GASB Statement No. 68 Report 2017
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GASB STATEMENT NO. 68 REPORT FOR THE VIRGINIA RETIREMENT SYSTEM PREPARED AS OF JUNE 30, 2017 Cavanaugh Macdonald C O N S U L T I N G, L L C The experience and dedication you deserve July 18, 2018 Board of Trustees Virginia Retirement System 1200 E. Main Street Richmond, VA 23219 Ladies and Gentlemen: Presented in this report is information to assist the Virginia Retirement System in meeting the requirements of the Governmental Accounting Standards Board (GASB) Statement No. 68 for the fiscal year ending June 30, 2018 (Reporting Date). This report has been prepared as of June 30, 2017 (the Measurement Date). The annual actuarial valuation used as a basis for much of the information presented in this report was performed as of June 30, 2016. The valuation was based upon data, furnished by the Virginia Retirement System staff, concerning active, inactive and retired members along with pertinent financial information. To the best of our knowledge, this report is complete and accurate. The necessary calculations were performed by, and under the supervision of, independent actuaries who are members of the American Academy of Actuaries with experience in performing valuations for public retirement systems. The calculations were prepared in accordance with the principles of practice prescribed by the Actuarial Standards Board and, in our opinion, meet the requirements of GASB 68. The actuarial calculations were performed by qualified actuaries according to generally accepted actuarial procedures and methods. The calculations are based on the current provisions of the System and on actuarial assumptions that are, individually and in the aggregate, internally consistent and reasonably based on the actual experience of the System. In addition, the calculations were completed in compliance with the laws governing the System. The undersigned are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinions contained herein. 3550 Busbee Pkwy, Suite 250, Kennesaw, GA 30144 Phone (678) 388-1700 • Fax (678) 388-1730 www.CavMacConsulting.com Offices in Kennesaw,Off GA • Bellevