabled (TC) Death (TD)

2011 165 2 2 0

2012 0 0 1 0

2013 24 0 1 0

2014 2 0 5 46

2015 0 1 5 11

2016 331 1 14 26

2017 138 0 7 19




e. Plan Specific Method (cont.) POLICE - Specific Information

Pension Amounts For Subchapter 2 we added pension amounts data from the following fields.

Field Description

PAYANN Portion of benefit attributed to employee contributions PAYPEN Portion of benefit attributed to employer contributions TYPE-0036 State Portion of Accidental Death Benefit AMTSUP Cost of Living Increases added VSFE Additional benefit of $12,000 per year if there is code For Subchapter 1 we added pension amounts data from the following fields.

PEN1AMOUNT Base Pension Benefit COLA Cost of Living Increases added VSFE Additional benefit of $12,000 per year if there is code

We did not include the lump sum value of the annuity reserve fund because they are paid as a lump sum similar to a life insurance benefit. The following table summarizes the amounts paid in addition to the pension and annuity amounts.

2016 2017

COLA Amount: $ 169,693,974 $ 167,692,195

VSFE Amount $ 375,180,000 $ 382,200,000

FIRE - Specific Information The FIRE data also included a WTC code and we studied the accidental disability incidence separately for those with and without a WTC code.

• WTA – WTC Disability/Death Benefit Application was filed

• WTB – WTC Disability/Death Benefit Application was verified

• TC – WTC Disability Benefit was approved by the Board of Trustees.

• TD – WTC Death Benefit was approved by the Board of Trustees.




e. Plan Specific Method (cont.) FIRE - Specific Information In the 2015 data 444 employees had a WTA code and 4,605 had a WTB code. Only employees with a WTB code were included in the WTC analysis. The TC and TD code were not found in the active or inactive data. In comparing the WTC codes over the years, we noticed there were employees who had the WTC code in earlier years but not in later years. The WTC code was removed for employees who had the WTC code in earlier years but not later years. Conversely employees who did not have a WTC code in earlier years but had a WTC code in later years were changed to WTC eligible for all years.

The following table summarizes the maturation of the WTC codes

Year Not WTB to WTB WTB to not WTB

2011 7 841 2012 14 14 2013 0 14 2014 36 18 2015 72 14 2016 66 12 2017 24 16

For Subchapter 2 we added pension amounts data from the following fields.

Field Description

PAYANN Portion of benefit attributed to employee contributions PAYPEN Portion of benefit attributed to employer contributions TYPE-0036 State Portion of Accidental Death Benefit AMTSUP Cost of Living Increases added VSFE Additional benefit of $12,000 per year if there is code

For Subchapter 1 we added pension amounts data from the following fields.

PEN1AMOUNT Base Pension Benefit COLA Cost of Living Increases added VSFE Additional benefit of $12,000 per year if there is code





FIRE - Specific Information The following table summarizes the amounts paid in addition to the pension and annuity amounts.

2016 2017

COLA Amount: $ 72,326,218 $ 70,152,814

VSFE Amount $ 55,116,000 $ 56,268,000

We did not include the lump sum value of the annuity reserve fund which is paid as a lump sum similar to a life insurance benefit.

Quality Control The experience study involved 5 plans, and the NYCERS plan was further divided in 5 groups for an initial total of 9 sets of data. We eventually combined TBTA and Transit, as noted earlier. Within each group we studied the experience shown in the table below. For each group we looked at 4, 10 and year-by-year experience. For all but FIRE and NYCERS Sanitation, we looked at male and female experience separately. For NYCERS, TRS and BERS, we studied Mandated and Elected retirement experience separately. For POLICE and FIRE, we studied WTC and Non-WTC disability separately. The following table summarized the number of tables generated, by decrement and plan. We blacked out cells for assumptions that do not apply to the System.

Decrement NYCERS TRS BERS POLICE FIRE

Retirement Mortality 34 10 10 10 4

Disability Mortality 34 10 10 10 4

Employee Mortality- Ordinary 20 7 7 7 3

Employee Mortality - Accidental 9 -11 7 3

Retirement in First Year 24 12 12 6 2

Retirement after First Year 28 13 13 7 3

Reduced “Early” Retirement 9 7 7

Withdrawal 24 7 7 7 3

Ordinary Disability 16 7 7 7 3

Accidental Disability 16 7 7 13 5

Salary Growth 20 5 5 5 5

Real Salary Growth 16 4 4 4 4

Overtime 20 5 5

Dual Overtime (Retirement) 16 4 4

Dual Overtime (Disability) 16 4 4

11 Not included due to lack of experience.





FIRE - Specific Information Quality Control The table shows a total of 636 tables. These tables are included in Appendices 6 through 10, separated by plan. The table above does not include the graphs and confidence intervals that we generated to more clearly show results of the experience study. These are included in section III of this Report with the discussion of the study results for each system. Ensuring quality control for so many tables and graphs, is a difficult task. We used the following approaches to ensure quality control.

• While the templates were gradually improved and modified we started with the same Access queries, and macros, so the coding was as similar as possible.

• Access coding was exported to excel using a standard format. For each plan, there were 3 excel work books, one for assumptions that were set based on age (e.g. mortality) one for assumptions that were set based on service (e.g. turnover) and one for salary increases and overtime queries.

• The excel formats were the same. Each tab of the workbook was designed to have as few inputs as possible to minimize errors, for example, there were cells, to select gender and number of years to keep tables from being duplicated or mislabeled.

• Each time an access query was run, a macro assigned a time stamp that was included in the name of the output tables. Thus, each file used to generate the tables, had included in its name the time it was generated, to minimize the possibility that previously corrected tables could inadvertently be used.

• Before the tables were generated we generated a reconciliation between the 2013 and 2014, 2014 to 2015 data, 2015 to 2016 and 2016 to 2017 data. These reconciliations were compared to reconciliations supplied by the OA in the 2014 to 2017 data that was provided to Buck who generated the NYC results.

• We used the Historical Data provided by GRS before data adjustments were made and tried to duplicate the results from the prior report. If we were able to match the results, this was a verification our coding was working as designed. If our results did not align with the prior results we rechecked our coding. If we believed our coding was correct, we attempted to duplicate the results by changing our method. In this way, we identified some differences in our method and GRS’ method. The results of this analysis is shown in Appendix 2.





FIRE - Specific Information Methods Used The following is a list of the differences between our approach to the experience study and that used by the prior independent actuary, GRS. Measuring Increases in Salary: The “base pay” provided by the OA included expected overtime. We used adjusted base pay, that is base pay divided by expected overtime. This change is fairly minor because in many cases the expected overtime assumption does not change from year 1 to year 2. Thus, the salary increase results would be the same. Determining OT for NYCERS General: We included all employees as exposures including employees with no OT in the year. It appears that GRS included only employees with OT in determining the OT experience. Our approach excluded about 13,600 employees who we understand were not eligible for overtime. GRS’ approach excluded about 50,000 employees, only some of whom were not eligible for overtime. Thus, our approach should provide a better, but slightly lower estimate of the actual overtime. Treatment of NYCERS Employees with Zero OT: Approximately half of the NYCERS general employees had zero overtime. As documented above less than 15% of NYCERS general employees were identified as not OT eligible. It appears that GRS excluded all employee with no Overtime. Bolton included all employees in the Overtime determination except those from Union Codes that were not eligible for Overtime Determining OT rates: GRS determined the OT percentage by dividing the OT provided by the base pay provided by the OA. The base pay provided by the OA was equal to the rate of pay as of the last pay period with expected overtime. For example, if expected OT was equal to 15 percent of pay, and the rate of base pay as of the end of year was $100,000 per annum, then the base pay provided by the OA was $115,000. We divided OT by the average of the prior year adjusted base pay and the current year adjusted base pay. Adjusted base pay is equal to the base pay excluding expected overtime. Continuing the example above, if the pay as of the beginning of the period (we used the prior year data for this) was $95,000, then we divided by the average of $95,000 and $100,000 or $97,500 while GRS divided by $115,000 to measure the overtime experience. This change increases the OT percentage by dividing by a smaller denominator.




e. Plan Specific Method (cont.) FIRE - Specific Information

Methods Used Studying OT (prior to retirement): In studying OT Bolton included each employee in no more than one OT experience table. We did not include employees that retired or were disabled in the following year in the general overtime experience, since these employees were already included in the dual overtime experience. This is because the valuation coding only applies the dual overtime rates in the years prior to retirement (either service or disability.) This impacts the level of employee contributions but only to the extent that the dual overtime experience is materially higher than general overtime experience. Including Leave of Absence Participants in the Withdrawal exposures. Bolton included employees with a status of B (LOA employees who returned to work) and C (not yet determined) in the denominators of the withdrawal experience probability determination (i.e., we treated these employees as part of the exposures.) The valuation coding applies withdrawal decrements to employees on a leave of absence, so we included these participants in determining the actual rate of termination from either employment or leave of absence status.

Confidence Intervals: Another significant difference in our analysis was the addition of confidence intervals to the analysis of whether the experience is at least 95% certain to be different from the assumption. Appendix 3 discusses the hypothesis testing we did to create the confidence intervals. Our intent was to identify assumptions where the likelihood that the assumption and the experience were based on the same distribution was less than 5%, to help identify the assumptions that require revision. Please note that hypothesis testing cannot be reasonably applied if the expected occurrences are too small. For some assumptions (e.g., Accidental disability) the expected incidence was too low to provide for a meaningful confidence interval. We did not prepare a confidence interval analysis for those assumptions.


Section III: Experience Study - Detailed Results

This portion of our report is divided into sections for the economic assumptions and for the

demographic assumptions, with the demographic assumptions addressed by System and plan.



Inflation Assumption The inflation assumption is at the heart of the economic assumptions, as it is used as a starting point for all of the other economic assumptions, including the Cost-of-Living Adjustment (COLA), salary improvement and investment return assumptions. Thus, our experience analysis starts with the inflation assumption.

Unlike demographic assumptions where past experience is often a good predictor of future experience, economic assumptions, and particularly investment return and inflation assumptions typically reflect future expectations more than past experience. So, we analyzed the inflation assumption from three perspectives:

• Past experience – based on the Consumer Price Index for all Urban Consumers (CPI) over the last 5, 10, 15, 20 and 25 years

• Current expectations of future experience – based on investment advisors’ analysis of future expected inflation

• Current, market-based expectations of future inflation – based on the difference between the treasury bond nominal yield curve and the Treasury Inflation Protected Securities (TIPS) yield curve. This curve is known as the Treasury Break-even Inflation yield curve (TBI).

The NYC plans offer some additional issues in considering the appropriate inflation rate assumption. First, COLAs are granted to different groups of retirees reflecting CPI increases in the year ending on either March 31, or June 30. Retirees receiving “auto” COLAs, in Tiers I, II, IV or VI of the NYCERS, TRS, BERS, Police Officers and Firefighters Plans (NYC Plans) receive a COLA based on ½ of the CPI, but not less than 1% or more than 3%. This COLA is paid based on the CPI increase through March 31. The COLA is paid on the lesser of the maximum payment option (regardless of the option elected) or $18,000. The $18,000 and 3% caps lessen the impact and volatility of the COLA. Employees of the NYC Plans who retire from Tier III generally receive a COLA based on the CPI increase for the year ended June 30. The increase (or decrease, if the CPI is negative) is the lesser of the CPI and 3%. This larger COLA is known as Full Escalation.

Different COLA Effective Dates Our analysis shows very little difference, at least in the past, between inflation ending on March 31 or June 30. For example, comparing the graphs below, shows a maximum difference in the CPI of 0.27% (or 27 basis points) in the five-year average CPIs over the last 30 years, and a more typical difference of about 0.09% (9 BP). Thus, we concluded that using a single inflation assumption for all purposes would simplify the assumptions while not adding any significant variance in the assumed assumption and would not result in any material distortion in the ultimate valuation results.



Inflation Assumption

Past Experience We first considered prior experience in developing our recommendation for the inflation assumption. We considered the five-year average experience (as shown in the tables above), as well as longer term trends (as shown immediately below.)

4.44%

2.81%2.25%

2.81%2.24%

1.23%

ENDING MARCH 31

Average Annual InflationCPI-U, Five-Year Averages

1988-1992 1993-1997 1998-2002 2003-2007 2008-2012 2013-2018

4.32%

2.72%2.34%

2.99%

1.97%

1.32%

ENDING JUNE 30

Average Annual InflationCPI-U, Five-Year Averages

1988-1992 1993-1997 1998-2002 2003-2007 2008-2012 2013-2018




We note that the inflation rate for the last five years has been historically low, although not as low as in the late 1950s and early 1960s or during the 1920s and 1930s (see graph below). Because of the low recent inflation, we believe that the use of five-year averages is more useful in anticipating future inflation. If we based our recommendation only on the historic inflation experience, we would suggest continuing to use an assumed 2.5% inflation rate, because of the long duration of the pension plan liabilities, which are best matched by the 25- and 30-year average shown above.

The following graph shows the swings in the inflation rate from the spectacular highs of the early 20th century to the significant lows of the early 1920s and 1930s and the 1970s “stagflation”. Please note that there were also significant numbers of years of deflation in the late 1800s, before the entries on this graph. While of interest, we do not believe that this long-term historical information is of use in helping determine the appropriate inflation assumption.

2.61%

2.27%2.15% 2.09%

1.64%

1.32%

ENDING JUNE 30

Average Annual Increase in CPI-U

Last 30 years Last 25 years Last 20 years

Last 15 years Last 10 years Last 5 years




Inflation Rate by Year

Investment Experts Inflation Assumptions Next, we considered the inflation assumption built into the investment return assumptions from investment managers (mentioned below) we used to analyze investment return assumptions. Five managers had clearly expressed investment return assumptions, with all assuming between 1.95% and 2.30% future inflation. These inflation assumptions are based on 10- and 20-year time horizons.

Of particular interest is the forecast of the Philadelphia branch of the Federal Reserve Bank, which in the second quarter of 2018 projected 10-year inflation to run at 2.3% (identified as Long-Term, for the 2018 to 2027 period), at the high end of the inflation assumed by the investment managers.

TBI Return Finally, we considered the inflation expectations built into the difference between the nominal treasury yields and the TIPS yields. The following table shows the TBI yields as of the present.

We note that there are some practical limitations of the TBI yields (principally the depth of the TIPS markets, and the limited duration of both the TIPS and Treasury bonds.) However, we believe that the TBI does provide a reasonable, independent and market related method of considering long-term inflation rate expectations.

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

19

13

19

16

19

19

19

22

19

25

19

28

19

31

19

34

19

37

19

40

19

43

19

46

19

49

19

52

19

55

19

58

19

61

19

64

19

67

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

20

09

20

12

20

15

Inflation Rate CPI-U Ending June 30




TBI Return Comparison of Implicit Inflation Rates, in Percent, and Period in Years

We note that the TBI yield curve graphs for 2016 and 2011 are significantly different than those for the other four years, which are clustered between 2.15% and 2.5%, except for very short durations. We note that the duration of the liabilities for the Police Officers and Firefighters plans are between 14.5 and 15.012 years. We anticipate that the duration of the liability for the other plans would be slightly lower, because of the higher age at retirement in those plans.

Practical Issues Typically, the most powerful effect on liabilities of the inflation assumptions is on the COLAs. COLAs in the NYC Plans are limited to 3%, and generally apply to only a portion of the benefit. However, the inflation assumption also affects the future salary improvement assumption and the investment rate assumption. The COLA assumption for the Auto COLA is currently 1.5%, 1% lower than the inflation assumption. The COLA assumption for the Escalation is 2.5%, the same as the inflation assumption. We note that for the roughly 80% of the years in which the CPI is between -1% and 7.5%, assuming that the Auto COLA is 1.5% is a very reasonable assumption. Even extending the range of actual CPIs from -2.5% to 12.5%, only slightly reduces the reasonableness of the 1.5% Auto COLA assumption.

12 Calculated using the Macaulay Duration formula

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0.5

3.0

5.5

8.0

10

.51

3.0

15

.51

8.0

20

.52

3.0

25

.52

8.0

30

.53

3.0

35

.53

8.0

40

.54

3.0

45

.54

8.0

50

.55

3.0

55

.55

8.0

60

.56

3.0

65

.56

8.0

70

.57

3.0

75

.57

8.0

80

.58

3.0

85

.58

8.0

90

.59

3.0

95

.59

8.0

TBI ending June 30

2011 2012 2013 2014 2015 2016 2017 2018




Practical Issues Currently the investment return, or discount rate, assumption is 7.0%, which is effectively a 2.5% inflation assumption and a 4.5% “real” investment return (i.e., net of inflation.) The salary improvement assumption consists of a General Wage Increase assumption of 3.0% (0.5% higher than the inflation assumption) and a 0.5% to 46.0% (for firefighters) increase assumption for merit, productivity and longevity. We address issues related to these assumptions with the related analysis.

Recommended Inflation Assumption Based on the review of the historical, investment advisors’ expectations and market-based expectations, we believe that NYC should, for the present, continue to assume that CPI will increase 2.5% annually. This is also consistent with the Horizon survey mentioned later which shows expected inflation assumption of 2.23% (10-year) to 2.44% (20-year), in their survey of all of the participating investment advisors (Table 4, 2017 Survey.)

We do not recommend changing the COLA assumptions derived from the inflation assumption, so are recommending that the Auto COLA remain at 1.5% while the Escalation remain at 2.5%.

We do not recommend changing the real wage growth assumption of 0.5% which is added to the inflation rate in developing the 3% wage growth inflation rate used by the OA.

We also do not recommend making any adjustments to when the COLA is expected to be paid. In our valuation replication we assumed that all COLAs are paid on the valuation date and believe that is a reasonable method for approximating the value of the COLAs, even though some COLAs are made in September and others in March.

Investment Return Assumption The single assumption that has the largest effect on the determination of plan liabilities, funding levels and contributions is the investment return assumption. Our belief is that historic investment experience, while interesting, is of little value in accessing the validity of an investment return assumption. We also note that the only certainty about future investment returns is that any assumption is most likely wrong, both in the short-term and in the long-term. While we typically suggest an investment return assumption based on the best estimate of the future investment return, reflecting investment advisors’ investment return expectations and the plan’s investment mix, we also recognize the value of choosing conservative investment return assumptions, trying not to assume the market expectations but to choose a return more likely to be exceeded than to not be met.

Our understanding is that OA currently wishes to use an investment return assumption that reflects the geometric average of expected returns. Unfortunately, most of the information provided by the Systems’ investment advisors reflects arithmetic average returns, and we were not provided the standard deviation of returns by investment class or the correlation coefficients of returns between the different returns. We used the Horizon study which includes the long-term geometric investment expectations for 13 investment advisors to partially address these differences.



Investment Return Assumption We also note that the adjustment from arithmetic returns to geometric returns is likely to be a reduction of between 0.5% to 0.7%, depending on the correlation of investment classes actually used. For purposes of normalizing returns, we did not use nominal returns when provided, but adjusted these returns to reflect the inflation assumption used by the OA, currently 2.5%. We did not normalize the Horizon study returns, because we concluded that the 2.47% inflation assumption embedded in their expected returns was close enough to the OA’s 2.50% expected inflation to be insignificant.

Finally, we note that the most appropriate investment returns for pension plans are long term returns. The returns provided by the Systems’ advisors are 30-year returns. The Horizon study uses 20-year returns. We did not attempt to adjust the investment returns in the Horizon study for a longer investment horizon.

Plans’ Investment Mix First, the following table shows the long-term target investment mix for each of the System13, provided by the OA from information obtained from the Systems;’ investment advisors.

Target Asset mix from Systems' Investment Advisors

System Equity Debt Alternatives Asset

Weight

NYCERS 49.0% 33.0% 18.0% 30.3%

TRS 50.0% 33.0% 17.0% 40.5%

BERS 50.0% 28.0% 22.0% 3.1%

Police 46.0% 31.0% 23.0% 19.7%

FIRE 46.0% 31.0% 23.0% 6.5%

Weighted Asset Mix 48.6% 32.3% 19.0%

We discovered some differences from the target investment mix shown above, and the investment mix present in the NYC June 30, 2018 CAFRs. For the purpose of comparing to the target investment mixes, we excluded assets held as collateral from securities lending transactions (as these are simply collateral, with the securities eventually being returned, and no information is provided regarding the type of security loaned) and Other Assets (approximately 0.01% of all assets.) For example, the weighted average target for Alternatives is 19.0%, while the actual percent of the June 30, 2018 assets is 13.6%. We assumed that this represents intentional, significant changes in the investment targets, and reflected the target investment mix in our analysis. The results are shown in detail in the table below.

13 This asset mix is based on information provided as of September 19, 2018, and subject to revision if substantial revisions are made to the investment policy. Based on the information in the NYC, NYCERS, BERS and POLICE CAFRs, we concluded that there has been no substantial change in the investment policy.



Investment Return Assumption

Actual Asset mix at 6/30/2018

System Equity Debt Alternatives Asset Weight

NYCERS 46.3% 38.4% 15.1% 30.3%

TRS 56.8% 33.2% 9.9% 40.5%

BERS 52.2% 36.0% 11.2% 3.1%

Police 46.8% 35.1% 18.1% 19.7%

FIRE 46.4% 35.6% 17.9% 6.5%

Weighted Asset Mix 50.9% 35.4% 13.6%

Next, some of the categories are not one often tracked by investment advisors. Economically Targeted Investments (ETI) is a recently developed investment category, with limited coverage. Because the purpose of these investments is primarily public good, and the targeted investment percentage was only 2%, we decided to set the expected real investment return to 0% for ETI. Other categories that were difficult to find in other investment advisor’s mix are the various fixed income categories (Credit – Investment Grade Corporates, Corporate – High Yield Securities, Corporate – Bank Loans, Convertible Securities and Opportunistic Fixed Income.) We noted that the Plans’ investment advisors typically categorized them as fixed income, so we did as well.

Because the OA has historically used the same investment return assumption for each of the valuations, and the difference in the investment mix targets are relatively small (no more than a 4% difference in any category), we chose to consider a single, asset weighted mix representing the five portfolios. We used the asset values based on the target mix, rather than based on the assets held for investments as of June 30, 2017, from the relevant CAFRs14. Using this value for weighting, we obtained the following average asset mix, which we used for determining the expected investment return. We also show the actual mix, based on the values shown in the CAFRs, for comparison.

While there are small differences between the investment mixes among the plans, the differences are not significant in the aggregate. We also understand that using a slightly different investment return assumption for each of the Plans would require difficult explanations and could result in gamesmanship among the Plans’ trustees. Thus, we decided that the best approach would be to take a weighted average of the investment mixes and use that mix to approximate the investment return of each of the Plans. The logical weighting is the asset values of the various plans, and we chose to use the asset values as of June 30, 2017, obtained from the CAFRs. Total asset values and weights we used are shown below.

14 For example, the NYCERS CAFR, page 72 and page 134. The CAFR shows an asset value of $60.8 billion held for investment on page 72, as is also shown as the total of investments, on page 134.




Total System Assets as of 6/30/2018

System Total Assets (thousands) Share of Total Assets

NYCERS $67,532,576 30.3%

TRS 90,295,722 40.5%

BERS 6,808,918 3.1%

Police 43,827,459 19.7%

FIRE 14,565,801 6.5%

Weighted Asset Mix $66,777,136 100.0%

Horizon We also compared expected investment returns to the study of multiemployer plan investment advisors prepared by the consulting firm Horizon Actuarial Services, LLC (Horizon), and the expectations of New York City own advisors, as reflected in spreadsheets provided by the OA.

Horizon prepares an annual study of capital market assumptions for multiemployer plans. While many of the intended audience for this study are substantially smaller than the Systems, because of the breadth of asset classes, and the number of investment advisors included (12 reflecting long-term return expectations), we feel that this investment study provides useful information for our analysis. We used the information from the 2018 version for this study.

The Horizon survey shows returns on a geometric basis, as well as an arithmetic basis. Because we used arithmetic returns for the information from some of the other advisors, and to conservatively represent the investment return expectations, we chose to treat the geometric returns as if they were arithmetic returns. We note that the difference in returns for the whole portfolio is likely to be more than 0.50%, between geometric and arithmetic returns.




Horizon

Comparison of Horizon Theoretical Investment Mix and NYCRS Asset Mix'

Hypothetical Multiemployer Plan Asset Class

Weight

Horizon Totals by

NYC Class NYC Asset

Class

NYCRS Asset Mix 6/30/2018 Target

US Equity - Large Cap 20.00% 42.50% Equities 50.9% 48.6%

US Equity - Small/Mid Cap 10.00%

Non-US Equity - Developed 7.50%

Non-US Equity - Emerging 5.00%

US Corporate Bonds - Core 7.50% 32.50% Bonds 35.4% 32.3%

US Corporate Bonds - Long Duration 2.50%

US Corporate Bonds - High Yield 5.00%

Non-US Debt - Developed 5.00%

Non-US Debt - Emerging 2.50%

US Treasuries (Cash Equivalents) 5.00%

TIPS (Inflation-Protected) 5.00%

Real Estate 10.00% 25.00% Alternatives 13.6% 19.0%

Hedge Funds 5.00%

Commodities 2.50%

Infrastructure 2.50%

Private Equity 5.0%

TOTAL PORTFOLIO 100.0% 99.9% 99.9%




Horizon As shown in the table below (Exhibit 10 of the Horizon report), reflecting the Horizon Theoretical Investment Mix, the average investment advisor is expecting that there is a 52% probability of reaching or exceeding a 7% return over the next 20 years. We note that the Horizon study also points out that this expectation of earning 7.0% or more has been trending down over the last five years. This trend toward lower assumed returns over the last few years is also reflected in the NASRA study discussed in the next section.

Adjusting for differences between the Horizon Theoretical Mix and the NYCRS mixes, yields the same expected return as the Horizon Theoretical Mix, but a slightly higher average return if the actual June 30, 2018 NYCRS asset mix is used. Thus, we conclude that the Horizon survey also fairly closely matches NYC’s assumption of a 7.0% investment return. Please note that the returns shown in the Horizon Survey reflect geometric returns, not arithmetic returns.

Plans’ Investment Advisors We reviewed the long-term, expected returns from the spreadsheets we received from the OA for the NYCERS, TRS, BERS, Police and Fire plans15. Our understanding is that this information was provided by the investment advisors for the Systems, reflecting long term, mostly arithmetic, returns. We concluded that the expected real investment return expectations, weighted by assets, are reasonably close to the current investment return assumption of 7.0%.

15 Limited information was provided regarding the method used to determine the expected returns. Expected returns were developed for three asset classes – Equity, Fixed Income and Alternatives. Expected returns were identified as long-term, with four specifically identifying the period as 30-year. Four of the five sets of returns were for Arithmetic, rather than Geometric returns, with a Geometric return only for NYCERS. Two Systems (NYCERS, POLICE) provided real returns, which we adjusted with 2.5% inflation, consistent with the Systems’ inflation assumption. The other three Systems reflected inflation assumptions between 2.25% and 2.75%. We were not provided either standard deviation by asset category or correlation coefficients to further combine the returns. Thus, our analysis reflects Arithmetic not Geometric returns. When necessary, we adjusted from Geometric to Arithmetic by adding 0.50%, based on analysis we prepared for another city, which had a similar asset mix (59% Equity, including international and private equity, 31% Debt, 8% Real Estate and 2% Commodities), and a difference of 0.69% between Geometric and Arithmetic returns.




Plans’ Investment Advisors

System

Nominal Expected

Return Asset

Weight

Asset Weighted

Return

NYCERS 7.1% 30.3% 2.2%

TRS 7.7% 40.5% 3.1%

BERS 8.7% 3.1% 0.3%

Police 8.0% 19.7% 1.6%

FIRE 7.6% 6.5% 0.5%

Total Nominal Return 7.6%

These nominal arithmetic returns are roughly equivalent to a geometric return of between 6.9% and 7.1%, depending on the asset mix. Since these are long term investment returns, from the investment managers responsible for the Systems’ investments, we believe that this is the most reliable source of expected return assumptions for the NYCRS Systems.

NASRA Finally, we also considered the National Association of State Retirement Systems’ (NASRA) annual Public Pension Plan Investment Return Assumptions (dated February 2019) reflecting 2018 investment return assumptions used by states (and some large cities). These returns reflect a continued pattern of decreasing investment return assumptions, with a current median rate of 7.25%. The two most frequent investment return assumptions shown in the study are 7.5% and 7%, with 72% of the participating plans using a rate of 7.0% to 7.5% (inclusive). While we would not suggest setting investment return assumptions based on this survey, in part since the trend line is strongly downward, we believe it is useful to know that the 7% assumption currently being used puts the Plans in the lowest third (i.e. most conservative third) of investment return assumptions used by states.




Practical Issues Typically, the most powerful effect on liabilities is the investment return assumption. Investment returns make up nearly two-thirds of public pension plan assets16, so accurately anticipating the investment experience is a critical assumption. Too high of an assumed return, and the required annual employer contributions (effectively paid by future tax payers) increase over time, potentially making the plan unaffordable. Too low, and current tax payers pay for benefits earned well in the future. Yet, given the size and maturity of the Plans there is a lot of risk17 and the amount of risk certainly is a factor in both setting the investment mix and the discount rate assumption.

As noted above, one issue is whether the investment return assumption should vary by Plan, based on each of the Plans investment mix. As we also note above, the investment mixes are not very different between the Plans (although the investment return expectations are.) Because of the minor variance among plans, and the difficulty in explaining the differences to readers of the actuarial valuations and the CAFRs, we agree that a single rate for all of the Plans is the best choice.

16 NASRA 2019 Public Pension Plan Investment Return Assumptions, page 1. 17 We define risk as the volatility of the contribution as a percentage of payroll, rather than simply the volatility of the investment return. We defined maturity as the portion of total liabilities due to inactive participants, and typically consider any plan with 50% or more of the liabilities a mature plan. Because the Plans have a significant portion of their liabilities from inactive participants (between 48% for BERS to 64% for Police), the volatility of the contribution is higher than other plans which are not as mature.




Recommended Investment Return Assumption Currently the investment return, or discount rate, assumption is 7.0%, which is effectively a 2.5% inflation assumption and a 4.5% “real” investment return (i.e., net of inflation.)

Based on the review of the investment advisors’ market-based investment return expectations, we believe that NYC should continue to assume that current assets and future contributions will earn 7.0% annually. We note that a lower investment return assumption would not be unreasonable, since much of the investment return information we relied upon is based on arithmetic calculations, and if the goal of the use of investment assumptions is to, over the long term, achieving the assumption 50% of the time, implying the use of a geometric average. We suggest that the OA should also consider revising the inflation assumption as part of any revision to the investment assumption, unless the OA concluded, based on the advice of the investment advisors, that the expected real returns had declined.

Other Recommendation While not suggesting any revision in the investment return assumption we do suggest some changes in the information available from the current investment advisors to the OA to assist them in reviewing the appropriateness of the investment assumption. We suggest that the five different investment advisors be requested to try to provide the OA with more comparable data on returns and asset classes. The advisors can continue to provide the trustees with expected return projections based on their preferred time horizons and asset class names. However, we believe it would benefit the OA (for setting the discount rate for both funding and accounting) if the Plans’ investment advisors provided the following in a consistent format:

1. Common asset class names and target allocation by class2. Expected rates of return by asset class using a consistent time horizon. That time

horizon could be 20-30 years (as defined by OA)3. Information on standard deviation by asset class and whether return information is

arithmetic or geometric. If geometric returns are not provided, correlation coefficientsshould also be provided

We understand that the OA, as we did in this report, needs to try to recharacterize information from the investment advisors, complicating the task of choosing the appropriate investment return assumption.


Results, including confidence intervals, for NYCERS


NYCERS Experience Analysis

New York City Employees’ Retirement System (NYCERS) is the largest of the New York City retirement plans (NYCRS), and the most complex due to the 11 contributing employers, with different provisions that result in the division of the members into five separate groups for purposes of the application of actuarial assumptions. NYCERS is a cost-sharing, multiple employer plan providing benefits to 185,000 employees. NYCERS includes all NYC employees who are not in one of the other four plans: TRS, BERS, POLICE and FIRE. We have divided the experience analysis into the four groups with different actuarial assumptions used in the OA’s annual valuation:

• General members• Corrections members• Sanitation members• Transit/TBTA.

Please note that we did not do any experience analysis for the Housing Police Transit Police (HP TP). HP TP employees were transferred to POLICE in 1994, and the remaining group of retirees and beneficiaries is relatively small. We suggest revising the mortality experience, to reflect not just the number of retirees who died, but to weight that experience by the participants’ benefit liabilities, versus the amount of the member’s benefits as a proxy. This lowers the ratio of actual mortality to expected mortality, and results in our suggesting changes to the mortality tables for each group.

The results for each group are shown in the sections below.

Issues Unique to the Groups An issue affecting all groups is the delay in adoption of union contracts affecting pay increases during the prior 10-year period, resulting in delayed pay increases and anomalous pay increase patterns. For example:

• Corrections officers contract was adopted January 6, 2017, retroactively effectiveto November 1, 2011

• Uniformed Sanitationmen’s contract was adopted March 3, 2017, retroactivelyeffective to September 21, 2011.

The toll road, bridge and tunnel business is undergoing a massive change as EZPass and similar transponders linked computer systems collect tolls instead of individuals working at toll booths. This has led to massive changes in employment for those working in the toll business. TBTA has been similarly affected, with retirement and withdrawal experience much higher than expected over the last decade. The number of TBTA employees has decreased significantly, so we decided to combine the experience with Transit.


NYCERS Experience Analysis

Issues Unique to the Groups Transit workers also had some unusual events in 2007 and 2013 that resulted in substantial drops in the overtime paid in those years. Hurricane Sandy was in early fiscal year 2013, there was a transit strike in December 2005 (fiscal year 2006) and a contract settlement in April 2014 (fiscal 2015.)

Corrections overtime was significantly affected by a series of changes in policies at Riker’s Island, leading to a nearly 50% overtime increase in 2014 and 2015 from overtime in 2010 to 2013.

Corrections, Transit and Sanitation members all have overtime included in their average pay calculations. However, not all members are eligible for overtime. Unfortunately, we did not have an easy method of telling those who were eligible for overtime from those who were not, particularly in the data provided by the prior auditor, GRS. Thus, in our initial report, we calculated the overtime experience over all employees in these groups, whether eligible or not for overtime. However, we were able to obtain identifying information regarding those employees eligible for overtime, which is reflected in this report, and is discussed in more detail in Section II, subsection d.7.

Mandated and Elected Retirement Chapter 96 of the laws of 1995 gave employees the option of selecting to join potentially more valuable retirement plans in return for higher employee contributions. For purposes of valuing plan liabilities, different retirement assumptions apply to the employees that elected the improved retirement benefits than those who stayed in the old Plans. The NYCERS data field “Improved Plan Code” was used to distinguish between employees who did not elect the new plans (Mandated) and those who elected the new plans (Elected). Employees hired after 1995 were not given a choice of plans and receive Mandated retirement benefits. The terms Mandated and Elected are used throughout our report to distinguish between these two groups of employees.


Results, including confidence intervals, for NYCERS - GENERAL


NYCERS - GENERAL Members

We are suggesting several changes to the NYCERS general employee’s assumptions. We are suggesting a reduction in the service retirees’ mortality assumption. We are suggesting reduced retirement assumptions for Mandated retirement for employees under age 63 and increased early retirement rates. We are suggesting a higher withdrawal assumption, and an increased overtime assumption. Finally, employee mortality and disability experience has been significantly lower than assumed, and accordingly we are suggesting lower rates for these assumptions. Finally, we are suggesting no change to the Elected retirement or the salary increase assumption.

1. Mortality – men and women – service and disability retirees

We compiled the results by lives and liabilities. Liability based mortality has not been

studied previously, so we only have 4 years of liability based experience. The liability

based results are appropriate for measuring the liability for benefits that vary by salary

and service, such as the retirement and disability benefits. The lives based results are

appropriate to measure liabilities that are for benefits which are the same for all

participants (e.g., OPEB benefits.) We suggest that the Office of the Actuary consider

the use of two different mortality assumptions depending upon the purpose of the

measurement. The SOA RP2014 report released two different tables, one by lives and

one by liabilities.

Ratio of actual to expected deaths

4-year experienceLives

4-yearexperience Liabilities

10-yearexperience

Lives

Service retirement – Men 101.30% 88.20% 100.81% Service retirement – Women 105.13% 96.28% 101.36% Service retirement – Combined 103.24% 91.54% 101.09%

Disability retirement – Men 112.10% 100.81% 101.28% Disability retirement – Women 105.19% 97.27% 108.43% Disability retirement – Combined 109.27% 99.58% 104.09%

The service retirees’ mortality by lives experience are within the confidence intervals for men and outside the confidence intervals for women with more deaths than expected. Accordingly, we are suggesting a 2 percent increase in the female mortality rates for lives.

The service retirees’ mortality by liability experience are outside the confidence intervals for men and women with less expected release of liabilities than expected. We would suggest that that the mortality experience be reduced. A reduction of 11 percent for male rates and 3 percent for female rates would result in an assumption with experience inside the confidence intervals.



1. Mortality – men and women – service and disability retirees (cont.)

The disabled retirees’ morality experience is within the confidence intervals for both lives and liabilities, except for male by lives in the most recent 4 years. The number of deaths is 603 versus the top end of the confidence interval of 583. Since the assumption is slightly conservative we would normally suggest no assumption change for disabled retirement mortality by liabilities, in total. However, we are suggesting a 4 percent increase in the male disabled mortality rates by lives and no change in the female disabled mortality rates to bring the assumption for men closer to the experience.

2. Mortality – men and women employees – ordinary18

Mortality experience for employees is substantially lower than expected for women and men. Moreover, there has been a steady decline in the number of employee deaths in this group.


4-year experience 10-year experience

Ordinary mortality – men 33.89% 63.70% Ordinary mortality – women 37.93% 65.95% Combined 35.68% 64.69%

These results are well outside the confidence intervals. We suggest a reduction of 40 percent of the male and female rates, which would put the 10-year experience within the confidence intervals. This suggestion would result in an employee mortality experience that is still outside the confidence intervals over the 4-year period, but much closer to the confidence intervals than the current assumptions.

3. Retirement – men and women – 1st year and after 1st year of Retirement Eligibility,Mandated and Elected

Previous experience studies separated retirement experience among the experience in the first-year members were eligible to retire, the year after the first year (second year) and retirement experience in all years after the first two. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussing the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to only include a first year eligible and an after first year eligible assumption. In developing the after first year assumption we focused on the after second year of retirement experience except for mandated retirements at age 63, as described below.

18 Throughout this report we refer to death and disability benefits as either accidental, meaning benefits for those injured or killed in the line-of-duty, or ordinary, meaning not accidental. We also apply this naming convention to the relevant assumption.



3. Retirement – men and women – 1st year and after 1st year of Retirement Eligibility,Mandated and Elected (cont.)

There is a significant difference between the retirement experience for those eligible to retire with unreduced retirement benefits and those currently eligible only for retirement benefits reduced for early payment (that is, for payment prior to the normal or unreduced retirement age.) The unreduced (that is, eligible for unreduced retirement) retirement experience is lower than assumed, while early retirement (that is, for those not eligible for unreduced retirement, but eligible to retire) experience is much higher than assumed. This is especially so for those with Mandated retirement. For those who chose Elected retirement there are more than expected retirements in the first year of retirement eligibility, but less retirements than assumed after the first year of retirement eligibility.

Elected Ratio of actual to expected retirements


First year of eligibility – Combined

114.15% 112.23%

Each succeeding year – Combined

86.34% 91.56%

Mandated Ratio of actual to expected retirements –



69.10% 68.73%


80.28% 87.33%

We do not suggest a change in the Elected retirement assumptions, since the rates are relatively close to the assumed rates. We also note that this group is shrinking over time.

We do suggest a reduction in the Mandated assumption. As we show below, the Mandated actual to expected ratios for the first year of retirement eligibility are much lower than anticipated at ages less than age 62, but close to expected at ages 62 or greater. There is similar bifurcated experience after the first year of retirement eligibility with the dividing age being 63.


4- Year Experience 10-Year Experience

First year of eligibility – Combined Less Than Age 62 33.63% 37.32% Age 62-69 92.20% 85.18% Each succeeding year – Combined Less Than Age 63 39.68% 54.07% Age 63-79 100.97% 103.61%




Accordingly, we suggest the following reductions for Mandated retirement.

• Year 1 – 60 percent of current rates for ages less than age 62 (i.e., using ratesthat are 40 percent of the current rates)

• each Succeeding Year – 50 percent for ages less than or equal to age 62.

We suggest no change to the over age 62 rates, as the actual experience to expected rates are all close to 100% at age 62 and later.

We have also extended the Mandated retirement rates from ages 70 to age 80 for mandatory retirement after the second year of eligibility.

The following tables summarizes the exposures for the second year and after second year of retirement eligibility for the four-year period ending 2017. Since most of the second year of eligibility experience is at ages 58 and 63, we primarily used the after second year of retirement eligibility assumptions and experience to develop the consolidated after first year of retirement assumption that we suggest above. We used the second year of retirement eligibly experience to develop the suggested assumption for age 58 and age 63 for the consolidated table.

Mandated Retirement

Age Year 2 of retirement

eligibility After year 2 of retirement

eligibility

58 5,211 17

63 4,999 3,001

Other ages 2,125 48,779

Total 12,335 51,797

We used the mandated assumption from the after second year or retirement eligibility for the combined assumption for all years. Using the mandated age 58 second year of retirement eligibility assumption in place of the after second year of retirement eligibility retirement rate increases the proposed rate from 3.50 to 5.00 percent. Use of the after second year of retirement eligibility for all ages resulted in less than 20 more expected retirements per year, along with a smoother curve of retirement rates and would not materially impact the results.




The Elected group is much smaller than the Mandated. The exposures are summarizedbelow

Elected Retirement



eligibility

56 515 71

63 146 290

Other ages 559 4,400

Total 1,220 4,761

The current age 56 assumption was the same for the second year and after second year of retirement eligibility.

Retirement prior to eligibility for unreduced retirement benefits (Early Retirees)

Early retirement experience has been much higher than assumed, as shown in the table below.

Ratio of actual to expected retirements – Early Retirement


Combined 183.35% 180.23%

These results are well outside the confidence interval. We suggest an increase in the early retirement assumption of 75 percent. With the increased early retirement rates the experience would still be outside the confidence intervals but much closer to the confidence intervals than under the current assumption.

4. Withdrawal – men and women

Withdrawal experience over the last 2 years (2016 and 2017) is markedly different(much lower) than prior years, because, we believe, of the unmatured leave-of-absencedata19. As we did with other groups, we limited the experience we analyzed to the 8years ended in 2015. Based on this analysis, we conclude that the experience over thelast 4 (ending in 2015) and 8 years has been higher than assumed

Ratio of actual to expected employee terminations - Mature

4-year experienceEnding in 2015

8-year experienceEnding in 2015

Men 156.51% 142.97% Women 157.24% 147.15% Combined 156.93% 145.37%

19 As we mentioned earlier, many of the employees who take a leave of absence do not return. Not including these employees in the analysis would result in artificially low withdrawal rates for the two most recent years. Thus, we excluded those years from our analysis.



4. Withdrawal – men and women (cont.)

Accordingly, we are suggesting an increase in the turnover assumption of 40 percent. This suggestion would result in turnover experience that is still outside the confidence intervals, but in light of the increase in the rates in the 4-year period as compared to the 8-year period we are suggesting a lower increase in the withdrawal rates.

5. Disability – men and women – Ordinary and Accidental

The Ordinary disability experience is significantly lower than assumed, over both 4 and 10-year periods. Accidental disability experience is even lower than expected (comparedto Ordinary disability.)

Ratio of actual to expected disabilities

4-year experience10-year

experience

Ordinary – Men 51.56% 67.73% Ordinary – Women 58.43% 71.24% Ordinary – Combined 55.19% 69.52% Accidental – Men 40.63% 56.63% Accidental – Women 40.71% 60.17% Accidental – Combined 40.66% 57.99%

There are over 2,700 ordinary disabilities over the 10-year period and the 4-year experience is outside the confidence intervals. We note that these rates are all (except for 4-year accidental for women, which increased slightly from 40.48% to 40.71%) lower than the prior study.

Thus, we are suggesting a 30 percent reduction in the ordinary disability assumption, consistent with 10-year experience and slightly above 4-year experience. While the incidence of accidental disability is much smaller than ordinary disability (220 disabled out of 1,313,995 exposures over the last 10 years) and is not fully credible, we would suggest a similar 30 percent reduction in the accidental assumption, as the 4-year experience is less than half the expected, while the 10-year experience is only about 60% of expected.

6. Total and merit salary increase – men and women combined

Pay increases over the last 4 and 10 years have been higher than anticipated. However, pay increases in the prior study, over the last 4 years were significantly below expected and over the prior 10 years were very close to the anticipated level. Please note that Total pay is the sum of Merit increases and inflation. Merit pay has been reduced for actual inflation, of 1.5%, over the 4- and 10-year periods.

Ratio of actual to expected salary


Total 123.08% 105.60% Merit 138.87% 108.24%



6. Total and merit salary increase – men and women combined (cont.)

The year by year results show that the experience seems highly cyclical. This suggeststhat the 10-year results are a better measure to assess the necessity of an assumptionchange. The 10-year results are less than 10 percent greater than expected for bothmerit and total salary experience, and were similarly close to assumptions in the priorstudy, so we are not suggesting a change to this assumption.

Year Actual Increase Expected Increase

2008 5.50% 3.49%

2009 6.47% 3.50%

2010 2.93% 3.51%

2011 2.68% 3.47%

2012 0.59% 3.44%

2013 1.93% 3.55%

2014 4.28% 3.49%

2015 3.10% 3.43%

2016 4.80% 3.41%

2017 4.71% 3.41%

7. Overtime Experience – men and women combined

The table below compares the OT experience to the assumption. The experience ishigher than expected for all years. However, the experience in the year prior toretirement will drive the liabilities more than overtime in other years, and the experienceis closest to the assumption in the year before retirement.

Overtime as a Percent of Base Pay - Actual to Expected 4 Year

2013 – 2016 9 Year

2008 - 2016

All Overtime 201.23% 181.81% Year Before Retirement 154.21% 129.27% Year Before Disability Retirement 148.06% 129.54%

The overtime experience is greater than anticipated over both the 4-year and 9-year periods and is significantly higher than in the prior study. In suggesting an assumption, we focused on the 10-year experience, because of the variability in the year-to-year experience. Accordingly, we are suggesting an increase in overtime of 75 percent in and in the dual retirement over-time assumptions of 25 percent.

Confidence Interval is within Acceptable Range

95% Confidence Interval of Proposed Assumption

95% Current Confidence Interval: 5,016 to 5,286


Actual Number of Deaths: 5,206


Expected Number of Deaths: 5,151

Proposed Assumptions are 100% of the Current Rates



95% Confidence Interval of Current Assumption

4-Year Period Ending 2017

Mortality By Lives - Men

New York City Employees' Retirement System - General

Service Retirees' Mortality Assumption and Experience

0

50

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55 60 65 70 75 80 85 90 95

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Actual 100% Proposed





Confidence Interval is not within Acceptable Range









Mortality By Lives - Women



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95% Current Confidence Interval: 132,585,205 to 135,789,494


Actual Amount of Pension Reduction: 118,532,240

Expected Amount of Pension Reduction: 119,921,644






Liability Weighted Mortality - Men



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Age















Liability Weighted Mortality - Women



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Age





Retirees' Mortality Assumptions and Experience

85%

90%

95%

100%

105%

110%

115%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Service Retirees

Actual/Expected 100%


95% Current Confidence Interval: 515 to 605


Expected Number of Deaths: 560

Actual Number of Deaths: 603








Disability Retirees' Mortality Assumption and Experience




0.00%

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55 60 65 70 75 80 85 90 95 100+

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Expected NUmber of Deaths: 371





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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Disability Retirees




Expected Mortality: 320.7

Actual Mortality: 179.0

95% Current Confidence Interval: 285.7 to 355.8







Men 4-Year Period Ending 2017

Rate of Ordinary Mortality



Active Ordinary Mortality Assumption and Experience

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5

10

15

20

25

30

35 40 45 50 55 60 65

Act

ual

Mo

rtal

itie

s

Age













Women 4-Year Period Ending 2017





0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

35 40 45 50 55 60 65

Age


0

5

10

15

20

25

30

35

35 40 45 50 55 60 65

Act

ual

Mo

rtal

itie

s

Age


0

5

10

15

20

25

35 40 45 50 55 60 65

Act

ual

Mo

rtal

itie

s

Age






0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year






Expected Retirements: 912.0

Actual Retirements: 1,044.0








Men and Women - Elected Retirement Benefit


Retirement Experience of those in First Year of Eligibility

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Age


0

50

100

150

200

250

300

350

50 51 52 53 54 55 56 57 58 59 60 61

Act

ual

Ret

irem

ents

Age


0

50

100

150

200

250

300

350

50 51 52 53 54 55 56 57 58 59 60 61

Act

ual

Ret

irem

ents

Age



95% Current Confidence Interval: 995.7 to 1,110.6



Expected Retirements: 1,053.2

Actual Retirements: 996.0








Men and Women - Elected Retirement Benefit


Retirement Experience of those After First Year of Eligibility

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Age


0

20

40

60

80

100

120

140

160

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Act

ual

Ret

irem

ents

AgeActual Actual Not in Interval Upper Bound Expected Lower Bound

0

20

40

60

80

100

120

140

160

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64

Act

ual

Ret

irem

ents

Age




95% Current Confidence Interval: 2,734.8 to 2,915.3






Proposed assumption for below age 62 is 40% of current






Men and Women - Mandated Retirement Benefit


0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

Age


0

500

1000

1500

2000

2500

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

Act

ual

Ret

irem

ents

Age


0

500

1000

1500

2000

2500

54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69

Act

ual

Ret

irem

ents

Age





Retirement Experience of those After First Year of Eligibility





Proposed assumption for below age 63 is 50% of current






Men and Women - Mandated Retirement Benefit


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

Age


0

200

400

600

800

1000

1200

1400

57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

Act

ual

Ret

irem

ents

Age

Actual Actual Not in Interval Upper Bound Expected Lower Bound

0

200

400

600

800

1000

1200

1400

57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

Act

ual

Ret

irem

ents

Age




Normal Retirement Experience


0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Normal Retirement Experience










Men and Women






Early Retirement Experience of Active Members


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

55 60

Age


0

200

400

600

800

1000

1200

55 60

Act

ual

Dis

abili

ties

Age


0

200

400

600

800

1000

1200

55 56 57 58 59 60

Act

ual

Dis

abili

ties

Age




Early Retirement Experience of Active Members


0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Early Retirement Experience



Actual Withdrawals: 7,158.0


Withdrawal Experience of Active Members


Expected Withdrawals: 4,568.2


Men









0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Men


0

200

400

600

800

1000

1200

1400

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

200

400

600

800

1000

1200

1400

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service










Women








0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Women


0

200

400

600

800

1000

1200

1400

1600

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

200

400

600

800

1000

1200

1400

1600

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service





8-Year Period Ending 2015 By Year

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015

Year

Actual/Expected Rates for Active, Men and Women




Expected Disabilities: 537.6

Actual Disabilities: 396.0







Ordinary Disability Experience of Active Members



Rate of Ordinary Disability



0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

35 40 45 50 55 60 65

Age


0

10

20

30

40

50

60

35 40 45 50 55 60 65 70

Act

ual

Dis

abili

ties

Age


0

5

10

15

20

25

30

35

40

45

35 40 45 50 55 60 65 70

Act

ual

Dis

abili

ties

Age


















0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

35 40 45 50 55 60 65

Age


0

10

20

30

40

50

60

70

80

35 40 45 50 55 60 65 70

Act

ual

Dis

abili

ties

Age


0

10

20

30

40

50

60

35 40 45 50 55 60 65 70

Act

ual

Dis

abili

ties

Age






0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Ordinary Disabilities














Accidental Disability Experience of Active Members

Men and Women 4-Year Period Ending 2017

Rate of Accidental Disability


0.00%

0.01%

0.01%

0.02%

0.02%

0.03%

0.03%

0.04%

0.04%

35 40 45 50 55 60 65

Age


0

2

4

6

8

10

12

35 40 45 50 55 60 65

Act

ual

Dis

abili

ties

Age


0

1

2

3

4

5

6

7

8

9

35 40 45 50 55 60 65

Act

ual

Dis

abili

ties

Age






0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Accidental Disabilities



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0 0 0 0


Proposed Assumptions are 100% of the Salary Increase


Salary Assumptions and Experience

For the Four-Year Period ending in 2017




0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

0 5 10 15 20 25 30+

Service

Annual Salary Increase, Men and Women


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0 5 10 15 20 25 30+

Service

Annual Merit Increase, Men and Women


55 - with tablesNew York Retirement Systems 101

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Total Salary Experience of Active Members


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%


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0 0 0 0


Overtime Assumptions and Experience


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

18 23 28 33 38 43

Service

Annual Overtime as % of Base Salary before Retirement, Men

and Women


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

3 8 13 18 23 28 33 38 43

Service

Annual Overtime as % of Base Salary before Disability, Men

and Women


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 5 10 15 20 25 30 35 40

Service

Annual Overtime as % of Base Salary, Men and Women


- with tablesNew York Retirement Systems 103

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Year by Year Overtime Pay Experience


0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

Annual Overtime Pay to Expected Overtime Pay,

Men and Women

Actual 100%



Results, including confidence intervals, for NYCERS – TRANSIT/TBTA


NYCERS – TRANSIT/TBTA Members

Due to the relatively small, and shrinking, number of TBTA members and the similarity of the demographic experience to that of Transit members, after discussions with the OA, we combined the two agencies for purposes of our experience study. We will refer to the combined agency as “Transit” or “Transit/TBTA”.

Transit members experience has been reasonably close to assumed. Retiree mortality experience fairly closely matches assumed, while withdrawal experience has, over the last four years, become lower than assumed. Retirement (higher for Elected, and much lower for Mandated) and ordinary disability (much higher for women, although there are few) experience has been somewhat lower than assumed. Employee mortality and accidental disability have been significantly lower than expected, although these assumptions have a very minor effect on liabilities. While salary improvement has been higher than expected, as well as regular overtime, salary improvement has been trending downward. The most important of the overtime assumptions, for employees in the year prior to retirement, has been lower than assumed.

Please note that most of our analysis combines the experience of men and women, because only about 10% of retirees and 17% of employees are women, so the experience for women alone is generally not very credible.


We compiled the results by lives and liabilities. Liabilities based mortality has not been studied previously, so we only have 4 years of liabilities-based experience. The liabilities-based results are appropriate for measuring the liability for benefits that vary by salary and service, such as the retirement and disability benefits. The lives-based results are appropriate to measure liabilities that are for benefits which are the same for all participants (e.g., OPEB Benefits.) We suggest that the Office of the Actuary consider the use of two different mortality assumptions depending upon the purpose of the measurement. The SOA RP2014 report released two different tables, one by lives and one by liabilities.


4-year experienceLives

4-yearexperience Liabilities

10-yearexperience

Lives

Service retirement – Men 101.65% 93.06% 101.95% Service retirement – Women 124.54% 112.75% 110.30% Service retirement – Combined 103.40% 94.24% 102.56% Disability retirement – Men 111.73% 104.61% 102.68% Disability retirement – Women 91.99% 81.02% 87.77% Disability retirement – Combined 108.15% 100.46% 100.26%

While the service retirees’ mortality rates are higher than expected for lives they are lower than anticipated by liabilities. The disability experience by liabilities is close to anticipated.



1. Mortality – men and women – service and disability retirees (cont.)

We suggest changing the retiree mortality rates, by lives or liabilities as shown in thefollowing table:

Lives Liabilites Lives Liabiilites

Men 100% 95% 102% 103%

Women 113% 112% 100% 90%

Service Retirement Disability Retirement

2. Mortality – active men and women – ordinary

Mortality experience for employees is substantially lower than expected for women andmen, for both ordinary mortality and accidental mortality. Moreover, there has been asteady decline (until 2017) in the number of employee deaths in this group, from around100 annually to 10 to 20.

Ordinary Employee Mortality Experience Ratio of actual to expected deaths


Combined 34.83% 63.20%

Accidental Employee Mortality Experience Ratio of actual to expected deaths


Combined 0.00% 5.41%

The confidence interval graph shows that the mortality rates at nearly every age are outside the 95% confidence interval of the current assumption.

We did not include accidental mortality graphs since there were so few accidental deaths.

We note that while the ordinary mortality experience includes 505 deaths over the last 10 years (509 if including employees over age 74), the accidental morality experience includes only 2.

We suggest a 40 percent reduction of both the ordinary and accidental mortality assumption to be better aligned with recent experience. While we could suggest a larger reduction in the accidental mortality experience, the incidence is so low that normal variation could easily exceed the revised assumption.



3. Retirement – men and women – 1st year, after 1st year, Mandated and Elected

Previous experience studies separated retirement experience among the experience in the first year members were eligible to retire, the year after the first year (second year) and retirement experience in all years after the first two. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussion the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to only include a first year eligible and an after first year eligible assumption. In developing the after first year assumption we focused on the after second year of retirement experience except for mandated retirements at age 63, as described below.

There is a significant difference between the retirement experience for those eligible to retire with unreduced retirement benefits and those currently eligible only for retirement benefits reduced for early payment. The Mandated unreduced (that is, eligible for unreduced retirement) retirement experience is much lower than assumed, while early retirement (that is, for those not eligible for unreduced retirement, but eligible to retire) experience is much higher than assumed20. For those with Elected retirement there are

more retirements than expected.

The experience for Elected and Mandated is summarized in the following tables.

Elected Ratio of actual to expected retirements 4-year experience 10-year experience

First year of eligibility – Combine 123.71% 120.95% Each succeeding year – Combined 103.18% 105.36%

We do not suggest an increase in the Elected retirement assumption, because both the numbers of eligible Elected are lower than the number of eligible Mandated members and the Elected members are a frozen group that continues to decline rapidly. Thus, the effect of an assumption revision would be relatively minor.

Mandated Ratio of actual to expected retirements – 4-year experience 10-year experience

First year of eligibility – Combined 48.59% 48.85% Each succeeding year – Combined 48.85% 57.54%

20 However, as discussed below, because of the very small number of employees eligible for the early retirement benefit we do not suggest making any changes to the current assumption.



3. Retirement – men and women – 1st year, after 1st year, Mandated and Elected(cont.)

We do suggest a reduction in the Mandated retirement assumption. As we show below, the Mandated actual to expected ratios are fairly close to anticipated at younger ages but much lower than anticipated at older ages. The following table shows the experience for under age 62 and age 62 to age 69 for the first year of retirement eligibility, and for under age 64 and age 64 to age 79 after the first year of retirement eligibility.


4- Year Experience 10-Year Experience

First year of eligibility – Combined Less Than Age 62 119.36% 124.83% Age 62-69 29.02% 28.78% After first year of Eligibility Less Than Age 64 92.62% 100.66% Age 64-79 51.78% 53.81%

Accordingly, we are proposing the following adjustments to the rates.

Mandated Suggested Assumption Change Adjustment

First year of eligibility Less Than Age 62 Increase 10% Age 62-69 Decrease 50% After First Year of Eligibility Less Than Age 62 No Change Age 63 Decrease 50% from 30% to 15% Age 64-79 Decrease 40%

The following table summarizes the exposures for the second year and after second year of retirement eligibility. Since most of the second year of eligibility experience is limited to age 63 the consolidated after first year of retirement assumption table is primarily based on the after second year of retirement eligibility assumption.

Mandated Retirement



eligibility

63 1,611 216 Other ages 865 9,012

Total 2,476 9,228

We used the age 63 Mandated assumption from the year 2 of retirement eligibility for the combined assumption, and after year 2 of retirement eligibility for the other ages.



3. Retirement – men and women – 1st year, after 1st year, Mandated and Elected(cont.)

Using the mandated age 63 second year of retirement eligibility assumption in place ofthe after second year of retirement eligibility retirement rate decreases the proposed ratefrom 30 to 15 percent. Alternately, use of the after second year of retirement eligibilityfor all ages would result in no more than 61 expected retirements per year, along with asmoother curve of retirement rates and would not materially impact the results.

The Elected group is much smaller than the Mandated. The exposures are summarizedbelow.

Elected Retirement



eligibility

56 1,151 7 Other ages 782 5,570

Total 1,933 5,577

The current age 56 assumption was the same for the second year and after second year of retirement eligibility.

As noted above, we also suggest (and have reflected in this analysis) extending the Mandated retirement rates from ages 70 to age 80 for retirement after the first year of eligibility. Extending the assumption to age 80 will reduce the number of employees assumed, in the valuation, to retire immediately, and both increase the precision in the liability calculations used to determine annual contributions (since employees are retiring later than in previous generations) and smooth the benefit payment projections by reducing the bump in the first year due to those employees over the maximum assumed retirement age, who are assumed to retire immediately.

Retirement prior to eligibility for unreduced retirement benefits (Early Retirees)

Most of the Transit employees are not eligible for an early retirement benefit, based on the plan provisions. The data shows only 1,151 exposures over the 10-year period. While the experience is much higher than expected (331.41% over 4 years and 337.62% over 10 years), the effect of a change would be very minor given how few members are eligible for this benefit. Annual exposures are typically around 100 to 140 members eligible for early retirement. Thus, since the assumption is not material we are not suggesting a change in this assumption.


Withdrawal experience over the last 2 years (2016 and 2017) is markedly different(much lower) than prior years, because, we believe, of the unmatured leave-of-absencedata. As we did with other groups, we limited the experience we analyzed to the 8 yearsended in 2015. Based on this analysis, we conclude that the experience over the last 4(ending in 2015) and 8 years has been higher than assumed



4. Withdrawal – men and women (cont.)

Ratio of actual to expected employee terminations

4-year experience, Endingin 2015

8-year experience, Endingin 2015


We suggest a 10 percent increase in the withdrawal assumption to better align with the recent experience. While this adjustment does not bring the assumption within the 95 percent confidence interval, the change does bring the experience to nearly the top of the 95 percent confidence interval, over the four-year period. Since the 8-year experience is significantly lower than the four-year experience, we believe that this adjustment is sufficient.


The Ordinary disability experience is lower than assumed, over both 4- and 10-year periods, although only slightly lower over the last 10 years. However, Ordinary disability experience is much higher than assumed for women. Accidental disability experience is much lower than expected over both 4- and 10-year periods.



Ordinary – Combined 79.30% 95.89% Accidental – Combined 17.04% 13.51%

The incidence of ordinary disability is small (1,152 disabled of 238,355 eligible, over the last 10 years), and while the experience has been lower than expected over the last 4 years, it is similar to the ordinary disability assumption over the last 10 years. Since the incidence of ordinary disability in each year is so low, we believe that using the experience over the longer period is more representative of the likely long-term experience. Thus, we do not suggest any revisions to the ordinary disability assumption. The incidence of accidental disability is much smaller than ordinary disability (10 disabled of 369,994 eligible, over the last 10 years.) Thus, very minor differences in the number of members actually disabled significantly changes the ratio of actual to assumed. Also, since the expected incidence is so low, the effect on liabilities is miniscule. Thus, we see no reason to revise the accidental disability assumption.


Merit pay increases over the last 4 years have been slightly lower than over the last 10 years. However, both 4- and 10-year increases are significantly higher than assumed.



Total 135.57% 139.76% Merit 165.82% 178.35%




Merit pay increases are 1.14% higher than anticipated (2.58% vs 1.44% over the last 10years and 1.07% higher over the last 4 years (2.70% versus 1.63%). The actual salaryincrease experience is closer to the anticipated salary increase early in members’careers and higher than anticipated later in their careers. Accordingly, we aresuggesting different adjustments for different service levels.

Merit Pay Improvement (10 Year Experience)21

Service Range Actual Expected Suggested

Adjustment Factor

Years 0-2 10.56% 10.07% 1.00

Years 3-4 4.95% 3.07% 1.50

Years 5 2.58% 1.11% 2.00

Years 6-22 1.81% 0.51% 3.00

Years 23+ 1.14% 0.50% 2.00

Total 2.58% 1.44% 1.58

The suggested total merit increase would be 2.28% which is .84% higher than the current assumption, still significantly below the experience in the last 10-years.


The table below compares the OT experience to the assumption. The regular OTexperience is higher than expected for all years, with the four-year experience higherthan the 9-year experience. However, the more important OT is the OT in the year priorto retirement or disability, and that experience is close to the assumptions. Theexperience in the year prior to retirement will have a much larger effect on liabilities thanovertime in other years. Accordingly, the assumption may be slightly conservative.

Overtime as a Percent of Base Pay - Actual to Expected

4 Year Ending 2016 9 Year Ending 2016

Overtime 154.57% 138.97%

Year Before Retirement 105.50% 93.24%

Year Before Disability Retirement 96.25% 94.41%

Thus, we are not suggesting a revision in the OT assumptions.

21 Please note that these averages are calculated using the sum of the actual salary for the relevant years divided by the expected salary for the period, netting out the 1.5% average inflation, consistent with the calculations done for each year.

New York City Employees' Retirement System - Transit / TBTAService Retirees' Mortality Assumption and Experience


4-Year Period Ending 2017Mortality By Lives - Men











0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

55 60 65 70 75 80 85 90 95 100+

Age



0

20

40

60

80

100

120

140

160

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

20

40

60

80

100

120

140

160

55 60 65 70 75 80 85 90 95

Actual Deaths

Age





4-Year Period Ending 2017Mortality By Lives - Women











0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

55 60 65 70 75 80 85 90 95 100+

Age



0

5

10

15

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

2

4

6

8

10

12

14

16

18

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age





4-Year Period Ending 2017Liability Weighted Mortality - Men











0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

55 60 65 70 75 80 85 90 95

Pension Amount of Deceased

Retirees

Age


0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

55 60 65 70 75 80 85 90 95

Pension Amount of Deceased Retirees

Age





4-Year Period Ending 2017Liability Weighted Mortality - Women











0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

100000

200000

300000

400000

500000

55 60 65 70 75 80 85 90 95Pension Amount of Deceased

Retirees

Age


0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

55 60 65 70 75 80 85 90 95


Age





80%

85%

90%

95%

100%

105%

110%

115%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




New York City Employees' Retirement System - Transit / TBTADisability Retirees' Mortality Assumption and Experience





95% Confidence Interval of Proposed AssumptionProposed Assumptions are 102% of the Current Rates







0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

5

10

15

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

2

4

6

8

10

12

14

16

18

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age















0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

1

2

3

4

5

6

7

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

7

55 60 65 70 75 80 85 90 95

Actual Deaths

Age




4-Year Period Ending 2017Liability Weighted Mortality - Men











0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

100000

200000

300000

400000

500000

55 60 65 70 75 80 85 90 95

Pension Amount of Deceased

Retirees

Age


0

50000

100000

150000

200000

250000

300000

350000

400000

450000

55 60 65 70 75 80 85 90 95


Age




4-Year Period Ending 2017Liability Weighted Mortality - Women


Actual Amount of Pension Reduction: 985,019





95% Current Confidence Interval: 947,943 to 1,166,080




0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

20000

40000

60000

80000

100000

120000

55 60 65 70 75 80 85 90 95Pension Amount of Deceased

Retirees

Age


0

20000

40000

60000

80000

100000

120000

55 60 65 70 75 80 85 90 95


Age





0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Men 4-Year Period Ending 2017Rate of Ordinary Mortality

New York City Employees' Retirement System - Transit / TBTAActive Ordinary Mortality Assumption and Experience











0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

35 40 45 50 55 60 65

Age


0

5

10

15

20

25

35 40 45 50 55 60 65

Actual Disabilities

Age


0

2

4

6

8

10

12

14

16

35 40 45 50 55 60 65

Actual Disabilities

Age



Women 4-Year Period Ending 2017Rate of Ordinary Mortality












0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

35 40 45 50 55 60 65

Age


0

1

2

3

4

5

35 40 45 50 55 60 65

Actual Disabilities

Age


0

0.5

1

1.5

2

2.5

3

3.5

35 40 45 50 55 60 65

Actual Disabilities

Age





0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Ordinary Mortality



New York City Employees' Retirement System - Transit / TBTAMen and Women - Elected Retirement Benefit

4-Year Period Ending 2017Retirement Experience of those in First Year of Eligibility











0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

55 56 57 58 59 60 61 62

Age


0

100

200

300

400

500

55 56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age


0

50

100

150

200

250

300

350

400

450

500

55 56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age



New York City Employees' Retirement System - Transit / TBTAMen and Women - Elected Retirement Benefit

4-Year Period Ending 2017Retirement Experience of those after First Year of Eligibility











0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

56 57 58 59 60 61 62 63 64 65

Age


0

50

100

150

200

250

300

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements


0

50

100

150

200

250

300

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age



New York City Employees' Retirement System - Transit / TBTAMen and Women - Mandated Retirement Benefit

4-Year Period Ending 2017Retirement Experience of those in First Year of Eligibility




95% Confidence Interval of Proposed AssumptionProposed assumption for below age 62 is 110% of current otherwise 50%







0

200

400

600

800

1000

1200

55 56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age


0

100

200

300

400

500

600

55 56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

55 56 57 58 59 60 61 62 63 64 65

Age



New York City Employees' Retirement System - Transit / TBTAMen and Women - Mandated Retirement Benefit





95% Confidence Interval of Proposed AssumptionProposed assumption is 15% at age 63 and 60% of current assumption after age 63







0

100

200

300

400

500

600

700

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements


0

50

100

150

200

250

300

350

400

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

56 57 58 59 60 61 62 63 64 65 66 67 68 69

Age



New York City Employees' Retirement System - Transit / TBTAActual/Expected Rates for Normal Retirement Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year







Rate of Retirement






95% Confidence Interval of Proposed AssumptionProposed Rates are 100% of the Current Rates.


New York City Employees' Retirement System - Transit / TBTAEarly Retirement Experience of Active Members


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

55 60

Age

Men and Women


0

2

4

6

8

10

12

14

55 60

Actual Disabilities

Age


0

2

4

6

8

10

12

14

55 60

Actual Disabilities

Age



New York City Employees' Retirement System - Transit / TBTAEarly Retirement Experience of Active Members


0%

100%

200%

300%

400%

500%

600%

700%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




New York City Employees' Retirement System - Transit / TBTAWithdrawal Experience of Active Members


4-Year Period Ending 2015Men










0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Men


0

50

100

150

200

250

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Actual W

ithdrawals

ServiceActual Actual Not In Interval Upper Bound Expected Lower Bound

0

50

100

150

200

250

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Actual W

ithdrawals

Service




New York City Employees' Retirement System - Transit / TBTAWithdrawal Experience of Active Members


4-Year Period Ending 2015Women

Expected Withdrawals: 213.9

Actual Withdrawals: 431.0







0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Women


0

5

10

15

20

25

30

35

40

45

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Actual W

ithdrawals

Service


0

5

10

15

20

25

30

35

40

45

50

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Actual W

ithdrawals

Service



New York City Employees' Retirement System - Transit / TBTA Withdrawal Experience of Active Members


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015

Year




New York City Employees' Retirement System - Transit / TBTAOrdinary Disability Experience of Active Members



Men 4-Year Period Ending 2017Rate of Ordinary Disability









0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

35 40 45 50 55 60 65

Age


0

5

10

15

20

25

30

35 40 45 50 55 60 65 70

Actual Disabilities

Age


0

5

10

15

20

25

30

35

40

35 40 45 50 55 60 65 70

Actual Disabilities

Age



New York City Employees' Retirement System - Transit / TBTAOrdinary Disability Experience of Active Members




Women 4-Year Period Ending 2017Rate of Ordinary Disability








0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

35 40 45 50 55 60 65

Age


0

2

4

6

8

10

35 40 45 50 55 60 65 70

Actual Disabilities

Age


0

1

2

3

4

5

6

7

8

9

10

35 40 45 50 55 60 65 70

Actual Disabilities

Age



New York City Employees' Retirement System - Transit / TBTAActual/Expected Rates for Ordinary Disabilities


0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




New York City Employees' Retirement System - Transit / TBTAAccidental Disability Experience of Active Members

Men and Women 4-Year Period Ending 2017Rate of Accidental Disability











0.00%

0.01%

0.01%

0.02%

0.02%

0.03%

0.03%

0.04%

0.04%

0.05%

35 40 45 50 55 60 65

Age


0

0.5

1

1.5

2

2.5

3

3.5

4

35 40 45 50 55 60 65

Actual Disabilities

Age


0

0.5

1

1.5

2

2.5

3

3.5

4

35 40 45 50 55 60 65

Actual Disabilities

Age



New York City Employees' Retirement System - Transit / TBTAActual/Expected Rates for Accidental Disabilities


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Merit Increase is an average 158% of current

Merit Increase is an average 158% of current

New York City Employees' Retirement System - Transit / TBTASalary Assumptions and Experience


0Salary Assumptions and Experience


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

0 5 10 15 20 25 30+

Service



0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

0 5 10 15 20 25 30+

Service




New York City Employees' Retirement System - Transit / TBTATotal Salary Experience of Active Members


0%

50%

100%

150%

200%

250%

300%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

Actual 100%


New York City Employees' Retirement System - Transit / TBTAOvertime Assumptions and Experience


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

18 23 28 33 38 43

Service

Annual Overtime as % of Base Salary before Retirement, Men and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

3 8 13 18 23 28 33 38 43

Service

Annual Overtime as % of Base Salary before Disability, Men and Women


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

0 5 10 15 20 25 30 35 40

Service




New York City Employees' Retirement System - Transit / TBTAOvertime Pay Experience for All Employees


0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

Annual Overtime Pay to Expected Overtime Pay,Men and Women

Actual 100%



Results, including confidence intervals, for NYCERS – SANITATION


NYCERS - SANITATION Members

Sanitation workers are nearly all men (27,978 of 28,729 employee exposures over the last 4 years), including retirees (32,432 of 32,629 service retiree exposures over the last 4 years), so we have not separated experience by gender. We did study the mortality experience for just men because there are different mortality assumptions for males and females. Experience with the most critical assumptions, retiree mortality, employee withdrawal, unreduced retirement, salary improvement and retirement overtime, as well as the less significant accidental disability, has generally been consistent with assumptions. The only significant differences have been with salary improvement and Mandated and early retirement. There is significantly more difference between the assumptions and experience for the minor assumptions (employee mortality, ordinary disability, regular overtime and disability overtime), although the overall cost impact for changes to these assumptions would be relatively minor.


We compiled the results by lives and liabilities. Liabilities based mortality has not been studied previously, so we only have 4 years of liabilities based experience. The liabilities based results are appropriate for measuring the liability for benefits that vary by salary and service, such as the retirement and disability benefits. The lives based results are appropriate to measure liabilities that are for benefits which are the same for all participants (e.g., a OPEB Benefits.) We suggest that the Office of the Actuary consider the use of two different mortality assumptions depending upon the purpose of the measurement. The SOA RP2014 report released two different tables, one by lives and one by liabilities.



Lives Liabilities

Service Combined 101.08% 91.50% 102.49% Disabled Combined 101.99% 93.69% 97.35%

The service retirement by lives the mortality experience are within the confidence intervals for both men and women and outside the confidence intervals for both men and women with less deaths than expected. We suggest a reduction of 6 percent from service retirement mortality rates, when weighted by benefits, which would result in an assumption with experience inside the confidence intervals.

The disability mortality experience is less credible with 292 deaths in the 4-year period and the experience is within the 95 percent confidence intervals. Accordingly, we are not suggesting a change in the disability retirement assumption.





2. Mortality – active men and women – ordinary (cont.)



Ordinary Combined 28.33% 67.42% Accidental Combined 0.00% 27.52%

The number of expected deaths (65 ordinary and 2 accidental deaths over 10 years) are too small to study with confidence intervals and the experience has little credibility, particularly for accidental deaths.

Please note that we have not included graphs of the accidental mortality experience because there were no accidental deaths over the last four years of experience.

Because of the relatively low incidence of both ordinary and accidental mortality among active NYCERS - Sanitation, and the relatively minor effect on plan liabilities, we do not suggest any change in either of these assumptions.

3. Retirement – men and women – 1st year, 2nd year and after 2nd year

Previous experience studies separated retirement experience among the three categories (1) experience in the first year members were eligible to retire, (2) experience in the year after the first year (second year) and (3) experience in all years after the first two. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussing the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to include only a first year eligible and an after first year eligible assumption. In developing the after first year assumption we focused on the after second year of retirement experience. There were only 2 elected exposure in the second year of retirement eligibility. The mandated assumption was the same for the second and after second year of retirement eligibility.

The unreduced (that is, eligible for unreduced retirement) retirement experience is much lower than assumed. This is especially so for those with Mandated retirement and less so for those with Elected retirement. We do not show the elected experience in the first year of retirement eligibility as there was only 1 exposure over the last 4 years, because virtually all employees who chose Elected retirement have been eligible to retire for at least one year.



3. Retirement – men and women – 1st year, 2nd year and after 2nd year (cont.)

Mandated and Elected




N/A22 62.16%


106.54% 90.53%

Mandated

Ratio of actual to expected retirements –



71.28% 73.01%


44.28% 45.19%

We do not suggest a change in the Elected retirement assumption, since the group is frozen, there are virtually no members eligible for Elected retirement except for those with more than one year since original eligibility for retirement and these employees are likely to retire in the near future. The mandated retirement experience is outside the confidence intervals. We suggest a 25 percent reduction in the assumed retirement rate in the first year of Mandated retirement eligibility. This revision in the retirement assumption would result in experience which is within the confidence intervals. We are suggesting a reduction of 50 percent after the first year of retirement eligibility. Retirement prior to eligibility for unreduced retirement benefits (Early Retirees) Most of the Sanitation employees are in plans with no early retirement provisions. The data shows only 300 exposures over the 10-year period, as compared to 2,336 exposures for mandated retirement. However, since the experience is more than 3 times the assumed experience over the last 10 years (409.56% over 4 years), we suggest doubling the early retirement assumption.

22 There is one employee eligible to retire in their 1st year of eligibility in the four most recent years, so we concluded that this experience is not credible.




Withdrawal experience has been higher than anticipated over the 4 and 8-year period ending in 2015. Including the two most recent years would reduce the 4-year experience to 53% of the assumed, and 10-year experience to 100.62%, but as noted for other groups, we believe that the two most recent years’ experience greatly understates the withdrawal experience because of the low incidence of employees on leave of absence returning to employment, and the number of leaves of absence which have not yet expired in the two most recent years of employee data.



Combined 120.06% 115.94%

However, the experience varies significantly year to year with 4 of the 8 years having fewer withdrawals than expected. Thus, we do not suggest changing the withdrawal assumption.


The Ordinary disability experience is lower than assumed, over both 4- and 10-year periods. Accidental disability experience is lower than expected over the 4-year period but higher than expected over the 10-year period.




However, the incidence of ordinary disability is small (175 disabled out of 40,508 eligible, over the last 10 years), and the last 4 years of experience are close to expected. The incidence of accidental disability is slightly lower than ordinary disability (306 disabled out of 72,687 over the last 10 years.) The 4-year accidental disability experience is lower than anticipated while the 10-year experience is higher than anticipated.

We are not suggesting changing either of these assumptions, since the number of expected disabilities is so small that even a handful of additional (or fewer) disabilities would significantly change the experience.


Pay increases over the last 4 and 10 years have been significantly lower than anticipated. Total pay increases are lower than assumed in 9 of the last 10 years, as are Merit pay increases.

Ratio of actual to expected salary 4-year experience 10-year experience

Total 79.88% 82.36% Merit 69.84% 74.79%




Merit pay increases are 1.04% less than anticipated (3.06% vs 4.10% over the last 10 years and 1.02% less over the last 4 years (2.34% versus 3.36%). The actual is closer to the anticipated in the early career and lower than anticipated later in the career. Accordingly, we are suggesting different adjustments for different service levels.

Merit Pay Improvement (9 Year Experience) Service Range Actual Expected Suggested

Adjustment Factor

Years 0--3 10.28% 9.44% 1.00 Years 4-30 2.40% 3.61% 0.67 Total 3.06% 4.10% 0.73

The suggested total merit increase would be 3.00% which is 1.10% lower than the current assumption.


The table below compares the experience to the assumption. The regular OT experience is higher than expected for all years, but the OT experience is lower than anticipated for the years prior to disability retirement, or over the last 9 years, service retirement. The experience in the year prior to retirement will drive the liabilities much more than overtime in other years. Accordingly, the assumption may be slightly conservative.

Overtime as a Percent of Base Pay -Actual to Expected 4 Year 9 Year

All Overtime 150.40% 121.24% Year Before Service Retirement 115.54% 89.75% Year Before Disability Retirement 75.29% 62.02%

The non-dual overtime experience is relatively close to the assumption over a 9-year period. The year before service retirement assumption is higher than anticipated over the 4-year period and lower than anticipated over the 9-year period. There were only 432 member-years of experience over the 9 years for the year before disability retirement and the last 4 years’ experience appears to be trending closer to the assumption.

Therefore, we do not suggest any changes to the overtime assumptions.




95% Current Confidence Interval: 991 to 1,113



95 % Confidence Interval of Proposed Assumption





95% Current Confidence Interval: 991 to 1,113

New York City Employees' Retirement System - Sanitation



0.00%

50.00%

100.00%

150.00%

200.00%

55 60 65 70 75 80 85 90 95 100+

Age



0

20

40

60

80

55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age


0

20

40

60

80

55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age






95 % Confidence Interval of Proposed AssumptionProposed Assumptions are 94% of the Current Rates





New York City Employees' Retirement System - SanitationService Retirees' Mortality Assumption and Experience

4-Year Period Ending 2017Mortality By Liabilities - Men



0.00%20.00%40.00%60.00%80.00%

100.00%120.00%140.00%160.00%180.00%200.00%

55 60 65 70 75 80 85 90 95 100+

Age



0

500000

1000000

1500000

2000000

55 60 65 70 75 80 85 90 95

Pen

sion Amount of

Deceased Retirees

Age


0

500000

1000000

1500000

2000000

55 60 65 70 75 80 85 90 95

Pen

sion Amount of Deceased

Retirees

Age



New York City Employees' Retirement System - SanitationService Retirees' Mortality Assumptions and Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Men and Women















New York City Employees' Retirement System - SanitationDisability Retirees' Mortality Assumption and Experience

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

5

10

15

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

5

10

15

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age














4-Year Period Ending 2017Mortality By Liabilities - Men

New York City Employees' Retirement System - SanitationDisability Retirees' Mortality Assumption and Experience

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

100000

200000

300000

400000

500000

55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


0

100000

200000

300000

400000

500000

55 60 65 70 75 80 85 90 95Pen

sion Amount of

Deceased Retirees

Age



New York City Employees' Retirement System - SanitationDisability Retirees' Mortality Assumptions and Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year












New York City Employees' Retirement System - SanitationActive Ordinary Mortality Assumption and Experience

4-Year Period Ending 2017Ordinary Mortality Rates - Men



0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

35 40 45 50 55 60 65

Age


0

1

2

3

4

5

35 40 45 50 55 60 65

Actual M

ortalities

Age


0

1

2

3

4

5

35 40 45 50 55 60 65

Actual M

ortalities

Age



New York City Employees' Retirement System - SanitationActive Ordinary Mortality Assumption and Experience


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




4-Year Period Ending 2017Elected - Men and Women









New York City Employees' Retirement System - SanitationRetirement Experience of those after First Year of Eligibility



0

10

20

30

40

50

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements


0

10

20

30

40

50

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements

AgeActual Actual Not In Interval Upper Bound Expected Lower Bound

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

45 50 55 60

Age










4-Year Period Ending 2017Mandated - Men and Women





New York City Employees' Retirement System - SanitationRetirement Experience of those in First Year of Eligibility

0

10

20

30

40

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements

Age


0

5

10

15

20

25

30

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements

Age


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

45 50 55 60

Age











New York City Employees' Retirement System - SanitationRetirement Experience of those after First Year of Eligibility

4-Year Period Ending 2017Mandated - Men and Women




0

10

20

30

40

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements


0

5

10

15

20

25

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Actual Retirements

Age


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

45 50 55 60

Age



New York City Employees' Retirement System - SanitationNormal Retirement Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates



95 % Confidence Interval of Proposed AssumptionProposed Rates are 200% of the Current Rates.

Expected Retirement: 11.1


Rate of Retirement


Expected Retirement: 5.5

Actual Retirement: 24.0



New York City Employees' Retirement System - SanitationEarly Retirement Experience of Active Members


Actual Retirement: 24.0


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

55 60

Age

Men and Women


0

1

2

3

4

5

55 60

Actual Retirements

Age


0

1

2

3

4

5

55 60

Actual Retirements

Age



New York City Employees' Retirement System - SanitationEarly Retirement Experience10-Year Period Ending 2017

0%

100%

200%

300%

400%

500%

600%

700%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

















Withdrawal Rate


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Men and Women


0

10

20

30

40

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Act

ual

Wit

hd

raw

als

Service


0

10

20

30

40

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Act

ual

Wit

hd

raw

als

Service






0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015

Year







Ordinary Disability Rate - Men and Women






New York City Employees' Retirement System - SanitationOrdinary Disability Experience of Active Members




0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

35 40 45 50 55 60 65

AgeActual Current Proposed

0

2

4

6

8

10

35 40 45 50 55 60 65 70

Actual Disab

ilities

Age


0

2

4

6

8

10

35 40 45 50 55 60 65 70

Actual Disab

ilities

Age



New York City Employees' Retirement System - SanitationOrdinary Disabilities Experience


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year












New York City Employees' Retirement System - SanitationAccidental Disability Experience of Active Members

4-Year Period Ending 2017Accidental Disability Rate - Men and Women



0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

35 40 45 50 55 60 65

Age


0

2

4

6

8

10

35 40 45 50 55 60 65

Actual Disab

ilities

Age


0

2

4

6

8

10

35 40 45 50 55 60 65

Actual Disab

ilities

Age



New York City Employees' Retirement System - SanitationAccidental Disabilities Experience


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




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0 0 0 0




0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1 6 11 16 21 27

Service



-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1 6 11 16 21 27

Service




#REF!

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#REF!

#REF!

#REF!

#REF!

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0%

20%

40%

60%

80%

100%

120%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%


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0 0 0 0




0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

18 24 29 34 39 44

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

3 8 13 18 24 29 34 39 44

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

1 6 11 16 21 27 32 37 42

Service




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0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Year


Men and Women

Actual 100%



Results, including confidence intervals, for NYCERS - CORRECTIONS


NYCERS - CORRECTIONS Members

Mortality experience was substantially lower than expected, particularly for employees, while withdrawals were substantially higher than assumed. Salary improvement was reasonably close to assumed, but the overtime was higher than assumed. While unreduced retirement was lower than assumed the results were largely within the confidence intervals. Finally, ordinary disability experience was substantially lower than assumed while accidental disability experience was substantially higher than expected.


We compiled the results by lives and liabilities. Liabilities based mortality has not been

studied previously, so we only have 4 years of liabilities-based experience. The

liabilities-based results are appropriate for measuring the liability for benefits that vary by

salary and service, such as the retirement and disability benefits. The lives-based

results are appropriate to measure liabilities that are for benefits which are the same for

all participants (e.g., OPEB benefits.) We suggest that the Office of the Actuary consider



one by liabilities.


4-year experience Lives

4-year experience Liabilities

10-year experience

Lives

Service retirement – Men .9239 .8470 .8679 Service retirement – Women .8526 .7771 .9079 Service retirement – Combined .9128 .8350 .8735

Disability retirement – Men .6943 .6397 .7331 Disability retirement – Women .8130 .6044 .8440 Disability retirement – Combined .7159 .6340 .7529

The service retirement mortality experience by lives is within the confidence intervals for both men and women and outside the confidence intervals by liabilities for both men and women with less deaths than expected. We suggest a reduction of 11 percent from male rates and 11 percent for female rates, which would result in the experience being within the 95 percent confidence interval of the liabilities-based mortality assumption.

For disability retirements all but the lives for women are outside the confidence intervals with lower mortality than assumed. We suggest a reduction of 29 percent from male rates and 23 percent for female rates which would result in the experience being within the 95 percent confidence interval of the liabilities-based disability mortality assumption. We suggest a reduction of 15 percent in the male rates, which would result in the experience being within the 95 percent confidence interval of the liabilities-based disability mortality assumption .





Ordinary Employee Mortality Experience Ratio of actual to expected deaths



There were no accidental employee deaths over the 10-year period. Only 9 were expected over the 10-year period. Because of the lack of accidental mortality incidence, we are not including accidental mortality confidence interval graphs. We suggest a reduction of 50 percent to the ordinary and accidental mortality assumptions.

3. Retirement – men and women – 1st year, and after first year, Mandated and

Elected The retirement experience is lower than assumed. This is more evident for those eligible for Mandated retirement and less so for those with Elected retirement, because of the lack of employees first eligible for Elected retirement, as discussed below.




35.71% 54.51%


96.86% 83.52%

The Elected retirement assumptions were the same for the second year of retirement eligibility as for the after the second year of retirement eligibility.

Mandated

Ratio of actual to expected retirements –



93.21% 77.23%


79.11% 69.00%



3. Retirement – men and women – 1st year, and after first year, Mandated and Elected (cont.) The Mandated retirement assumptions were the same for the second year of retirement eligibility as for the after the second year of retirement eligibility. The results for virtually every age are within the confidence intervals and accordingly we are not recommending a change at this time.

Please note that over the last 4 years Elected retirement was 2 of 8 eligible retirees in the first year of retirement eligibility. There were, however, 620 employees who chose Elected retirement after the first year of retirement eligibility out of 2,837 exposures.

Because of the lack of first year of elected retirement eligibility exposures we are not including first year of elected retirement eligibility confidence interval graphs.

Early retirement

There are no longer any early retirement exposures (the last exposure was four years ago) accordingly no early retirement tables or graphs are included. As there appear to be no employees eligible for Early Retirement, we suggest that the OA consider removing this assumption.


Withdrawal experience over the last four years is higher than assumed. The ratios are closer to 200 percent for the 4-year period than for the 10-year period. We did not consider 2016 and 2017 experience as we noticed that many of the employees who ultimately terminate are doing so after a leave of absence and many employees on leaves of absence have not yet reached the end of those leaves of absence.


4-year experience Ending in 2015

8-year experience Ending in 2015


The number of withdrawals is substantially higher than anticipated, we suggest an increase in the withdrawal rates of 50 percent. This change would result in the experience still being outside the confidence intervals of the suggested assumption. The experience for 2013 of 284 percent and 2015 of 222 percent were unusually high and thus may be resulting in an unusually high average employee withdrawal experience.




The Ordinary disability experience is significantly lower than assumed, over both 4- and 10-year periods. Because of the small number of disabilities and the use of a unisex assumption we looked at combined experience.


4-year experience

10-year experience


The incidence of Ordinary and Accidental disability is small (151 ordinary disabled out of 67,344 eligible for ordinary disability and 456 disabled out of 87,248 eligible for accidental disability, over the last 10 years), and the experience has been lower than expected for ordinary disability and higher than expected for accidental disability.

We do not suggest changing the ordinary disability assumption as the experience is not fully credible and close to being within the confidence intervals (71 actual disabilities over 4 years, with a lower bound of 73.5 disabilities). The accidental disability assumption is well outside the confidence intervals. An increase of 35 percent in the assumption would result in the 4-year experience being within the confidence interval. In deference to the 10-year experience we suggest an increase of 25 percent in the accidental disability assumption.


Pay increases over the last 4 years have been lower than assumed However, pay increases over the last 10 years are higher than assumed.

Ratio of actual to expected salary 4-year

experience 10-year

experience

Total 97.55% 110.91% Merit 95.10% 113.37%

Because of the cyclical nature of pay increases we believe that the 10-year experience is more indicative of future experience than the 4-year experience. However, the 10-year experience is not high enough for us to suggest a change in the assumption.




The table below compares the OT experience to the assumption. The regular and retirement OT experience is higher than expected for all years, but lower than anticipated for the years prior to disability retirement. The experience in the year prior to retirement will drive the liabilities much more than overtime in other years. Furthermore, the OT experience for both regular and pre-retirement OT has increased substantially over the last 4-year period.

Overtime as a Percent of Base Pay - Actual to Expected 4 Year Ending

2016 9 Year Ending

2016

All Overtime Except for Dual Retirement 229.69% 181.54% Year Before Retirement 200.09% 158.36% Year Before Disability Retirement 96.94% 91.23%

The Overtime experience is much higher than anticipated for all but the year prior to disability retirement. We suggest an increase in the Overtime assumption of 50 percent for dual retirement OT and all overtime prior to dual retirement. We are not suggesting a change to the dual disability OT assumption. The experience of the past 4 years is higher than in the past, which may warrant future increases in addition to these suggested increases.





Proposed Assumptions are 100% of the Current Rates95% Confidence Interval of Proposed Assumption






Mortality By Lives - Men4-Year Period Ending 2017

Service Retirees' Mortality Assumption and ExperienceNew York City Employees' Retirement System - Corrections

0

5

10

15

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

2

4

6

8

10

12

14

16

18

20

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

55 60 65 70 75 80 85 90 95 100+

Age














Mortality By Lives - Women4-Year Period Ending 2017


0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

55 60 65 70 75 80 85 90 95 100+

Age



0

1

2

3

4

5

6

7

8

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

7

8

55 60 65 70 75 80 85 90 95

Actual Deaths

Age













Liability Weighted Mortality - Men4-Year Period Ending 2017


0

100000

200000

300000

400000

500000

600000

700000

55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


0

100000

200000

300000

400000

500000

600000

700000

55 60 65 70 75 80 85 90 95

Pen

sion Amount of Deceased Retirees

Age


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

55 60 65 70 75 80 85 90 95 100+

Age













Liability Weighted Mortality - Women4-Year Period Ending 2017


0

50000

100000

150000

200000

250000

300000

350000

55 60 65 70 75 80 85 90 95Pen


Retirees

Age


0

50000

100000

150000

200000

250000

300000

350000

55 60 65 70 75 80 85 90 95

Pen


Age


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

55 60 65 70 75 80 85 90 95 100+

Age



10-Year Period Ending 2017Retirees' Mortality Assumptions and Experience

New York City Employees' Retirement System - Corrections

0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year















Disability Retirees' Mortality Assumption and ExperienceNew York City Employees' Retirement System - Corrections

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

1

2

3

4

5

6

7

8

9

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

7

8

55 60 65 70 75 80 85 90 95

Actual Deaths

Age










Actual NUmber of Deaths: 20





0.00%

200.00%

400.00%

600.00%

800.00%

1000.00%

1200.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

0.5

1

1.5

2

2.5

3

3.5

55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

0.5

1

1.5

2

2.5

3

3.5

55 60 65 70 75 80 85 90 95

Actual Deaths

Age
















0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

50000

100000

150000

200000

250000

55 60 65 70 75 80 85 90 95Pen


Retirees

Age


0

50000

100000

150000

200000

250000

55 60 65 70 75 80 85 90 95

Pen


Age





Expected Amount of Pension Reduction: 535,788





Expected Amount of Pension Reduction: 695,829





0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

700.00%

800.00%

900.00%

55 60 65 70 75 80 85 90 95 100+

Age


0

10000

20000

30000

40000

50000

60000

45 50 55 60 65 70 75 80 85 90 95Pen


Retirees

Age


0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

45 50 55 60 65 70 75 80 85 90 95Pen


Age




New York City Employees' Retirement System - CorrectionsDisability Retirees' Mortality Assumption and Experience

0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year














Rate of Ordinary MortalityMen 4-Year Period Ending 2017

New York City Employees' Retirement System - CorrectionsActive Ordinary Mortality Assumption and Experience

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

35 40 45 50 55 60 65

Age


0

0.5

1

1.5

2

2.5

3

3.5

4

25 30 35 40 45 50 55 60 65

Actual M

ortalities

Age


0

0.5

1

1.5

2

2.5

25 30 35 40 45 50 55 60 65

Actual M

ortalities

Age














Active Ordinary Mortality Assumption and ExperienceWomen 4-Year Period Ending 2017


0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

35 40 45 50 55 60 65

Age


0

0.5

1

1.5

2

2.5

35 40 45 50 55 60 65

Actual M

ortalities

Age


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

35 40 45 50 55 60 65

Actual M

ortalities

Age



Active Ordinary Mortality Assumption and Experience10-Year Period Ending 2017


0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Active Employee Mortality













Retirement Experience of those after First Year of Eligibility

Men and Women - Elected Retirement BenefitNew York City Employees' Retirement System - Corrections


0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Age


0

10

20

30

40

50

60

70

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents


0

10

20

30

40

50

60

70

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents

Age













Retirement Experience of those in First Year of Eligibility4-Year Period Ending 2017

Men and Women - Mandated Retirement BenefitNew York City Employees' Retirement System - Corrections

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Age


0

10

20

30

40

50

60

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents

Age


0

10

20

30

40

50

60

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents

Age













Retirement Experience of those after First Year of Eligibility4-Year Period Ending 2017

Men and Women - Mandated Retirement BenefitNew York City Employees' Retirement System - Corrections

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Age


0

5

10

15

20

25

30

35

40

45

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents


0

5

10

15

20

25

30

35

40

45

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

Actual Retirem

ents

Age



10-Year Period Ending 2017Normal Retirement Experience


0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year













Men






0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Men


0

20

40

60

80

100

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

20

40

60

80

100

120

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service













Women





0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Women


0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

10

20

30

40

50

60

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service






0%

50%

100%

150%

200%

250%

300%

2008 2009 2010 2011 2012 2013 2014 2015

Year


Actual/Expected 1












Rate of Ordinary DisabilityMen 4-Year Period Ending 2017

Ordinary Disability Experience of Active MembersNew York City Employees' Retirement System - Corrections

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

35 40 45 50 55 60 65

Age


0

1

2

3

4

5

6

7

35 40 45 50 55 60 65 70

Actual Disabilities

Age


0

1

2

3

4

5

6

7

35 40 45 50 55 60 65 70

Actual Disabilities

Age













Women 4-Year Period Ending 2017Rate of Ordinary Disability

Ordinary Disability Experience of Active MembersNew York City Employees' Retirement System - Corrections

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

35 40 45 50 55 60 65

Age


0

1

2

3

4

5

6

35 40 45 50 55 60 65 70

Actual Disabilities

Age


0

1

2

3

4

5

6

35 40 45 50 55 60 65 70

Actual Disabilities

Age



10-Year Period Ending 2017Ordinary Disability Experience of Active Members


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year








95% Confidence Interval of Proposed AssumptionProposed Assumptions are 125% of the Current Rates for Men and 125% for Women







Accidental Disability Experience of Active MembersNew York City Employees' Retirement System - Corrections

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

35 40 45 50 55 60 65

Age


0

2

4

6

8

10

12

14

16

18

35 40 45 50 55 60 65

Actual Disabilities

Age


0

2

4

6

8

10

12

14

16

18

35 40 45 50 55 60 65

Actual Disabilities

Age



10-Year Period Ending 2017Accidental Disability Experience of Active Members


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




#REF!

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0 0 0 0


Proposed Assumptions are 100% of the Salary Increase







0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0 5 10 15 20 25 30+

Service



-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

0 5 10 15 20 25 30+

Service




#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

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#REF!

#REF!

#REF!




0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%


#REF!

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#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

0 0 0 0




0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

18 23 28 33 38 43

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

3 8 13 18 23 28 33 38 43

Service


and Women


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

0 5 10 15 20 25 30 35 40

Service




#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!




0%

50%

100%

150%

200%

250%

300%

350%

400%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Year


Men and Women

Actual 100%


Results, including confidence intervals, for TEACHERS


TRS Experience Analysis

The following sections discuss the differences between TRS and the other plans, and the TRS demographic experience.

Issues Unique to TRS

Please note that analysis was done both for male and female groups even though the number of women is significantly higher than the number of men, because the number of men is still high enough to provide for credible results. Over the last 4 years, the total male employee life exposures were 104,120, while the female employee life exposure were 351,650. Large service retiree life exposures were also available.

TRS limits the variance in pay in the averaging period; thus, no assumption is made regarding overtime. TRS also provides normal retirement benefits at age 62 (63 for Tier VI) and unreduced retirement benefits at age 55 with 25 years of service (Elected Retirement) or 27 years of service (Mandated Retirement.) Early retirement benefits are provided at age 55 with at least 5 years of service (10 years, if Tier VI.) Ordinary disability and accidental disability benefits are provided, as well as ordinary and accidental death benefits, although no accidental deaths are assumed. Thus, we did not analyze either overtime or accidental death experience.

While retiree mortality is reasonably close to assumptions, TRS is the only group for which employee mortality is higher than expected. Normal retirement experience has been relatively consistent over the 4- and 10-year periods and is higher than assumed except for the first year of unreduced retirement eligibility for mandated retirement. Early retirement experience has been higher than anticipated. Withdrawal experience is also higher than anticipated. However, the most recent 4 year has lower experience than the 8-year experience. Ordinary disability experience has been higher than expected, while Accidental disability experience has dropped from higher than expected over the 10-year period to lower than expected over the four-year period. Finally, the merit salary experience has been higher than expected over the last 4 years but slightly less than expected over the 10-year period.

TRS Members

1. Mortality – male and female – service and disability retirees

The following graphs and tables show the incidence of mortality for service retirees and disabled retirees, for the most recent four or ten years, ending June 30, 2017. Overall, actual mortality experience by lives for service retirees was higher than expected over both 4-year and 10-year periods (5.36% and 0.29%, respectively.) Please note that there was an increase in the number of deaths in 2016 and 2017 which was due to enhancements in the method of checking external records for retiree deaths. We have accepted the data as is without adjustment.

Retiree exposures for disability retirees is but a small fraction of service retirees (combined over 10 years, 30,286 versus 688,766, with 923 deaths compared to 16,759 deaths). This is particularly clear for males, where the total exposures are only 3,148 over the last four years and 7,420 over the last 10 years. Overall disability retiree mortality experience was only 3.90% higher than expected over the last 10 years, with lower experience for men offset by higher experience for women.



1. Mortality – male and female – service and disability retirees

We compiled the results by lives and liabilities. Liabilities based mortality has not been studied previously, so we only have 4 years of liabilities-based experience. The liabilities-based results are appropriate for measuring the liability for benefits that vary by salary and service, such as the TRS retirement and disability benefits. The lives-based results are appropriate to measure liabilities that are for benefits which are the same for all participants (e.g., OPEB benefits.) The four-year experience for lives is 5 percent greater than assumed, while the four-year experience for liabilities is 4 percent less than assumed. So, the current assumption is in the aggregate, consistent with recent experience by lives and liabilities. If this were to change in the future, we suggest that the Office of the Actuary consider the use of two different mortality assumptions depending upon the purpose of the measurement.



4-year experience Amounts

10-year experience

Lives

Service retirement – Men .9530 .8753 .9107 Service retirement – Women 1.1108 1.0342 1.0555 Service retirement – Combined 1.0536 .9639 1.0029

Disability retirement – Men 1.0156 .8657 .9182 Disability retirement – Women 1.1827 1.0131 1.0888 Disability retirement – Combined 1.1335 .9612 1.0390

Service Retirement Mortality Adjustments

We suggest, for the liability-weighted mortality assumption, a decrease in the service retirement male rates of 11 percent coupled with an increase of the female mortality rates of 2 percent. These changes would result in rates within the 95 percent confidence intervals.

We suggest, for the lives-based mortality assumption a decrease in the service retirement male rates of 2 percent coupled with an increase of the female mortality rates of 8 percent. These changes would result in rates within the 95 percent confidence intervals.

Disability Retirement Mortality Adjustments

We suggest, for the liability-weighted mortality assumption, a decrease in the disability retirement male rates of 6 percent, which would result in rates within the 95 percent confidence intervals. The female liability-weighted disability mortality assumption is within the 95 percent confidence intervals without an adjustment to the current rates, so we do not suggest any change to the female disability mortality.



1. Mortality – male and female – service and disability retirees (cont.)

The male lives-based disability mortality assumption is within the 95 percent confidence

intervals without an adjustment to the current rates. Thus, we do not suggest any

revision to the male lives-based disability mortality rates. However, we suggest an

increase in the disability retirement female rates of 4 percent, which would result in rates

within the 95 percent confidence intervals.


Mortality experience for active TRS members is substantially higher than expected for

women and men (over the last 10 years) but lower than expected for men over the last

four years, as shown in the following graphs. The table immediately below shows that

the recent experience is closer to the assumption than earlier experience, although

actual deaths (and assumed) are relatively low.



Ordinary mortality – men 90.96% 103.07% Ordinary mortality – women 134.20% 128.97% Combined 118.15% 119.91%

The confidence intervals show that in total the results are inside of the 95 percent boundaries for men and outside of the interval for women. Accordingly, we are suggesting that this assumption be increased by 25 percent for women only.

3. Retirement – men and women – 1st year, 2nd year and after 2nd year, Mandated and

Elected

Retirement assumptions are divided by normal or unreduced retirement and retirement prior to eligibility or unreduced retirement. The impact on plan liabilities of earlier retirement than assumed is much greater for unreduced retirement than for retirement prior to eligibility for unreduced retirement, so these assumptions have a more significant impact on plan costs.

Unreduced retirement

Previous experience studies separated retirement experience among the experience in the first year members were eligible to retire, the year after the first year (second year) and retirement experience in all years after the first two. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussing the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to include only a first year eligible and an after first year eligible assumption. In developing the after first year assumption we focused on the after second year of retirement experience except for mandated retirements at age 58, and elected retirements at age 56 as discussed below.




Elected (cont.)

Retirement in TRS is complicated by the change in 2008, which allowed employees in Tiers II and IV to elect retirement with an unreduced benefit upon completion of 25 years of service and attainment of age 55 or older (instead of age 62). This is referred to as Elected retirement. Those who are hired after February 27, 2008 are eligible to retire with an unreduced benefit upon the completion of 27 years of service and attainment of age 55. This is referred to as Mandated retirement. Also, employees with less than the requisite years of service for an unreduced retirement benefit may elect early retirement after reaching age 55 and before age 62, and receive a benefit reduced for early payment before age 62.

We studied the experience of the mandated and elected plans separately.

Ratio of actual to expected retirements – Elected Plan


First year of eligibility – Men 131.63% 122.54% First year of eligibility – Women

127.63% 113.50%


128.49% 115.44%

Each succeeding year – Men 112.56% 114.53% Each succeeding year – Women

115.51% 118.41%


114.90% 117.61%

Ratio of actual to expected retirements – Mandated Plan


First year of eligibility – Men 87.42% 88.52% First year of eligibility – Women

87.15% 83.62%


87.21% 84.74%

Each succeeding year – Men 108.97% 111.76%

Each succeeding year – Women

116.46% 118.96%


114.63% 117.20%




Elected (cont.)

Over the last 4 years, there were 5,374 retirements from 27,350 (19.65 percent)

exposures for all employees in the mandated plan who had one or more years of

eligibility for retirement. 3,995 of the 27,350 employees in the mandated plan are age 70

or above. Under the current assumptions these 3,995 employees are expected to retire

on the valuation date. Thus, the number of actual retirements is much less than

anticipated under the current assumptions, because of the high number of employees

age 70 or greater that are expected to retire. We found that approximately 20 percent of

the retirees age 70 or older retired per year. We also found that this percentage did not

increase with age. Accordingly, we first extend the existing mandated retirement table to

age 80 by setting all of the rates from age 70 to age 80 to 20 percent. The tables show

that the actual to expected ratio after the first year of eligibility is based on the extended

tables, and now show actual to expected ratios greater than 100 percent. We are

recommending a level 20 percent mandated retirement rate after the first year of

retirement eligibility because 19.98 percent (14,361 retirements out of 71,864 exposure)

retired over the 10- year period and we found that while the experience did vary

somewhat there was no clear pattern and most of the experience was close to 20

percent.

We are suggesting the following adjustments to the unreduced retirement assumption.

Elected Mandated

First year of eligibility 25% higher 10% lower

Each succeeding year 10% higher Made to be 20% for all years

The following tables summarizes the exposures, for the four-year period ending 2017, for the second year and after second year of retirement eligibility for Mandated and Elected retirement. Since most of the second year of eligibility experience is limited to age 56 and age 63 the consolidated after first year of retirement assumption table is primarily based on the after second year of retirement eligibility assumption.

Mandated Retirement



eligibility

56 299 -

63 4,669 247


Total 5,447 21,903

We used the age 56 Mandated assumption from the year 2 of retirement eligibility for the combined assumption, and after year 2 of retirement eligibility for the other ages. The age 63 assumption was the same for both the second year of retirement eligibility and after the second year of retirement eligibility.




Elected (cont.)

There was no assumption for retirement at age 56 after the second year of retirement eligibility under the prior three-tiered assumption structure. If we had retained the prior three-tiered structure, we would have suggested a 22 percent retirement rate at age 56 for the second year of retirement eligibility. Using the mandated age 56 second year of retirement eligibility assumption in place of the after second year of retirement eligibility retirement rate increases the suggested rate from 0 percent to 22 percent. Alternately, use of the after second year of retirement eligibility for all ages (including age 56) would result in a 20 percent assumption instead of a 22 percent assumption which would result in less than 15 fewer expected retirements per year, along with a smoother curve of retirement rates and would not materially impact the results.

The Elected group is far smaller than the Mandated. The exposures for the Elected group are summarized below:

Elected Retirement



eligibility

56 1,267 -

63 138 623

Other ages 1,259 6,686

Total 2,664 7,309

We used the age 56 Elected assumption from the year 2 of retirement eligibility and after year 2 for the other ages.

The tables above demonstrate that the experience for the second year of retirement eligibility is concentrated in one or two ages. This is also true for the first year of retirement eligibility. When reviewing the actual to expected ratios in the graphs it is important to bear in mind that there is not much experience for most of the ages. The graphs give the misleading impression that all ages have a similar impact.

Retirement prior to eligibility for unreduced retirement benefits (Early Retirements)

Early retirement experience has been much higher than assumed although decreasing over time, as shown in the table below.

Ratio of actual to expected retirements – Early Retirement






Elected (cont.)

While the experience is much higher than assumed, the percentage of eligible employees electing early retirement is only about 5%, while the percentage of those eligible for unreduced retirement electing in their first year of eligibility is over 30%, based on the last 4 years’ experience. The last 4 years’ experience is also closer to the assumption than the prior years. We note that the early retirement experience is not within a 95% confidence interval of the assumed early retirements.

Suggested change

We suggest that the early retirement assumption be increased 25 percent for men and women.


The withdrawal experience of TRS members is approximately 10 percent higher than expected for the 4 years ending in 2015 for both men and women. We combined the experience, since the same withdrawal table is used for both men and women. The combined experience for the 8year period ending in 2015 is close to 15 percent higher than expected23.

Ratio of actual to expected withdrawals

4-year experience ending in 2015

8-year experience ending in 2015

Withdrawal – men 115.79% 123.07% Withdrawal – women 107.09% 110.59% Combined 109.60% 113.92%

The 4-year experience ending in 2015 is lower than the 8-year experience ending in 2015 which could be due to lowering turnover experience which is consistent with what we have been observing in other plans. The most recent 4 year fully mature experience is already two years old, which could mean that the fully mature 4- year experience ending in 2017 will show even lower actual to expected ratios. Accordingly, we believe that there is currently no reason to change this assumption. However, if the higher than anticipated experience were to continue, this is an assumption that might be changed in future experience studies. An increase in the withdrawal assumption would decrease liabilities and recommended appropriations.


The experience of Ordinary disability appears to be substantially higher than assumed, with a decrease between 10-year and recent experience. Please note that most of the variance occurs at older assumed ages (starting in late 40s for men and around age 50 for women.)

23 As we mentioned earlier, many of the employees who take a leave of absence do not return. Not including these employees in the analysis would result in artificially low withdrawal rates for the two most recent years. Thus, we excluded those years from our analysis.




However, Accidental disability experience has been quite different, perhaps because of the low assumed rates and the relatively rare incidence. Experience over the last 10 years was well above assumed, while the experience in the last 4 years is well below.

There appears to have been a significant change in the experience from 2015 to 2017, when the actual to assumed ratio dropped from 114% to 63%. However, as the information is relatively recent we are unsure about its credibility. Thus while we included it in our analyses we didn’t overweight its importance.



Ordinary – Men 116.03% 144.05% Ordinary - Women 117.85% 129.88% Ordinary – Combined 117.50% 132.55% Accidental - Men 39.89% 99.52% Accidental - Women 70.26% 129.96% Accidental – Combined 62.60% 122.31%

Even though the Ordinary disability experience is higher than the assumed experience, we do not currently suggest a revision to this assumption. The probability of Accidental disability is much lower than for Ordinary disability, and the actual experience has been lower in the last three years than in prior years, so we also do not suggest a revision in the accidental disability assumption. Note that there were only 274 accidental disabilities among the 1,123,624 exposed lives.

6. Total and merit salary increases – men and women combined

Total and Merit salary improvement experience for TRS members has been higher than anticipated over the last 4 years but close to expected over the last 10 years.

We used the 4-year average CPI and the 10-year average CPI to reduce the total salary increase to obtain the merit salary increase.



Total 127.77% 100.08% Merit 138.29% 98.64%

We are not suggesting changes to the merit pay assumption, because of the similarity

between the total experience and the assumed experience over the last 10 years.

However, the recent merit experience has been higher than anticipated. Higher pay

increases than anticipated in the next few years could result in this assumption being

changed in future studies.

Service Retirees' Mortality Assumption and ExperienceTeachers' Retirement System of the City of New York












0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

56 61 66 71 76 81 86 91 96

Age

Actual/Expected Rates for Men

Current Proposed 100%

0

20

40

60

80

100

120

140

56 61 66 71 76 81 86 91 96

Actual Deaths

Age


0

20

40

60

80

100

120

140

56 61 66 71 76 81 86 91 96

Actual Deaths

Age















0%

20%

40%

60%

80%

100%

120%

140%

160%

56 61 66 71 76 81 86 91 96

Age

Actual/Expected Rates for Women


0

50

100

150

200

250

300

56 61 66 71 76 81 86 91 96

Actual Deaths

Age


0

50

100

150

200

250

300

56 61 66 71 76 81 86 91 96

Actual Deaths

Age















0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

56 61 66 71 76 81 86 91 96Pen


Retirees

Age


0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

56 61 66 71 76 81 86 91 96

Pen


Age


0%

20%

40%

60%

80%

100%

120%

140%

160%

56 61 66 71 76 81 86 91 96

Age
















0

2000000

4000000

6000000

8000000

10000000

56 61 66 71 76 81 86 91 96Pen


Retirees

Age


0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

10000000

56 61 66 71 76 81 86 91 96

Pen


Age


0%

20%

40%

60%

80%

100%

120%

140%

56 61 66 71 76 81 86 91 96

Age






0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Disability Retirees' Mortality Assumption and ExperienceTeachers' Retirement System of the City of New York












0%

100%

200%

300%

400%

500%

600%

45 50 55 60 65 70 75 80 85 90 95 100+

Age



0

2

4

6

8

10

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

7

8

9

10

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age



Teachers' Retirement System of the City of New YorkDisability Retirees' Mortality Assumption and Experience












0%

50%

100%

150%

200%

250%

300%

350%

400%

45 50 55 60 65 70 75 80 85 90 95 100+

Age



0

2

4

6

8

10

12

14

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

2

4

6

8

10

12

14

16

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age

















0

50000

100000

150000

200000

250000

300000

350000

45 50 55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


0

50000

100000

150000

200000

250000

300000

350000

45 50 55 60 65 70 75 80 85 90 95

Pen


Age


0%

100%

200%

300%

400%

500%

600%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


















0

50000

100000

150000

200000

250000

300000

350000

400000

450000

45 50 55 60 65 70 75 80 85 90 95Pen


Retirees

Age


0

50000

100000

150000

200000

250000

300000

350000

400000

450000

45 50 55 60 65 70 75 80 85 90 95

Pen


Age


0%

50%

100%

150%

200%

250%

300%

350%

45 50 55 60 65 70 75 80 85 90 95 100+

Age






0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Teachers' Retirement System of the City of New YorkActive Ordinary Mortality Assumption and Experience


Rate of Ordinary MortalityMen 4-Year Period Ending 2017










0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

35 40 45 50 55 60 65

Age


0

2

4

6

8

10

35 40 45 50 55 60 65

Actual M

ortalities

Age


0

1

2

3

4

5

6

7

8

9

10

35 40 45 50 55 60 65

Actual M

ortalities

Age





Rate of Ordinary MortalityWomen 4-Year Period Ending 2017










0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

35 40 45 50 55 60 65

Age


0

5

10

15

20

35 40 45 50 55 60 65

Actual M

ortalities

Age


0

2

4

6

8

10

12

14

16

18

20

35 40 45 50 55 60 65

Actual M

ortalities

Age





0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year



Teachers' Retirement System of the City of New YorkMen and Women - Elected Retirement Benefit












0

0.1

0.2

0.3

0.4

0.5

0.6

56 57 58 59 60 61 62

Age

Elected Plan, Men and Women


0

20

40

60

80

100

120

140

160

56 57 58 59 60 61 62 63

Actual Retirements

Age


0

20

40

60

80

100

120

140

160

56 57 58 59 60 61 62

Actual Retirements

Age



Men and Women - Elected Retirement BenefitTeachers' Retirement System of the City of New York

Retirement Experience of those after First Year of Eligibility4-Year Period Ending 2017











0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

56 57 58 59 60 61 62 63 64 65 66

Age



0

50

100

150

200

250

300

350

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements


0

50

100

150

200

250

300

350

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age



Men and Women - Mandated Retirement BenefitTeachers' Retirement System of the City of New York












0

0.2

0.4

0.6

0.8

1

1.2

56 57 58 59 60 61 62 63 64 65 66 67

Age

Mandated Plan, Men and Women


0

500

1000

1500

2000

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age


0

200

400

600

800

1000

1200

1400

1600

1800

56 57 58 59 60 61 62 63 64 65 66

Actual Retirements

Age



Men and Women - Mandated Retirement BenefitTeachers' Retirement System of the City of New York







Proposed Assumptions are 20% for the Assumed Probability95% Confidence Interval of Proposed Assumption





0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

Age



0

100

200

300

400

500

600

700

800

900

60 61 62 63 64 65 66 67 68 69 70

Actual Retirements


0

200

400

600

800

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1200

60 61 62 63 64 65 66 67 68 69 70

Actual Retirements

Age



Normal Retirement ExperienceTeachers' Retirement System of the City of New York


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year



Early Retirement Experience of Active MembersTeachers' Retirement System of the City of New York

4-Year Period Ending 2017Men and Women











0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

55 60

Age



0

50

100

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350

55 56 57 58 59 60

Actual Retirements

Age


0

50

100

150

200

250

300

350

400

55 56 57 58 59 60

Actual Retirements

Age



Early Retirement Experience of Active MembersTeachers' Retirement System of the City of New York


0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Early Retirement Experience of Active Members












Men




Teachers' Retirement System of the City of New York


0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Men


0

100

200

300

400

500

600

700

800

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

100

200

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400

500

600

700

800

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service













Women





0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Service

Women


0

200

400

600

800

1000

1200

1400

1600

1800

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

Wit

hd

raw

als

Service


0

200

400

600

800

1000

1200

1400

1600

1800

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Act

ual

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hd

raw

als

Service






0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015

Year





Teachers' Retirement System of the City of New YorkOrdinary Disability Experience of Active Members












0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

35 40 45 50 55 60 65

Age


0

1

2

3

4

5

6

7

8

35 40 45 50 55 60 65

Actual Disabilities

Age


0

1

2

3

4

5

6

7

8

35 40 45 50 55 60 65

Actual Disabilities

Age
















0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

35 40 45 50 55 60 65

Age


0

5

10

15

20

25

35 40 45 50 55 60 65

Actual Disabilities

Age


0

5

10

15

20

25

25 30 35 40 45 50 55

Actual Disabilities

Age





0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Teachers' Retirement System of the City of New YorkAccidental Disability Experience of Active Members





Proposed Assumptions are 100% of the Current Rates for Men and 100% for Women







0

1

2

3

4

5

6

7

8

9

35 40 45 50 55 60 65

Actual Disabilities

Age


0

1

2

3

4

5

6

7

8

9

35 40 45 50 55 60 65

Actual Disabilities

Age


0.00%

0.01%

0.02%

0.03%

0.04%

0.05%

0.06%

0.07%

0.08%

35 40 45 50 55 60 65

Age




Teachers' Retirement System of the City of New YorkAccidental Disability Experience of Active Members

0%

50%

100%

150%

200%

250%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year









0%

50%

100%

150%

200%

250%

300%

350%

0 5 10 15 20 25 30+

Service

Annual Total Salary to Expected Salary, Men and Women

Actual 100%

0%

100%

200%

300%

400%

500%

600%

700%

0 5 10 15 20 25 30+

Service

Annual Merit Salary to Expected Salary, Men and Women

Actual 100%


#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!




92%

94%

96%

98%

100%

102%

104%

106%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%



Results, including confidence intervals, for BERS


BERS Experience Analysis

The following sections discuss the differences between BERS and the other plans, and the BERS demographic experience. Please note that the differences between experience and assumptions is largest for BERS among all of the plans and subplans. Also note that the participant data provided for BERS turned out to be unreliable in many instances. Thus, while we note some significant variances between assumptions and experience, we did not necessarily suggest assumption changes when we felt that the data was inadequate. We further note that a significant effort was made to improve the data in 2016 and a new system provided the 2017 data, which appeared to be extensive (e.g. includes part-time status) and more reliable. Thus, we expect that the next experience study will have three to five years of reliable data.

Issues Unique to BERS

BERS has the smallest liabilities of the NYCRS plans, and second smallest number of participants. BERS has also been undergoing an extensive review and update of member data as part of the implementation of a new system to track and provide member data to the OA. The new system was used to provide the June 30, 2017 data to the OA.

The BERS employee group is unusual, because:

• The employee group, as with TRS, is predominantly women. About 75% of active employees are women, in 2017. Thus, results for women are much more credible than for men.

• There are significant numbers of part-time employees, unlike the other NYCRS Systems.

• The largest spread in salaries of any other group. For example, the average pay of the Senior College group is $178,000 (in 2016) while the average for the New York City group (the largest group of employees) is $45,000. Thus, the death of a few retirees, with large benefits, at ages (64) earlier than expected can cause the liability weighted mortality rates to be higher than the unweighted mortality rates.

• The effect of pay increases just before retirement are limited. Hence, overtime pay cannot have as significant of an effect on final average pay as some other plans. Therefore, there is no overtime assumption to be reviewed.

• Early Retirement experience is much higher at BERS than any of the other plans. While in the other NYCRS systems nearly all retirees elect unreduced or normal retirement, in BERS there were 1,574 normal retirements and 1,557 early retirements in the 10- year period ending in 2017. Thus, we more carefully studied the Early Retirement experience.

• While ordinary and accidental disability and death benefits are provided, there is no assumption regarding the probability of accidental death. Furthermore, the participant data appears to include a total of less than 10 accidental deaths in the last 10 years. Thus, we did not analyze the accidental death experience.

• BERS has the largest relative part-time population of any of the Systems. We note that the participant data now includes part-time or full-time status. We suggest that the OA and the actuary preparing the next experience study consider for which assumptions experience should be separately studied, to determine whether assumptions should reflect part-time status. We suggest that retirement, withdrawal and pay increase assumptions should be studied.




Historical BERS retiree mortality data is unreliable. A number of retirees have dropped off the roles for different reasons, some of whom did in fact die, but in other cases the retired employee had returned to active service. In some cases, a beneficiary receiving a n-year certain annuity who reached the end of the year certain period was reported as deceased, rather than that the benefit had expired. A finding in the audit of the 2016 data was that many of the retirees who disappeared from the participant data did in fact die. The BERS system has substantially improved the process and the mortality experience in 2016 and 2017 is close to the expected number of deaths, while the number of deaths for prior to 2016 are much lower than anticipated. Because the unreliable mortality data prior to 2016 data and the lack of credible data in 2016 and 2017 (i.e., not enough deaths for the results to be credible) we are suggesting no changes in either the life-based mortality assumptions or in moving toward liability-weighted mortality assumptions.

The following graphs and tables show the incidence of mortality for service retirees and disabled retirees, for the most recent 4 or 10 years, ending June 30, 2017. Overall, actual mortality experience was 65% to 80% of assumed for service retirees and 80% to 85% for disabled retirees, over the last 4 years. Overall experience over the 10-year period is 74% of assumed for service retirees and 93% of assumed for disability retirees.

We compiled the results by lives and liabilities. Liabilities based mortality has not been studied previously, so we only have 4 years of liability-based experience. The liability-based results are appropriate for measuring the liability for benefits that vary by salary and service, such as the BERS retirement and disability benefits. The lives based results are appropriate to measure liabilities that are for benefits which are the same for all participants (e.g., OPEB.) We suggest that the Office of the Actuary consider the use of two different mortality assumptions depending upon the purpose of the measurement. The SOA RP2014 report released two different tables, one by lives and one by liabilities




10-year experience

Lives

Service retirement – Men 65.87% 62.82% 62.30%

Service retirement – Women 78.51% 74.75% 77.40%

Service retirement – Combined 75.51% 68.96% 73.77%

Disability retirement – Men 84.75% 101.03% 96.01%

Disability retirement – Women 79.84% 78.16% 92.11%

Disability retirement – Combined 81.40% 88.79% 93.41% These results are shown as a point of reference only. Because the 2016 and 2017 experience prepared after the data clean-up (including cleanup of the retiree data) shows much higher mortality rates we believe this experience is unreliable.




Mortality experience for BERS employees is substantially lower than expected over both the 4- and 10-year periods, as shown in the following graphs and tables. The table immediately below shows that the recent experience is closer to the assumption than earlier experience, although actual and assumed deaths are relatively low.

Ratio of actual to expected deaths 4-year experience 10-year experience

Ordinary mortality – men 63.79% 62.19%

Ordinary mortality – women 58.63% 52.50%

Combined 60.18% 55.39% The experience is outside confidence interval graphs (in total). Furthermore, there have been fewer employee deaths than anticipated in each of the last 10 years. Accordingly, we are suggesting that the employee mortality assumption be reduced by a third.

The effect of the revision in the active ordinary mortality is slight, as few employees are expected to die while employed, and the relative value of the death and the forgone retirement benefits roughly offset at the ages with the highest mortality rates.

3. Retirement – men and women – 1st year, after 1st year, Mandated and Elected

Previous experience studies separated retirement experience among the three categories (1) experience in the first year members were eligible to retire, (2) experience in the year after the first year (second year) and (3) experience in all years after the first two. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussing the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to include only a first year eligible and an after first year eligible assumption. In developing the after first year assumption we focused on the after second year of retirement experience except for mandated retirements at age 58, and elected retirements at age 56 as discussed below.

As with TRS, there is a significant difference between the retirement experience for those eligible to retire with unreduced retirement benefits and those currently eligible only for retirement benefits reduced for early payment. Unlike TRS, the BERS experience for those members eligible for unreduced retirement is much lower than assumed, while experience for those eligible only for early retirement, is much higher than assumed.



3. Retirement – men and women – 1st year, after 1st year, Mandated and Elected (cont.)

Employees eligible for the Elected retirement provisions are retiring at a somewhat higher rate than the Mandated group, although still at a much lower rate than assumed. There are many more Mandated than Elected employees, and the percentage of Elected employees continues to decrease over time. In 2008 only 698 of the 23,202 employees were Elected and in 2017 the number of Elected employees decreased to 597 of the 25,794 employees. Based on the decrease in the Elected group, combined with the increase in the Mandated group, the Mandated group retirement assumptions are the more critical assumptions in the future. Thus, we conclude that there should be no further analysis of the Elected group retirement experience, after this study.

Elected Ratio of actual to expected retirements 4-year experience 10-year experience

First year of eligibility – Men 54.05% 70.14%

First year of eligibility – Women 38.46% 60.24%

First year of eligibility – Combined 45.64% 64.75%


Each succeeding year – Women 76.08% 77.43%

Each succeeding year – Combined 73.21% 78.37%

Mandated Ratio of actual to expected retirements 4-year experience 10-year experience



First year of eligibility – Combined 63.74%

64.66%




The experience is outside confidence interval graphs (in total). Furthermore, there have been fewer retirements than anticipated in each of the last 10 years, and the experience the last two years has been lower than the 10-year average. Accordingly, we are suggesting that the retirement assumption be reduced as follows:

Elected Mandated

Year 1 15% 33%

Thereafter 25% 35%




We are recommending that the age 56 after the first-year elected rate be reduced from 20 to 15 percent and the age 58 mandated after the first-year rate be reduced from 15 to 7.5 percent. The following tables summarizes the exposures, for the four-year period ending 2017, for the second year and after second year of retirement eligibility for Mandated and Elected retirement. Since most of the second year of eligibility experience is limited to age 58 and age 63 the consolidated after first year of retirement assumption table is primarily based on the after second year of retirement eligibility assumption.

Mandated Retirement

Age Second Year of retirement

eligibility After Second Year of retirement eligibility

58 1,692 4

63 946 986


Total 3,285 15,248 We used the age 58 Mandated assumption from the second year of retirement eligibility for the combined assumption, and after the second year of retirement eligibility for the other ages.

Using the mandated age 58 second year of retirement eligibility assumption in place of the after second year of retirement eligibility retirement rate increases the proposed rate from 6.50 to 7.50 percent. Alternately, use of the after second year of retirement eligibility for all ages would result in less than 5 fewer expected retirements per year, along with a smoother curve of retirement rates and would not materially impact the results.

The Elected group is far smaller than the Mandated. The exposures are summarized below:

Elected Retirement

Age Second Year of retirement

eligibility After Second Year of retirement eligibility

56 55 -

63 18 20

Other ages 20 345

Total 93 365

We used the age 56 Elected assumption from the second year of retirement eligibility and after second year for the other ages.




The tables above demonstrate that the experience for the second year of retirement eligibility is concentrated in one or two ages. This is also true for the first year of retirement eligibility. When reviewing the actual to expected ratios in the graphs it is important to bear in mind that there is not much experience for most of the ages. The graphs give the misleading impression that all ages have a similar impact.

In addition, our rounding conventions result in some high and misleading actual retirement experience. For example, 141 out of 202 (69.80 percent) of age 61 mandated employees who were in the first year of retirement eligibility over the 4-year period ending 2017 retired. 138 out of the 141 retirees were not eligible to retire based on our rounding conventions but did retire (for example they may have been age 61 and a few days and retired at the end of the year at age 62). These retirees were added to the age 61 experience. If we were to move the 138 retirees to age 62 than the age 61 experience would show 3 out of 64 eligible employees retiring or 4.69 percent and the percentage of age 62 employees who retired in the first year of eligibility would have increased from 22.70 percent to 30.82 percent.

We also suggest (and have reflected in this analysis) extending the Mandated retirement rates from ages 70 to age 80 for retirement after the first year of eligibility. Extending the assumption to age 80 will reduce the number of employees assumed, in the valuation, to retire immediately, and both increase the precision in the liability calculations used to determine annual contributions (since employees are retiring later than in previous generations) and smooth the benefit payment projections by reducing the bump in the first year due to those employees over the maximum assumed retirement age, who are assumed to retire immediately. Retirement prior to eligibility for unreduced retirement benefits (Early Retirement)

Early retirement experience has been much higher than assumed although it has

decreased over the last 4 years, as shown in the table below.

Ratio of actual to expected retirements – Early Retirement 4-year experience 10-year experience

Men and Women 148.81% 187.73%

The early retirement experience, while still greater than anticipated, is trending towards the assumption; accordingly, we are only suggesting a 25 percent increase to this assumption.




We note that the initial data provided two years ago for 2014 and 2015 reflected much lower withdrawal than expected, while the matured data this year shows significantly higher experience. This is because of the large numbers of employees who take leaves of absence, and who appear to be much more likely to terminate employment by the end of the leave of absence24.


4-year experience ending 2015



We suggest a 40% increase in this assumption, based on experience between 2008 and 2015. We suggest that this be reviewed again in 2 and 4 years to determine whether this increase is sufficient, once the improved data being produced by BERS is reflected.


The ordinary disability experience is significantly lower than assumed over the 10-year period, but only slightly lower over the 4-year period. Accidental disability experience is much lower than expected for men over both 4- and 10-year periods, but for women, the accidental disability experience is much higher over both the 4- and 10-year periods. We noted in our prior report that the accidental experience was lower than expected, rather than significantly above expected as it is in this study.

Ratio of actual to expected disabilities 4-year experience 10-year experience

Ordinary – Men 73.69% 67.32%

Ordinary – Women 96.63% 81.45%

Ordinary – Combined 91.24% 78.13%

Accidental – Men 40.08% 43.71%

Accidental – Women 189.91% 166.53%

Accidental – Combined 130.69% 119.787%

The incidence of ordinary disability is low (519 disabled out of 109,442 eligible, over the last 10 years), and while the experience has been lower than expected, it is within the confidence intervals in total, so we are not suggesting a change in the assumption. The incidence of accidental disability is even lower (72 disabled out of 242,537 eligible, over the last 10 years). Thus, very minor differences in the number of disabled significantly change the ratio of actual to assumed. Also, in the aggregate over the last 10 years, the accidental disability experience is only 119.78% of expected. Thus, we see no reason to revise the overall accidental disability assumption, although we suggest reducing the men’s assumption by 25% while increasing the women’s assumption by 25%.

24 As we mentioned earlier, many of the employees who take a leave of absence do not return. Not including these participants in the analysis would result in artificially low withdrawal rates for the two most recent years. Thus, we excluded those years from our analysis.




Total salary experience (i.e., including the effect of wage inflation), was lower than assumed over both the 10-year and 4-year period. With the 10-year average experience being 26 percent lower than the assumed increase. The total salary experience over the last 4 years is closer to the assumption. By contrast, the merit salary (i.e., net of actual or assumed inflation) experience over the 10-year period is 6 percent higher than the assumed merit salary increase and was 44 percent higher than assumed over the last 4 years.

Ratio of actual to expected salary 4-year experience 10-year experience

Total 90.10% 74.12%

Merit 144.21% 106.18%

We are not suggesting changing the merit or total pay assumptions, because the experience brackets the assumptions over the last 4 and 10 years.



Board of Education Retirement System of the City of New York Service Retirees' Mortality Assumption and Experience


Actual NUmber of Deaths: 267








0%

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56 61 66 71 76 81 86 91 96

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56 61 66 71 76 81 86 91 96

Actual Deaths

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56 61 66 71 76 81 86 91 96

Actual Deaths

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Expected Amount of Deaths: 1,303

Actual Amount of Deaths: 1,015

Actual Amount of Deaths: 1,015



Expected Amount of Deaths: 1,303

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56 61 66 71 76 81 86 91 96

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56 61 66 71 76 81 86 91 96

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56 61 66 71 76 81 86 91 96

Actual Deaths

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Service Retirees' Mortality Assumption and Experience4-Year Period Ending 2017


Mortality by Pension Amount - Men

Board of Education Retirement System of the City of New York




Expected Amount of Pension Reduction: $10,527,127

Actual Amount of Pension Reduction: $6,583,275

95% Current Confidence Interval: $9,902,138 to $10,830,056




0

100000

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56 61 66 71 76 81 86 91 96Pen


Retirees

Age


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56 61 66 71 76 81 86 91 96Pen


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Age


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56 61 66 71 76 81 86 91 96

Age






4-Year Period Ending 2017Mortality By Pension Amount - Women










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56 61 66 71 76 81 86 91 96Pen


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56 61 66 71 76 81 86 91 96Pen


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Age


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56 61 66 71 76 81 86 91 96

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Board of Education Retirement System of the City of New York Disability Retirees' Mortality Assumption and Experience













0%

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45 50 55 60 65 70 75 80 85 90 95 100+

Age



0

1

2

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45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


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1

1.5

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45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age






4-Year Period Ending 2017Disability Retirees' Mortality Assumption and Experience










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45 50 55 60 65 70 75 80 85 90 95 100+

Age



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45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


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45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age






Expected Amount of Pension Reduction: $625,643

Actual Amount of Pension Reduction: $632,087


95% Current Confidence Interval: $496,994 to $687,999




4-Year Period Ending 2017Mortality by Pension Amount - Men


0

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45 50 55 60 65 70 75 80 85 90 95Pen


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45 50 55 60 65 70 75 80 85 90 95 100+

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Disability Retirees' Mortality Assumption and Experience4-Year Period Ending 2017

Mortality By Pension Amount - Women


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For the Ten-Year Period ending in 2017

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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Ordinary Mortality Rates - Men



95% Confidence Interval of Proposed AssumptionProposed Assumptions are 66.7% of the Current Rates


Board of Education Retirement System of the City of New York Active Ordinary Mortality Assumption and Experience







0

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35 40 45 50 55 60 65

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ortalities

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ortalities

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35 40 45 50 55 60 65

Age





Ordinary Mortality Rates - Women







Proposed Assumptions are 66.7% of the Current Rates95% Confidence Interval of Proposed Assumption




0

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35 40 45 50 55 60 65

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ortalities

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35 40 45 50 55 60 65

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ortalities

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35 40 45 50 55 60 65

Age



Need graph



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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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56 57 58 59 60 61 62 63

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56 57 58 59 60 61 62 63 64 65 66

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56 57 58 59 60 61 62 63 64 65 66

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Board of Education Retirement System of the City of New York Retirement Experience of those After First Year of Eligibility







4-Year Period Ending 2017Elected Plan, Men and Women






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56 57 58 59 60 61 62 63 64

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56 57 58 59 60 61 62 63 64 65 66

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57 58 59 60 61 62 63 64 65 66

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57 58 59 60 61 62 63 64 65 66

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Retirement Experience of those After First Year of Eligibility4-Year Period Ending 2017













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58 59 60 61 62 63 64 65 66 67 68 69 70 71

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Board of Education Retirement System of the City of New York Normal Retirement Experience


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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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Board of Education Retirement System of the City of New York Early Retirement Experience of Active Members

4-Year Period Ending 2017Men and Women

Proposed Assumptions are 125% of current rates

Total Number of Expected Retirements: 403.2

95% Confidence Interval: 386.4 to 420.

Actual Number of Retirements: 475



Total Number of Expected Retirements: 322.6

95% Confidence Interval:305.7 to 339.4

Actual Number of Retirements: 475



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55 56 57 58 59 60 61

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Board of Education Retirement System of the City of New York Early Retirement Experience of Active Members


0%

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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Actual/Expected Rates for Early Retirement Experience of Active Members



Board of Education Retirement System of the City of New York Withdrawal Experience of Active Members

4-Year Period Ending 2015Rate of Withdrawal- Men












0%1%2%3%4%5%6%7%8%9%

10%

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Service

Men


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ServiceActual Actual Not In Interval Upper Bound Expected Lower Bound

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Actual W

ithdrawals

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4-Year Period Ending 2015Rate of Withdrawal- Women







95% Confidence Interval of Proposed Assumption Proposed Assumptions are 140% of the Current Rates




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Service

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Actual W

ithdrawals

Service




4-Year Period Ending 2015Rate of Withdrawal- Men and Women







95% Confidence Interval of Proposed Assumption Proposed Assumptions are 140% of the Current Rates




0%

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Service

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2008 2009 2010 2011 2012 2013 2014 2015

Year




Actual Number of Disabilities: 48


Total Number of Expected Disabilities :65.8

95% Confidence Interval: 58.1 to 73.5


95% Confidence Interval of Proposed AssumptionProposed Assumptions are 100% of Current Rates


Total Number of Expected Disabilities: 65.8



Ordinary Disability Rates

Board of Education Retirement System of the City of New York Ordinary Disability Assumptions and Experience

4-Year Period ending in 2017

0

0.002

0.004

0.006

0.008

0.01

0.012

0.014

0.016

35 40 45 50 55 60 65 70

Age

Ordinary Disability, Men


0

1

2

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4

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35 40 45 50 55 60 65 70

Actual Retirem

ents

Age


0

1

2

3

4

5

6

7

8

35 40 45 50 55 60 65 70

Actual Retirem

ents

Age









Ordinary Disability Rates





Board of Education Retirement System of the City of New York Ordinary Disability Assumptions and Experience

4-Year Period ending in 2017

0

0.002

0.004

0.006

0.008

0.01

0.012

0.014

0.016

0.018

35 40 45 50 55 60 65 70

Age

Ordinary Disability, Women


0

5

10

15

20

25

35 40 45 50 55 60 65 70

Actual Retirem

ents

Age


0

5

10

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35 40 45 50 55 60 65 70

Actual Retirem

ents

Age



Need graph

Board of Education Retirement System of the City of New York Ordinary Disability Experience of Active Members


0%

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80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year






95% Confidence Interval of Proposed AssumptionProposed Assumptions are 75% of the Current Rates for Men and 125% for Women



Board of Education Retirement System of the City of New York Accidental Disability Experience of Active Members







0.00%

0.02%

0.04%

0.06%

0.08%

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0.12%

0.14%

0.16%

35 40 45 50 55 60 65

Age


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35 40 45 50 55 60 65

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Age


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35 40 45 50 55 60 65

Actual Disabilities

Age



Board of Education Retirement System of the City of New York Accidental Disability Experience of Active Members


0%

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

0 0 0 0









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8.00%

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0 5 10 15 20 25 30+

Service



-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

0 5 10 15 20 25 30+

Service




#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!

#REF!




-50%

0%

50%

100%

150%

200%

250%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%



Results, including confidence intervals, for POLICE


POLICE Experience Analysis

The following sections discuss the differences between POLICE and the other plans, and the POLICE demographic experience.

Issues Unique to Police

The number of POLICE members is substantially higher than the number of FIRE members (roughly 80,000 members instead of 30,000 for FIRE, and roughly twice as many employees), so the POLICE demographic experience is more credible than the FIRE experience. While the number of women in the POLICE plan is much higher than for FIRE, it is still substantially lower than men, particularly for retirees, so the differences between expected and actual results are significantly more credible for men than for women.

POLICE provides for early retirement only for those with 20 but less than 22 years of service (Tiers 2 and 3 Revised). However, while the OA assumes a probability of early retirement for POLICE members, the first Tier 3 member to be eligible for early retirement will be eligible in 2029. Hence, there is no early retirement experience to analyze. Ordinary and accidental disability and death benefits are provided, with accidental benefits differing for those participating in the World Trade Center (WTC) rescue, recovery or clean up. The number of officers eligible for WTC benefits is declining over time, from nearly 50% to about 25% in 2017.

The overtime assumption is quite significant for POLICE, and separate assumptions are made in the year prior to retirement or disability (referred to as Dual Overtime). Our analysis excluded members in the year prior to retirement (either service or disability) from the determination of normal overtime experience. Also note that we are unable to determine which employees in 2017 will retire in 2018, so did not include any dual overtime analysis for 2017. The relevant tables and graphs end at 2016.

We note that the five unions that represent POLICE members have contracts that expire between July 31, 2017 and April 30, 2019. The Policemen’s Benevolent Association contract has expired and we understand that the contract negotiations are now in arbitration.

A large difference between POLICE and FIRE, however, is that there are many more disabled FIRE retirees than service retirees, while the opposite is true for POLICE.

POLICE members

Please note that we organized this section for POLICE and FIRE slightly differently than we did for the other plans. We include six items below, combining Salary and Overtime into a single section, because of the much greater impact of overtime in the determination of benefits for POLICE and FIRE.




The mortality experience for men and women, who retired either under service or disability retirement or are survivor beneficiaries, are reflected in the table below. While we did analyze women’s mortality experience for disability retirements, because of the relatively small number of disabled women (6,135 life years in the 4-year data and 13,546 in the 10-year data) included in the retiree data and the low number of deaths (44 over 4 years, 96 over 10), these results are not credible. Please note that the number of male life years included in the service retiree mortality experience (111,455 for 4 years and 265,628 for 10 years) is between 7.7 and 8.8 times the female life years (14,632 and 30,069, respectively), so the men’s experience is much more credible than the women’s experience. This pattern is true throughout the POLICE experience data.

We compiled the results by lives and liabilities. Liability weighted mortality has not been

studied previously, so we only have 4 years of liability-based experience. The liability-

based results are appropriate for measuring the liability for benefits that vary by salary

and service, such as the POLICE retirement and disability benefits. The lives-based

results are appropriate to measure liabilities that are for benefits which are the same for

all participants (e.g., OPEB benefits.) We suggest that the Office of the Actuary consider



one by liabilities. We suggest using 91% of the assumed mortality for service retirees

and 85% for disabled retirees, for the liability-based mortality assumptions. We suggest

no adjustment for service retirement and 97% of the assumed mortality for disability

retirees, for the lives-based mortality assumptions.



4-year experience

Liability Weighted

10-year experience

Lives

Service retirement – Men 103.39% 89.36% 103.15%

Service retirement – Women 74.24% 65.15% 81.12%

Service retirement – Combined 102.50% 88.31% 102.59%

Disability retirement – Men 92.36% 82.69% 94.51%

Disability retirement – Women 116.71% 119.03% 117.36%

Disability retirement – Combined 93.03% 83.77% 95.08% The service retirement assumption by liabilities is outside the confidence interval and, as noted above, we are suggesting that the service retirement mortality assumption by liabilities be changed by a reduction to 91% of the base probabilities.

The disability retirement assumption by lives and liabilities is also outside the confidence interval and we are suggesting that the mortality assumption be changed for both the lives and liabilities.



2. Mortality – active men and women – ordinary and accidental

The following graphs and tables show the incidence of mortality for active POLICE members (employees) due to ordinary and accidental causes, for both men and women. Please note that the total life exposures are roughly five times higher for men than for women (116,042 over 4 years and 289,010 over 10 years for men, as compared to 23,520 over 4 years and 59,424 over 10 years for women.) Thus, the credibility of the results for men is significantly higher than the credibility of the results for women. Furthermore, the assumed rates of active mortality are relatively low (0.06% for men .09% for women, in the ages with significant exposures) and the rates of accidental mortality are even lower (0.01% for both men and women, in the relevant ages).

Ratio of actual to expected deaths 4-year experience 10-year experience

Ordinary - Men 76.31% 85.70%

Ordinary - Women 129.24% 88.82%

Ordinary - Combined 84.49% 86.22%

Accidental - Men 80.46% 67.87%

Accidental - Women 23.55% 9.56%

Accidental - Combined 70.94% 58.03% Ordinary mortality experience for men was about 24% below expected in the last 4 years, and 14% less than expected over the last 10 years. For women, ordinary mortality experience was 29% higher than expected (20 instead of the 15.47 assumed deaths), but the difference wasn’t credible. However, women’s ordinary mortality experience was lower than expected over 10 years, but also not credible (33 vs. 37.15). Please note that because of the low incidence of accidental mortality we are not providing confidence intervals for the accidental mortality assumption.

We note that while the assumption of accidental deaths is the same for men and women, of the 18 accidental deaths in the last 4 years, 17 were men; in the last 10 years, only 1 of the 36 accidental deaths was of a woman. Because of the substantial growth in the number of female POLICE members in recent years, we believe that there is no reason to revise the assumption at this time, but that this variance should be reviewed in the next several experience studies, as the number and concentration of women members increases.

Thus, we are not currently suggesting any revisions to the ordinary and accidental mortality assumptions for actively employed POLICE members.



3. Retirement – men and women

Previous experience studies separated retirement experience among the three categories (1) experience in the first year that members were eligible to retire, (2) experience in the year after the first year (second year) and (3) experience in all years after the first two years of retirement eligibility. We determined that the experience between the second year and later years was generally not sufficiently different to warrant separate retirement assumptions. After discussing the effect on the annual valuations with the OA we consolidated the suggested changes to the retirement assumptions to include only a first year eligible and an after the first year of retirement eligibility assumption. In developing the after first year assumption we focused on the after second year of retirement experience because the number of 2nd year of retirement eligibility exposures (3,675 over the 4 years ending in 2017) was much less than the number of exposures after the second year of retirement eligibility (15,390 in the years ending in 2017). Also, the assumptions were the same for ages greater than age 49.

POLICE retirement experience has been substantially lower than expected in the last 10 years, including the last 4 years. However, this difference has been primarily in the first year of eligibility for retirement.

POLICE members appear to be retiring slightly later than assumed. Recent experience and 10-year experience have been consistent with actual experience being close to assumed after the first year or retirement eligibility. Experience in the first year of eligibility has been a lower percentage of assumed and has decreased in the most recent years. We note that this appears to be consistent with the nationwide trend toward later retirement. Accordingly, we are suggesting a 30 percent reduction in the Tier 1 and Tier 2 retirement rates in the first year of retirement eligibility, and a no change to the retirement rates after the first year Tier 1 and Tier 2 second year of retirement eligibility. We are not suggesting a change in the Tier 3 retirement assumption as there is no retirement experience for Tier 3 participants.

Also, while women’s experience is much less credible, women are retiring at a much faster rate than men, although that rate is lower in the most recent 4-years of experience than in the 10-year period. Note that the combined experience for men and women is within the 95% confidence interval for both the second year and the post second year periods. Accordingly, we are not suggesting a change in the retirement assumption for women. The differential between the rate of men retiring and women retiring bears watching as the percentage of women in the workforce increases.

Ratio of actual to expected retirements, men and women 4-year experience 10-year experience



First year of eligibility – Combined 67.03% 70.32%







While the withdrawal assumption is the same for men and women, we analyzed differences between men and women, to determine whether separate assumptions should be used.

Withdrawal experience has changed substantially over the last decade. Looking at just the most recent 4 years’ experience, actual withdrawals have been much lower than expected, but the 4-year averages have increased since the 2015 study. Unlike with the NYCERS, TRS and BERS withdrawal experience, we did not see large decreases in withdrawal in the most recent two years, due to employees on leaves of absence which had not yet ended, and which in prior years frequently became terminations.




The 2008 experience was higher than anticipated but dropped significantly in 2009 and continuing at the lower level to the present. Because the experience has been lower than anticipated the last 9 years, and largely outside of the 95% confidence interval we are suggesting a 25% reduction in this assumption.

However, while we note that the incidence of withdrawal continues to be much lower for

women than men, the incidence is quite low and the number of exposures is only about

1/5th of the number of exposures for men. Thus, we are not suggesting the development

of a separate withdrawal table for women, although we suggest that this should continue

to be evaluated in future experience studies.

5. Disability – men and women – ordinary, accidental WTC eligible and ineligible

The experience of ordinary disability appears to be very different between men and women, although the number of men included in the experience study is about 5 times higher than the number of women. While men are becoming disabled at a rate substantially below that assumed, women are becoming disabled at a rate above what has been assumed. Both groups have seen a drop in the disability rates in the last 4 years, as compared to the last 10 years.

Accidental disability experience, both for those eligible for WTC benefits and those not eligible, is substantially lower than expected over both 4 and 10-year periods, with smaller differences between men’s and women’s experience than for ordinary disability.



5. Disability – men and women – ordinary, accidental WTC eligible and ineligible (cont.)

Ratio of actual to expected disabilities 4-year experience 10-year experience

Ordinary – Men 44.61% 59.75% Ordinary – Women 133.31% 161.18%

Ordinary – Combined 57.88% 75.07% Accidental, WTC Eligible – Men 39.67% 50.44% Accidental, WTC Eligible – Women 36.88% 43.63% Accidental, WTC Eligible – Combined 39.28% 49.44% Accidental, not WTC Eligible – Men 59.65% 64.64% Accidental, not WTC Eligible – Women 52.18% 53.58% Accidental, not WTC Eligible – Combined 58.25% 62.51%

As is shown in the table above, the significance of the WTC disability assumption is decreasing as the number of eligible POLICE and FIRE members declines over time, so the importance of this WTC disability assumption is declining, while the importance of the non-WTC disability is increasing.

Because the combined disability experience continues to be significantly lower than assumed we suggest a reduction of 20% to the ordinary disability rates, 40% to the WTC eligible rates and 30% to the ordinary accidental disability rates. We note that the ordinary disability experience is mostly within the 95% confidence interval (for both men and women), and women’s accidental disability is also mostly within the 95% confidence interval. However, for all of the disability assumptions the experience in total are outside of the confidence intervals, accordingly we believe that revising the disability rates is warranted.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent of Employees Eligible for WTC Benefit

fire police



6. Salary increase – men and women – base, merit, regular overtime, retirement overtime and disability overtime

The salary improvement assumptions include a variety of assumptions, including:

• The inflation assumption (addressed in the economic assumptions)

• The annual salary improvement assumption

• The annual merit improvement assumption

• The annual regular overtime assumption

• The overtime assumption in the year of retirement

• The overtime assumption in the year of disability.

The last two assumptions are referred to as the Dual Overtime assumption.

Ratio of actual to expected salary experience 4-year experience 10-year experience

Salary Improvement 116.18% 131.24%

Merit Improvement 121.45% 140.69% The annual salary improvement and the annual merit improvement assumption are related, because the difference between the two is the inflation assumption. We used the average inflation experience over the last 4 years of 1.5% to adjust the salary improvement to the merit improvement experience. The 10-year merit salary experience is significantly higher than 4-year experience for both.

By both measures and over both the 4 and 10-year periods, the salary increases are 15 percent or more over the expected amounts, accordingly we are suggesting a 15 percent increase to the merit improvement salary increase assumption.

Ratio of actual to expected

overtime experience 4-year experience ending

2016 9-year experience ending

2016

Regular Overtime 120.33% 118.34% Retirement Overtime 119.88% 116.42% Disability Overtime 101.24% 93.71%

Overtime experience, except for dual disability retirement over the last 9-year period, is higher than expected, as shown in the table above.

The ratio of actual overtime to expected overtime has varied between 107% and 133% during the last 9 years. The dual retirement overtime experience has varied between 103% and 135% during the last 9 years. The overtime and dual retirement overtime experience the last two years has been higher than the averages. Because the 4- and 9-year averages are fairly close to each other we are suggesting a 15% increase to both of these assumptions.

The dual disability overtime experience is very close to expected over the last 4 years. Thus, we are not suggesting a change to this assumption.


Expected Number of Deaths: 2,084.53

Actual Number of Deaths: 2,157.









New York City Police Pension FundService Retirees' Mortality Assumption and Experience

Mortality By Lives

0%20%40%60%80%

100%120%140%160%180%200%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

0

20

40

60

80

100

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

20

40

60

80

100

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age




Expected Number of Deaths: 66.27

Actual Number of Deaths: 49.










Mortality By Lives

0%

50%

100%

150%

200%

250%

300%

350%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

0

1

2

3

4

5

6

7

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

7

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age






Expected Liabilities Reduction: $46,652,880

Actual Liabilities Reduction: $45,796,478







Service Retirees' Mortality Assumption and ExperienceLiability Weighted Mortality4-Year Period Ending 2017

New York City Police Pension Fund

0%20%40%60%80%

100%120%140%160%180%200%

55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

‐

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

55 60 65 70 75 80 85 90 95

Pen


Retirees


‐

500,000

1,000,000

1,500,000

2,000,000

2,500,000

55 60 65 70 75 80 85 90 95Pen

sion Amount of

Deceased Retirees

Age



95% Current Confidence Interval: $841,014 to $3,393,004












Liability Weighted Mortality4-Year Period Ending 2017

0%

50%

100%

150%

200%

250%

300%

350%

55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

‐

100,000

200,000

300,000

400,000

55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


‐

100,000

200,000

300,000

400,000

55 60 65 70 75 80 85 90 95

Pen


Retirees

Age



New York City Police Pension FundMortality Assumptions and Experience

For the Ten-Year Period ending in 2017 By Year

90%

95%

100%

105%

110%

115%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Service Retirees By Lives














Disability Retirees' Mortality Assumption and ExperienceNew York City Police Pension Fund

Mortality By Lives


0%

50%

100%

150%

200%

250%

45 50 55 60 65 70 75 80 85 90 95 100+

Age

Actual/Expected Rates for Disability Retirees, Men

Actual 100%

0

20

40

60

80

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

20

40

60

80

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age














Disability Retirees' Mortality Assumption and ExperienceNew York City Police Pension Fund

Mortality By Lives


0%

100%

200%

300%

400%

500%

600%

45 50 55 60 65 70 75 80 85 90 95 100+

Age

Actual/Expected Rates for Disability Retirees, Women

Actual 100%

0

1

2

3

4

5

6

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age


0

1

2

3

4

5

6

45 50 55 60 65 70 75 80 85 90 95

Actual Deaths

Age















New York City Police Pension FundDisability Retirees' Mortality Assumption and Experience

0%20%40%60%80%

100%120%140%160%180%200%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

‐

500,000

1,000,000

1,500,000

2,000,000

2,500,000

45 50 55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


‐

500,000

1,000,000

1,500,000

2,000,000

45 50 55 60 65 70 75 80 85 90 95

Pen


Retirees

Age





95% Current Confidence Interval: ($188,671) to $2,504,610






95% Current Confidence Interval: ($98,320) to $2,822,954




New York City Police Pension FundDisability Retirees' Mortality Assumption and Experience

0%

100%

200%

300%

400%

500%

600%

700%

45 50 55 60 65 70 75 80 85 90 95 100+

Age

Actual/Expected Rates for Disability Retirees, Women

Actual 100%

‐

50,000

100,000

150,000

200,000

250,000

300,000

350,000

45 50 55 60 65 70 75 80 85 90 95

Pen


Retirees

Age


‐

50,000

100,000

150,000

200,000

250,000

300,000

45 50 55 60 65 70 75 80 85 90 95

Pen


Retirees

Age




New York City Police Pension FundMortality Assumptions and Experience

75%

80%

85%

90%

95%

100%

105%

110%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected Rates for Disability Retirees By Lives



Actual Number of Deaths: 61.0








Ordinary Mortality Rates - Men



New York City Police Pension FundActive Ordinary Mortality Assumption and Experience


0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

25 30 35 40 45 50 55

Age

Men


0

2

4

6

8

10

25 30 35 40 45 50 55

Actual Deaths

Age


0

2

4

6

8

10

25 30 35 40 45 50 55

Actual Deaths

Age











Ordinary Mortality Rates - Women



New York City Police Pension FundActive Ordinary Mortality Assumption and Experience


0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

25 30 35 40 45 50 55

Age

Women


0

0.5

1

1.5

2

2.5

3

25 30 35 40 45 50 55

Actual Deaths

Age


0

0.5

1

1.5

2

2.5

3

25 30 35 40 45 50 55

Actual Deaths

Age



New York City Police Pension FundOrdinary Mortality Assumptions and ExperienceFor the Ten-Year Period ending in 2017 By Year

0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year
















Retirement Experience of Active MembersNew York City Police Pension Fund

First Year of Retirement Eligibility, Men and Women

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

40 45 50 55

Age


0

100

200

300

400

500

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Actual Retirements

Age


0

50

100

150

200

250

300

350

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Actual Retirements

Age















Retirement Experience of Active MembersNew York City Police Pension Fund

After First Year of Retirement Eligibility, Men and Women

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

40 45 50 55


0

50

100

150

200

250

300

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54

Actual Retirements


0

50

100

150

200

250

300

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Actual Retirements




New York City Police Pension FundNormal Retirement

0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




New York Police Department Pension Fund



Withdrawal Rate

Expected Amount of Withdrawals: 1,518

Actual Amount of Withdrawals: 943






Expected Amount of Withdrawals: 1,139

Actual Amount of Withdrawals: 943


Proposed Rates are 75% of the Current Rates

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Service

Withdrawal, Men and Women


0

50

100

150

200

250

300

0 6.4 11.4 16.4

Act

ual

Wit

hd

raw

als

Years of Service


0

50

100

150

200

250

0 6.4 11.4 16.4

Act

ual

Wit

hd

raw

als

Years of Service



New York Police Department Pension Fund



0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual/Expected

Actual/Expected













Men 4-Year Period Ending 2017Rate of Ordinary Disability


0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

25 30 35 40 45 50 55

Age

Men


0

2

4

6

8

10

12

14

25 30 35 40 45 50 55

Actual Disabilities

Age


0

2

4

6

8

10

12

25 30 35 40 45 50 55

Actual Disabilities

Age





Ordinary Disability Experience of Active MembersWomen 4-Year Period Ending 2017











0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

25 30 35 40 45 50 55

Age

Women


0

2

4

6

8

25 30 35 40 45 50 55

Actual Disabilities

Age


0

2

4

6

8

25 30 35 40 45 50 55

Actual Disabilities

Age



New York City Police Pension FundOrdinary Disability Experience of Active MembersFor the Ten-Year Period ending in 2017 By Year

0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year










Expected Disabilities: 1,242.6


New York City Police Pension FundAccidental Disability Experience of Active Members

4-Year Period Ending 2017Rate of Accidental Disability -WTC Eligible



0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

25 30 35 40 45 50 55

Age

Men


0

20

40

60

80

100

120

25 30 35 40 45 50 55

Actual Disabilities

Age


0

10

20

30

40

50

60

70

25 30 35 40 45 50 55

Actual Disabilities

Age












4-Year Period Ending 2017Rate of Accidental Disability -WTC Eligible



0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

25 30 35 40 45 50 55

Age

Women


0

5

10

15

20

25

25 30 35 40 45 50 55

Actual Disabilities

Age


0

5

10

15

20

25 30 35 40 45 50 55

Actual Disabilities

Age














4-Year Period Ending 2017Rate of Accidental Disability -Non WTC Eligible

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

25 30 35 40 45 50 55

Age

Men


0

10

20

30

40

50

60

70

25 30 35 40 45 50 55

Actual Disabilities

Age


0

10

20

30

40

50

25 30 35 40 45 50 55

Actual Disabilities

Age














4-Year Period Ending 2017Rate of Accidental Disability -Non WTC Eligible

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

25 30 35 40 45 50 55

Age

Women


0

5

10

15

20

25 30 35 40 45 50 55

Actual Disabilities

Age


0

5

10

15

25 30 35 40 45 50 55

Actual Disabilities

Age





0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year





Salary Experience of Active Members


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0 5 10 15 20 27

Service



0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

0 5 10 15 20 27

Service




New York City Police Pension FundTotal Salary Experience of Active Members


-

0.50

1.00

1.50

2.00

2.50

3.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Annual Total Salary to Expected Total Salary,Men and Women

Actual 100%



Overtime Experience of Active Members


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

18 25 30 35 40 45

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

3 8 13 18 25 30 35 40 45

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0 5 10 15 20 27 32 37 42

Service





Overtime Pay Experience for All Years


-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year


Men and Women

Actual 100%



Results, including confidence intervals, for FIRE


FIRE Experience Analysis

The following sections discuss the differences between FIRE and the other plans, and the FIRE demographic experience.

Issues unique to FIRE

Please note that the analysis was done only for men or for combined men and women, since there are so few women included in the data. Thus, there would have been no creditability for any analysis done exclusively for women.

Also, the fire department hiring freeze had a significant effect on the number of employees hired during a three-year period, leaving insufficient numbers of members in those cohorts for the results of any analysis to be credible. This also likely resulted in much higher overtime during that period, and in the succeeding years, as new employees were hired and brought up to speed.

Finally, FIRE is a relatively small group (less than 30,000 participants), with just more than 10,000 currently employed. Moreover, the retiree group consists of about 10,000 disabled retirees and only 5,000 service retirees. Roughly 90% of the disabled retirees were disabled due to accidental disability, largely related to the World Trade Center destruction. Thus, the mortality experience for service retirees is less credible, and less important to the valuation results, than that for disabled retirees. Also, the employed firefighters who could become eligible for WTC disability benefits is shrinking quickly, as more new employees are hired, and is now below 50% of current firefighters. Thus, the accidental disability assumption for non-WTC eligible firefighters is becoming more important than the assumption for WTC eligible firefighters.



FIRE members – Demographic Assumption Review

1. Mortality – service and disability retirees

The critical change in our analysis is analyzing mortality experience weighted by liabilities.

The following graphs and tables show the incidence of mortality for service retirees and disabled male retirees, for the most recent 4 or 10 years, ending June 30, 2017. We do not provide any experience analysis for women as the number of retired women (7 service retirees and 25 disabled retirees) would not result in credible analysis. Please note that the results of the analysis for service retirees below age 55 and disabled retirees below age 45 is entirely unreliable due to the paucity of retirees in those age groups. See the table for the 4-year period which shows, for service retirees, total exposures of less than 200 at each age prior to age 54, and an expected number of deaths of only 1.5 at age 55. Even at older ages, the number of retiree exposures are never more than 838 (although the expected deaths peak at age 85 with more than 30 expected at that age), so significant variance between actual and expected mortality experience is to be expected. Overall, actual mortality experience was 3.5% higher than expected. Experience over a 10-year period is slightly further from the mortality assumption at 6.6% higher. We also measured the mortality experience, weighted by liabilities instead of lives for the 4-year period. We did not have liability information by retiree prior to the most recent 4-year period. The result is very different from the experience based on lives. The actual to expected ratio decreases from 3.5% higher than assumed to 12.3% lower than assumed for the service retired members. While the mortality experience for service retirees remains entirely within the 95% confidence interval, the mortality experience weighted by liabilities is frequently outside of the 95% confidence interval.

Exposures for disability retirees are roughly double that of service retirees (over 4 years, 40,466 versus 21,094, with 937 deaths compared to 716 deaths), although, because of the younger average age of disability retirees the average mortality rate is lower. Overall experience was only 2.6% higher than expected over the last 4 years and 1.8% higher than expected over the last 10 years. We measured the mortality experience weighted by liability amounts for the 4-year period. The result is very different, with the actual to expected ratio decreasing from 2.30% higher than expected to 19.6% lower than expected. Similar to service retirement experience, disabled lives mortality experience by lives is largely within the 95% confidence interval, while the liabilities weighted mortality experience is largely below the bottom of the 95% confidence interval.

Ratio of actual to expected deaths – Men




Service retirement 103.48% 87.69% 106.64% Disability retirement 102.62% 80.37% 101.75%



1. Mortality – service and disability retirees (cont.)

Interestingly, the difference in the mortality experience for service retirees is significantly different for those over age 80 than for those under age 80. While for those under age 80, mortality experience is only 0.90% higher than expected (not weighted by liabilities), for those over age 80, mortality experience is 5.09% higher than expected. Similarly, liability-weighted experience shows that mortality experience above age 80 is closer to the assumption (8.3% lower than assumed), while experience below age 80 is much lower than assumed (17.2% lower, or 82.8% of assumed). Thus, while applying a constant adjustment factor to the current assumption results in a better overall fit, at the younger ages the adjusted A/E ratios are less than 1.0 while at the older ages the adjusted A/E ratios are higher than 1.0. Thus, we considered adjusting the standard Society of Actuaries (SOA) tables rather than the current assumption by a constant factor to see if the A/E ratios would be consistently closer to 1.0 at younger and older ages but found that the shape of the SOA curves are very similar to the NYC Fire mortality assumption and would not result in a closer fitting assumption.

Mortality experience for disability retirees also varies significantly by age. Under age 80, the mortality experience is only 91.76% of assumed, while at ages over 80 mortality experience is 114.23% of assumed (not weighted by liabilities.) When weighted by liabilities, the experience above age 80 is just 0.65% lower than expected, while the experience under age 80 is only 68.37% of expected.

As previously noted, we only have 4 years of liability data. However, since the results are outside the 95% confidence intervals, we recommend reducing the mortality assumption so that the new mortality assumption is within the confidence intervals. Decreasing assumed mortality assumptions would increase the FIRE liabilities and increase the required contributions. For the service retirement mortality assumption, a decrease of 9 percent would result in the experience being within the confidence intervals. For the disabled retirement mortality assumption, a decrease of 17 percent would result in the experience being within the confidence intervals. However, reducing the disabled retirement mortality assumption by a higher percentage than the service retirement mortality assumption would result in mortality rates that are less at higher ages for disabled retirees than for service retirees. However, our experience is that mortality for disabled retirees is never less than that for non-disabled retirees. Thus, we suggest setting the mortality rates for disabled retires equal to service retirees at ages 85 and above. This adjustment resulted in the actual experience being just outside the confidence interval.

As noted above, another issue is the shape of the mortality curve. The following graphs

compare the shape of the SOA liabilities mortality tables to the actual experience and

the current assumption, for both the service mortality and the disability mortality. We

compared the liabilities weighted experience to the SOA liabilities weighted tables and

the current table. As is shown in the following four graphs, the closer fit to actual

experience is the current NYC table, as adjusted.

Please note that we compared disabled mortality experience to both the SOA disabled

mortality table and to the SOA Blue Collar mortality table. The Blue Collar table was the

closer fit of the two, and is nearly identical to the disabled mortality table currently used

by the OA. However, as noted above, the table already being used by the OA is an

even closer match, when adjusted as noted above.




Finally, the graphs are split between before and after age 80, to allow the viewer to

better notice the differences before age 80, as the mortality rates increase substantially

over age 80. The first two tables are for service mortality and the second two for

disability mortality.

0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79

FireService Retirees' Mortality by Liabilities - Until 804 Year Period Ending 2017Comparison to SOA RP 2014 Blue Collar and NYC Assumption

Actual Amts SOA BC Amts NYC Assumed




0.0000

0.0500

0.1000

0.1500

0.2000

0.2500

0.3000

0.3500

0.4000

81 83 85 87 89 91 93 95 97 99

FireService Retirees' Mortality by Liabilities - Above 804 Year Period Ending 2017Comparison to SOA RP 2014 Blue Collar and NYC Assumption

Actual Amts SOA BC Amts NYC Assumed




0.0000

0.0100

0.0200

0.0300

0.0400

0.0500

0.0600

0.0700

0.0800

41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79

FireDisability Retirees' Mortality by Liabilities - Until 804 Year Period Ending 2017Comparison to SOA RP 2014 Blue Collar and NYC Assumption

Actual Amts SOA Dis Amts SOA BC Amts NYC Assumed



1. Mortality – service and disability retirees

0.0000

0.1000

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81 83 85 87 89 91 93 95 97 99

FireDisability Retirees' Mortality by Liabilities - Above 804 Year Period Ending 2017Comparison to SOA RP 2014 Blue Collar and NYC Assumption

Actual Amts SOA Dis Amts SOA BC Amts NYC Assumed



2. Mortality – ordinary and accidental

Mortality experience for active firefighters is substantially lower than expected for both ordinary and accidental mortality. The table immediately below shows that the recent experience is even farther away from the assumption than earlier experience, although the numbers of assumed and actual deaths is relatively low. Please note that, for purposes of these calculations, we extended the current employee mortality rates from age 62 to age 64 by assuming the same rate applies to age 63 and 64 as applied at age 62. This applies to all other decrements as well.



Ordinary mortality 21.65% 41.65% Accidental mortality 23.64% 44.48%

Although there is a relatively low incidence of both ordinary and accidental mortality (37 and 26 deaths, respectively, over the last 10 years, with 108,800 exposures) among members, and the relatively minor effect on plan liabilities, we suggest that the current employee mortality assumptions be halved for both ordinary and accidental mortality (i.e., reducing the ordinary and accidental mortality rates by 50 percent.)

3. Retirement – men and women – 1st year, 2nd year and after 2nd year

Retirement experience has been substantially lower than expected in the last 10 years, including the last 4 years. Firefighters appear to be retiring later than assumed. Recent experience and 10-year experience have been consistent with actual experience being about 60% of assumed for the second and succeeding years of retirement eligibility. Experience in the first year of eligibility has been a lower percent of assumed and has decreased sharply in the most recent years.

Ratio of actual to expected retirements


First year of eligibility 36.43% 31.83% Each succeeding year 71.80% 60.32%

Based on the experience we are suggesting a significant decrease in the Tier 1 and Tier 2 retirement assumptions as follows:

1. 50% reduction in the first year of eligibility 2. 25% reduction prior to age 62, and an extension of the maximum assumed

retirement age (MRA) from age 62 to age 65 for each year succeeding the first year of retirement eligibility. The assumption at ages 63 and 64 is 25 percent, with a 100 percent retirement assumption at age 65.

We do not yet have any retirement experience for Tier 3 participants, so we are not suggesting a change in Tier 3 retirement except for an increase in the maximum retirement age from age 63 to age 65 and the changes noted above for eligibility for unreduced retirement benefits.



4. Withdrawal

FIRE withdrawal experience is lower than expected (83.85% of expected for the last 4 years and 82.71% of expected over the last 10 years). While there were several years with very few hires, in recent years there are significant number of new hires with many exposures in years 0-2. Looking back at the year by year experience, the actual to expected ratio in 2010 to 2012 (61%, 50%, 46%) were lower than the other years (except 2015), possibly due to the hiring freeze reducing dramatically the population of employees included and skewing the results. If we exclude from consideration those three years, the actual to expected ratio increases to 92%. We also note that, unlike the other plans and Systems, there does not appear to be a significant number of employees on leaves of absence which are unresolved as of June 30, 2017, resulting in non-credible data in fiscal years 2016 and 2017. Thus, we believe that there is currently no reason to change this assumption.

We did not exclude the most recent two years of withdrawal experience, because we did not see significant differences in the withdrawal experience due to employees reaching the end of the leave of absence and withdrawing from employment.

5. Disability – ordinary, accidental WTC eligible, and accidental WTC ineligible

The experience of ordinary disability appears to be very different from what has been assumed, as 7 members have qualified over the last 4 years while 192 were assumed to qualify (the experience over the last 10 years is 19 actual ordinary disabilities compared to 389 assumed).

However, accidental disability, whether for those eligible for WTC benefits or those not eligible, is an entirely different story. The accidental disability assumption, which in total is substantially higher than the ordinary disability assumption, appears to reasonably approximate accidental disabilities over the last 4 years. (The WTC Benefits Eligible 1,031 actuals and 1,082.94 expected combined with the Non – WTC Benefits Eligible 224 actuals and 170.81 expected gives a 100.10% actual to expected accidental disabilities ratio.) Over time, as the number of firefighters hired after 2001 surpasses the number of those hired before, there may be an increase in the number of ordinary disabilities and a decrease in the number of accidental disabilities.



Ordinary Disability 3.70% 4.96% Accidental – WTC Eligible 96.22% 114.14%

Accidental – not WTC Eligible 131.87% 115.36% We suggest reducing the ordinary disability assumption by 75%. Because of the recent upward trend in the non-WTC disabilities, and the increasing importance of the assumption, we also suggest increasing the accidental non-WTC disability assumption by 15%.



5. Disability – ordinary, accidental WTC eligible, and accidental WTC ineligible (cont.)

As is shown in the table above, the significance of the WTC disability assumption is decreasing as the number of eligible POLICE and FIRE members declines over time. However, even now nearly 40% of active FIRE members are eligible for WTC disability benefits.

The combined accidental disability liability experience is only slightly above 100% of assumed (100.10%, including all eligible members). However, we are still suggesting a slight increase in the accidental disability assumption for non-WTC disability.

6. Salary increase – base, merit, regular overtime, retirement overtime and disability overtime

The salary improvement assumptions include a variety of assumptions, including:

• The inflation assumption (addressed in the economic assumptions)

• The annual salary improvement assumption

• The annual merit improvement assumption

• The annual regular overtime assumption

• The overtime assumption in the year of retirement

• The overtime assumption in the year of disability.

The last two assumptions are referred to as the Dual Overtime Assumption.

Ratio of actual to expected salary experience


Salary Improvement 127.43% 140.14% Merit Improvement 146.35% 158.08%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2009 2010 2011 2012 2013 2014 2015 2016 2017

Percent of Employees Eligible for WTC Benefit

fire police



6. Salary increase – base, merit, regular overtime, retirement overtime and disability overtime (cont.)

Ratio of actual to expected overtime experience


9year experience ending 2016

Regular Overtime 198.51% 159.46% Retirement Overtime 216.26% 189.01% Disability Overtime 173.51% 152.88%

The annual salary improvement and the annual merit improvement assumption are related, because the difference between the two is the inflation assumption. We used the average inflation experience over the last 4 or 10 years, of 1.5%%, respectively, to adjust the salary improvement to the merit improvement experience. The experience for members with five or more years of service, for both assumptions, is relatively close to the assumption. However, there were significant differences for members in the first five years of employment. Since the number of employees hired in the last five years is substantially lower than usual, due to a hiring freeze, we do not anticipate that this experience is representative of what would be expected in the future after a return to normal hiring patterns.

Merit pay increases are 1.73% higher than anticipated (4.69% vs 2.96% over the last 10 years and .90% higher over the last 4 years (2.85% versus 1.95%). If we divide the 10-year experience between the first 6 years and the rest of the career you find the following.

Merit Pay Improvement

Actual Expected Recommended

Year 0 24.55% 5.00% 20.00% Year 1 12.37% 9.00% 12.00% Year 2 12.36% 10.00% 12.00% Year 3 11.96% 10.00% 12.00% Year 4 27.02% 46.00% 27.00% Year 5 16.46% 1.00% 16.00% Year 6+ 3.14% 1.58% 2.37%

Total 4.69% 2.96% 3.95%

We suggest increasing the first-year merit rate increase assumption from 5 percent to 20 percent, years 1 to 3 to 12 percent, year 4 to 27 percent and year 5 to 16 percent. We suggest increasing the merit increase in years 6 and after by 50%.

Please note that the 4-year experience has very little exposure in years of service 3 to 6. A large percent of the expected increase is in years 3 to 6 and since these years had little exposure the overall average results are biased to be lower than should be expected over the long term. The 10-year experience does have significant exposure in all years and is thus a better measure than the 4-year experience.



6. Salary increase – base, merit, regular overtime, retirement overtime and disability overtime (cont.)

Overtime experience is consistently higher than expected, as shown in the table above. We changed the way that the overtime pay rate was determined by GRS by dividing the overtime amount by the average of the beginning and end of year pay, instead of dividing just by the beginning of year pay. We believe that this better reflects the overtime experience because overtime is tied to current pay, which increases during the year. Thus, using an average pay more likely reflects the actual salary being earned when the overtime was worked.

The ratio of overtime to total pay increased substantially from 2008 to 2014 but declined slightly in 2015 and 2016. Overtime in 2016 was 90.7% higher than anticipated (as opposed to 11.8% higher than anticipated in 2008 and 1.4 percent lower than anticipated in 2009), suggesting that the overtime assumption should be increased. We have been told by the OA and Comptroller’s Office that there is a City-wide policy to limit overtime to 300 hours and 1) eliminate overtime for light duty firefighters 2) firefighters (with overtime) will not be able to earn more than their station’s battalion. This policy is now being enforced and there should be a reduction in overtime. Reflecting these changes, we suggest only a 33% increase to all three of the overtime assumptions.












New York Fire Department Pension Fund



Mortality By Lives

0%

20%

40%

60%

80%

100%

120%

140%

160%

55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

0

5

10

15

20

25

30

35

40

45

55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age


0

5

10

15

20

25

30

35

40

45

55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age

















Liability Weighted Mortality

0%

20%

40%

60%

80%

100%

120%

140%

55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

55 60 65 70 75 80 85 90 95

Pen

sio

n A

mo

un

t o

f D

ecea

sed

Ret

iree

s

Age


-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

55 60 65 70 75 80 85 90 95

Pen

sio

n A

mo

un

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f D

ecea

sed

Ret

iree

s

Age




Service Retirees' Mortality Assumptions and Experience


0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year





Expected Numberof Deaths: 914.93













Mortality By Lives

0%

50%

100%

150%

200%

250%

300%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

0

10

20

30

40

50

60

70

80

45 50 55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age


0

10

20

30

40

50

60

70

80

45 50 55 60 65 70 75 80 85 90 95

Act

ual

Dea

ths

Age







Proposed Rates are 83% of Current Rates to age 85, Above 85 Are Same As Ordinary Retirees









Liability Weighted Mortality


0%

50%

100%

150%

200%

250%

300%

45 50 55 60 65 70 75 80 85 90 95 100+

Age


Actual 100%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

45 50 55 60 65 70 75 80 85 90 95

Pen

sio

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un

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ecea

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Ret

iree

s

Age


-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

45 50 55 60 65 70 75 80 85 90 95

Pen

sio

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mo

un

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ecea

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Ret

iree

s

Age





Disability Retirees' Mortality Assumptions and Experience

0%

20%

40%

60%

80%

100%

120%

140%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year
















Ordinary Mortality Rates - Men and Women



0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

25 30 35 40 45 50 55

Age


0

1

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3

4

5

25 30 35 40 45 50 55

Act

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Dea

ths

Age


0

0.5

1

1.5

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3

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Act

ual

Dea

ths

Age




Active Ordinary Mortality Assumptions and Experience


0%

20%

40%

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year











Accidental Mortality Rates - Men and Women







Active Accidental Mortality Assumption and Experience

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

25 30 35 40 45 50 55


0

1

2

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4

25 30 35 40 45 50 55

Act

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Dea

ths

Age


0

0.5

1

1.5

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2.5

25 30 35 40 45 50 55

Act

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Dea

ths

Age




Active Accidental Mortality Assumptions and Experience


0%

20%

40%

60%

80%

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120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

















Retirement Rates - Men and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

40 45 50 55

Age


0

5

10

15

20

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30

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Act

ual

Ret

irem

es

Age


0

5

10

15

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Act

ual

Ret

irem

ents

Age







Proposed Assumptions are 75% of Current Rates prior to age 62





Retirement Experience of those after First Year of Eligibility


Retirement Rates - Men and Women




0.00%

1.00%

2.00%

3.00%

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5.00%

6.00%

7.00%

40 45 50 55


0

5

10

15

20

25

30

35

40

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Act

ual

Ret

irem

ents


0

5

10

15

20

25

30

35

40

45

50

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

Act

ual

Ret

irem

ents




Normal Retirement Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year





Expected Withdrawals: 93

Actual Withdrawals: 78




Expected Withdrawals: 93

Actual Withdrawals: 78







Withdrawal Rate

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Service

Men and Women


0

5

10

15

20

25

30

35

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Act

ual

Wit

hd

raw

als

Years of Service

Actual Upper Bound Expected Lower Bound

0

5

10

15

20

25

30

35

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Act

ual

Wit

hd

raw

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Years of Service

Actual Upper Bound Expected Lower Bound





0%

20%

40%

60%

80%

100%

120%

140%

160%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year








Proposed Assumptions are 25% of Current Rates




Ordinary Disability Rates - Men and Women






0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

30 35 40 45 50 55 60


0

5

10

15

20

25

30 35 40 45 50 55 60

Act

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Dis

abili

ties

Age


0

2

4

6

8

10

30 35 40 45 50 55 60

Act

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Dis

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ties

Age




Ordinary Disabilities Experience


0%

20%

40%

60%

80%

100%

120%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year




Actual Disabilities: 1,031.0




Actual Disabilities: 1,031.0








Accidental Disability Rates - Men and Women, WTC Eligible



0%

5%

10%

15%

20%

25%

30%

35%

40%

30 35 40 45 50 55 60 65

Age


0

20

40

60

80

100

30 35 40 45 50 55 60 65

Act

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Dis

abili

ties

Age


0

20

40

60

80

100

30 35 40 45 50 55 60 65

Act

ual

Dis

abili

ties

Age














Accidental Disability Rates - Men and Women, Non WTC Eligible




0%

1%

1%

2%

2%

3%

3%

4%

25 30 35 40 45

Age


0

5

10

15

20

25

30

25 30 35 40 45

Act

ual

Dis

abili

ties

Age


0

5

10

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20

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30

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Act

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Dis

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Age




Accidental Disabilities Experience


0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year





Salary Experience of Active Members


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0 5 10 15 20 25 30+

Service



0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

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50.00%

0 5 10 15 20 25 30+

Service







-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Actual 100%



Overtime Experience of Active Members


0.00%

10.00%

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30.00%

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18 23 28 33 38 43

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

3 8 13 18 23 28 33 38 43

Service


and Women


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

0 5 10 15 20 25 30 35 40

Service





Overtime Pay Experience for All Years - Excluding Dual OT


-

0.50

1.00

1.50

2.00

2.50

2008 2009 2010 2011 2012 2013 2014 2015 2016

Year


Men and Women

Actual 100%



Section IV Cost Impact of Suggested Revisions


Section IV Cost Impact of Suggested Revisions Impact of Proposed Revisions We show the expected effect of our suggested changes in assumptions, in total, and by System in the following tables. Please note that our analysis is based on the replication audit programming, so we are reflecting the effect of changes in the July 1, 2016 valuation, that would have applied to fiscal year 2018. Also note that the cost analysis for the proposed revisions we suggest are just applied to the participants to whom the assumptions apply. So, for example, the changes in retirement assumption apply primarily to Tier II participants, and not to Tier III participants. Please note that the cash flows for benefit payments are also affected by the change in the ultimate retirement age assumption. This is addressed with an example for TRS, shown below. Although this also affects several of the NYCERS plans, BERS and FIRE, the effects are not as great for these groups (particularly FIRE, as the increase is only from 63 to 65, rather than 70 to 80 for the others.)

Combined Cost for all Systems

Assumption Effect on Annual

Contribution Cumulative Contribution

1. Contribution Determined in 2016 Valuation N/A 10,948.6

2. Retired Mortality 255.1 11,203.7

3. Active Mortality (2.2) 11,201.5

4. Retirement (250.6) 10,950.9

5. Withdrawal (20.6) 10,930.3

6. Disability Rates (104.9) 10,825.4

7. Merit Salary 108.7 10,934.1

8. Overtime 120.5 11,054.6 The total effect of the suggested assumption changes, on the 2016 valuation, which would affect the fiscal year 2018 contributions is an increase of about $106 million or 1%. However, the effect varies significantly by System with the largest increase for FIRE and decreases for NYCERS, TRS and BERS. POLICE also would experience an increase.



Combined Cost of NYCERS Proposed Revisions The table below shows the cost effect of the revision of assumptions for all of the groups within NYCERS.



1. Contribution Determined in 2016 Valuation N/A 3,405.4

2. Retired Mortality 118.3 3,523.8

3. Active Mortality 4.9 3,528.7

4. Retirement (207.8) 3,320.9

5. Withdrawal (24.7) 3,296.2


7. Merit Salary 44.5 3,333.3

8. Overtime 37.5 3,370.8 The overall result of the revisions to the NYCERS assumptions is a slight ($34.6 million) decrease in cost, largely due to the change in the retirement assumptions because employees are retiring later than previously.

Cost of TRS Proposed Revisions and Effect on Cash Flow The table below shows the cost effect of the revision of each assumption, reflecting the contribution amount changes based on the 2016 actuarial valuation. Amounts shown are in millions.


Section IV Cost Impact of Suggested Revisions Cost of TRS Proposed Revisions and Effect on Cash Flow



1. Contribution Determined in 2016 Valuation N/A 3,947,0

2. Retired Mortality NC 3,947.0


4. Retirement (19.2) 3,925.5

5. Withdrawal NC 3,925.5

6. Disability Rates NC 3,925.5

7. Merit Salary NC 3,925.5

8. Overtime NC 3,925.5 Note that the contribution amount decreases by $21.5 million (from $3,947.0 million to $3,925.5 million). If OA decided to change the mortality assumption to be within the 95 percent confidence intervals by decreasing the service retirement male rates by 11 percent and increasing the female mortality rates by 2 percent, the cost of the mortality change would be an increase of $27.2 million. Effect on Benefit Payment Cash Flow from Extended Retirement Assumptions Currently all employees are assumed to retire by age 70, or earlier. We suggest revising that to age 80 for NYCERS General, Transit/TBTA, TRS and BERS because all four of these groups have significant numbers of employees over age 70. The largest effect on cash flow of this suggested assumption revision is to TRS, as it has the largest population of employees currently age 70 or older. An ancillary effect of increasing the ultimate retirement age for these plans is an improvement in the precision of cash flow projections. We show the effect on the projected TRS cash flows in the first five years in the table below. While the initial cash flows decrease, over time the cash flows increase because of the much smaller mortality rate for employees than retirees, resulting in a higher total number of retirees. We only show the impact for the TRS cash flows as the impact is smaller for the other 3 impacted groups.

Expected Benefit Payments ($ millions) Year Current Assumptions Proposed Assumptions

2016 4,211.5 4,167.8

2017 4,265.6 4,252.8

2018 4,347.8 4,342.0

2019 4,427.0 4,430.2

2020 4,509.6 4,512.5



Cost Effect of BERS Suggested Assumption Revisions The table below shows the cost effect of the revision of each assumption, reflecting the contribution amount changes based on the 2016 actuarial valuation. Amounts shown are in millions. NC means that there is no change in the assumption, resulting in no change in the contribution amount.


Contribution

Cumulative Contribution

(millions)

1. Contribution Determined in 2016 Valuation N/A $322.7

2. Retired Mortality NC $322.7

3. Active Mortality $0.2 $322.9

4. Retirement $(23.9) $299.0

5. Withdrawal $(3.7) $295.3

6. Disability Rates NC $295.3

7. Merit Salary NC $295.3

8. Overtime NC $295.3 Note that the contribution amount decreases by $27.4 million, from $322.7 million to $295.3 million.

Cost of POLICE Proposed Revisions The table below shows the cost effect of the revision of each assumption, reflecting the contribution amount changes based on the 2016 actuarial valuation. Amounts shown are in millions.

Assumption Effect on Annual Contribution Cumulative Contribution

1. Contribution Determined in 2016 Valuation N/A $2,408.2

2. Retired Mortality $86.7 2,494.9

3. Active Mortality – N/C N/C 2,494.9

4. Retirement (25.7) 2,469.1

5. Withdrawal 4.0 2,473.2


7. Merit Salary 27.6 2,380.6

8. Overtime 40.2 2.420.7


Section IV Cost Impact of Suggested Revisions Cost of POLICE Proposed Revisions Note that the contribution amount increases by $12.6 million (0.5%) from $2,408.2 million to $2,420.7 million.

Cost of FIRE Proposed Revisions The table below shows the cost effect of the revision of each assumption, reflecting the contribution amount changes based on the 2016 actuarial valuation. Amounts shown are in millions.



1. Contribution Determined in 2016 Valuation N/A $1,188.0

2. Retired Mortality $50.0 1,238.0


4. Retirement 2.2 1,235.3

5. Withdrawal – N/C N/C 1,235.3

6. Disability Rates 22.8 1,258.1

7. Merit Salary 36.6 1,294.7

8. Overtime 42.8 1,337.5 Note that the contribution amount increases by $149.5 million (12.6%) from $1,188.0 million to $1,337.5 million.


Section V. Actuarial Certification


Section V. Actuarial Certification June 4, 2019 We completed tables for all key decrements for each of the NYCRS pension plans and all material participant groups. This is the second of two biennial projects. We are suggesting revisions to many assumptions, as part of our analysis of the last 10 years of experience. Overall, we found that the assumptions chosen by the Office of the Actuary (OA) reasonably model the plans’ experience. We divided assumptions into significant and minor assumptions. Significant assumptions are those which significantly affect the determination of plan liabilities. This includes the inflation and discount rates, retiree mortality, employee retirement and termination assumptions and salary increase and overtime assumptions. While we are not suggesting any changes to the economic assumptions, we are suggesting changes to the other significant assumptions for some of the Systems or plans. We are also suggesting changes to many of the less significant assumptions. We noted in the prior study that the experience for BERS (the smallest of the five plans) showed the greatest deviations between plan experience and assumptions. We anticipated significant changes in the participant data for fiscal years ending in 2016 and 2017. The experience in these years was, in fact, significantly different from prior years. We believe that the data provided for 2016 and 2017 is significantly more credible than the data previously provided, particularly as it relates to retiree mortality. However, because we have only two years of this improved data, and the differences between that data and the related assumptions is not so great as to require us to suggest revisions, we believe that the best alternative is to suggest only modest changes to the BERS assumptions and rely on the next actuary preparing an experience study, with 6 years of reliable data to propose more extensive changes. The total effect of the assumption changes we suggest in this report, if implemented in the 2016 valuation would result in an increase in the annual contribution of about $106 million or 1% of the total for NYCRS. However, the effect varies significantly by System with the largest increase for FIRE, decreases for NYCERS, TRS and BERS and a smaller increase for POLICE. We are available to answer any questions on the material in this report or to provide explanations or further details as appropriate. Colin and Kevin meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained in this report. We are responsible for the analysis contained in this report. We are not aware of any direct or material indirect financial interest or relationship, including investments or other services that could create a conflict of interest, which would impair the objectivity of our work or not make our work independent.

Colin England, FSA, EA, MAAA Kevin Binder, FSA, EA, MAAA


Appendices

1 – Acknowledgements

2 – Hypothesis Testing

3 – Confidence Intervals

4 – Experience Table Results

5 – Current and Suggested Assumptions


Appendix 1 – Acknowledgements

Our work would not have been possible without extensive assistance with an understanding of the NYCRS plans, recent labor issues, other issues in recent experience affecting employees’ in NYCRS behavior, provision of participant data, provision of economic data, including investment policies and anticipated inflation and investment returns.

We express our sincere thanks to the individuals listed below. We are grateful for their assistance and support during the course of the Administrative Review.

Office of the Comptroller

• Preston Niblack • Alex Doñé • Scott Evans • Miles Draycott • David Jeter • John Dorsa • Eng-Kai Tan

• Rosa Charles • Michael Hecht

Office of the Actuary

• Sherry Chan • Michael Samet • Anderson Huynh

Office of Management and Budget

• Ken Godiner • Syed Omair Hassan • Neha Mahajan • Edward Lin • Bilal Waheed

Mayor’s Office

• John Adler • Cynthia Collins

Municipal Labor Committee

• Allen Brawer


Appendix 2 – Hypothesis Testing

Hypothesis Testing This section explains the process of constructing confidence intervals for the testing of hypothesis that experience is different from assumption. This procedure requires the application of binomial distribution and normal approximation.

Applying the Binomial Distribution The binomial distribution is a family of probability distributions that has known mean and variance. Applying the binomial distribution to study retirement, withdrawal, disability or mortality experience can simplify analysis and permit easier comparison of results. The binomial distribution has several important characteristics. First, the total sample size is known and fixed. Second, each event has exactly two possible outcomes, which are denoted as success and failure. Lastly, each successive event must be independent of the previous one, and the probability of success needs to remain the same for all events. Decrements analyzed under the experience study, such as retirement and withdrawal, closely resemble the traits of a binomial distribution. For example, each retirement event has two outcomes, either the employee retires from the job or continues working. For a given age, the probability of retirement is fixed, therefore the probability of retirement remains the same for employees of a specific age. The sample size is known and is fixed since the number of employees working at any given time is a known quantity. The one criterion that requires careful consideration is that each event must be independent. In normal circumstances, each employee makes his or her independent judgement on the appropriate time to retire. From this perspective, the independence requirement is met. However, this is not always true. In times of economic recession, retirement experiences may not be independent due to organizational policies and incentives. For this analysis, it is assumed that successive retirement events are independent of each other. After the assumptions are made, the retirement experience becomes a collection of binomial distributions with different parameters. An example will illustrate this concept. For age Y, there is a known number of exposures, or sample size, n. There is also a probability for retirement for employees of age Y, denoted as p. The probability is the same for every employee of age Y. In addition, each employee’s decision for retirement is expected to be independent of other employees. The number of employees that will retire is a random number that could be any integer value ranged from 0 to n. This random process can be described by a binomial distribution with parameters (n, p). This binomial distribution has mean equal to n * p, and variance equal to n * p * (1 − p). In other words, it is expected that n * p number of employees will retire, and the dispersion of the estimate is measured by the standard deviation, which is

√n ∗ p ∗ (1 − p).

The next age, age Z, will have a different binomial distribution since the sample size and retirement probability will be different. Therefore, the retirement experience of each age is a binomial distribution with its own mean and variance. With a known distribution in place, confidence intervals can be constructed to test whether the actual experience provides sufficient evidence to support or reject that the assumed probability for retirement, p, is the true parameter that correctly describes the population under study.


Appendix 3 – Confidence Intervals

Constructing Confidence Intervals Using Normal Approximation If the sample size of a binomial distribution is sufficiently large, the binomial distribution approximates a normal distribution with the same mean and variance. Ideally, for the normal approximation to be effective, n * p should be greater than or equal to five, and n * (1− p) should also be greater than or equal to five. One consequence of this general standard is that if p is very small or very large, then a large sample size n is required for normal approximation. For this study, p is relatively small for mortality probability in younger ages and withdrawal probability for employees with longer years of service. Therefore, caution should be exercised in applying the normal approximation. In these situations, if the sample size is not sufficiently large, then the binomial distribution will not be approximately normal. Instead, it will be positively or negatively skewed depending on the parameter p. The advantage of normal approximation is that it simplifies calculations in constructing the confidence interval for the mean. Before a confidence interval can be constructed, a confidence level must be selected. The confidence level determines the width of the confidence interval. For this study, the confidence level is uniformly set at 95% for all confidence intervals constructed. In a normal distribution, by symmetrical characteristic, 95% of all possible outcomes are captured in the range between 1.96 standard deviation to left of the mean and 1.96 standard deviation to the right of the mean. Normal approximation enables a binomial distribution to be treated as if it is a normal distribution. Therefore, a 95% confidence interval for a binomial distribution with parameters (n, p) has an upper bound of (n * p) + 1.96

√n ∗ p ∗ (1 − p) and a lower bound of (n * p) − 1.96 √n ∗ p ∗ (1 − p). Comparison of the actual experience against the confidence interval plotted can reveal important insights. Given that the binomial probability p is true, the confidence interval should capture the actual experience approximately 95% of the time in long run proportion. Because the actual experience is a random quantity, there is a 2.5% probability that it would exceed the upper bound of the confidence interval and another 2.5% probability that it would fall below the lower bound. However, a 5% probability is relatively small, and therefore the actual experience would fall within the confidence interval most of the time (95%). This assumption forms the basis for conducting hypothesis testing. The purpose of hypothesis testing is to test whether an assumed parameter is true given a set of data collected. In this case, the mean n * p is being tested. The null hypothesis is that mean equals to n * p, and the alternative hypothesis is that the mean does not equal to n * p. The confidence interval forms the boundary in determining whether to reject or fail to reject the null hypothesis. If the actual experience falls within the confidence interval, then there is no sufficient evidence to reject the null hypothesis. On the other hand, if the actual experience falls outside the confidence interval, then the null hypothesis is rejected with a 95% confidence level. In other words, there is a 5% probability of committing a Type I Error, whereby a true null hypothesis is incorrectly rejected. We assumed that a 5% probability for error in choosing to revise the assumption, when it was in fact correct, is acceptable. If the null hypothesis is rejected, this means that there is evidence to show that the assumed mean is not true and therefore the assumed binomial probability p is also not true. When the confidence interval and actual experience of all ages or service years are plotted, then the regions above the upper bound of the confidence interval and below the lower bound of the confidence interval form the critical rejection area. If the actual experience consistently trends in the critical rejection area, the reasonableness of the assumed probabilities should be further evaluated.



Development of a Single Statistic for the Confidence Intervals The 95 percent confidence intervals result in an expected value, a higher bound and lower bound for each age. The probability of the actual experience exceeding the higher bound or being less than the lower bound is 5 percent. However, this analysis is somewhat limiting as a few of the individual ages might be outside the bounds, but in total the assumption could be reasonable. For example, if there were 40 ages it could well be that one of the ages was outside of the confidence intervals (you would expect on average for 2 ages that the results would be outside of the confidence intervals). To assess the overall reasonableness of the assumptions we developed a single statistic for the entire assumption age or service range. In general, Let X and Y be two random variables. The variance (Var) of the variable X+Y is given by the formula: Var(X+Y) = Var(X) +Var(Y) + 2 Covariance (X,Y). We have made the simplifying assumption that the variables are independent so the Covariances are zero. For mortality the probability of death at age each age would be the random variable. The number of exposures varies by each age. The formula for the variance of two independent variables X and Y weighted by a exposures for X and b exposures for Y is Var (aX + bY) = a2Var(X) + b2Var(Y) To develop lives-based mortality confidence intervals for each age we squared the exposures and multiplied by the probability of death times 1 minus the probability of death (denoted q). The square root of the sum of the ages would be the standard deviation. The Variance would be equal to ∑exp (age)

2 x p(age) x q(age)

For other assumptions the same formulas apply using the appropriate exposures and assumptions. To develop confidence intervals for liabilities-based mortality each annuitant has a different annuity amount and application of the formula required us to square the annuity for each annuitant and multiply the result by p x q. The same formula was applied on a retiree by retiree basis. ∑annuity 2 x p(retire) x q(retiree)

The square root of the sum is the standard deviation for liabilities weighted mortality.



Mortality Improvement When considering mortality probabilities, mortality improvement and gender difference need to be taken into account. Males and females of a specific age have different mortality probability; therefore, the two groups need to be separated. Another complication is mortality improvement. Each year, the mortality probability for a given age decreases by a small amount, thus creating the problem where successive events have slightly different binomial probabilities. To simplify calculations, the mortality probabilities for a given age in several successive years are averaged. This average, �̅�, is used as the binomial probability. In effect, this simplification creates one distribution for one specific age instead of several binomial distributions with slightly different binomial probabilities. The resulting distribution is continued to be treated as a binomial distribution with parameters (N, �̅� ), where N is the sum of all exposures in each age across the several years under study. This simplification has two advantages. First, it increases the sample size, which makes normal approximation more accurate. The second advantage is that there is only one probability to analyze instead of several. After simplification, the steps taken to construct confidence intervals and conduct hypothesis testing remain the same. One consequence of the simplification is that the estimate of the variance becomes biased, meaning that it is expected to create results slightly more variable than they should be, resulting in a slightly higher variance than would be calculated if we used different mortality rates for each year rather than their average. While 𝑁 ∗ �̅� ∗ (1 − �̅�) is still a close estimate of the variance, the

exact variance is 𝑁 ∗ �̅� ∗ (1 − �̅�) − 𝑛 ∗ 𝑠2, where s is the standard deviation of the several binomial probabilities that are being averaged to produce �̅�. Therefore, when the estimated variance is used in constructing confidence interval, the width of the confidence interval is slightly wider than what it should be. Given that mortality improvements are relatively small, we deemed that the resulting difference from using �̅� is negligible and would not lead to significant change to the confidence level.

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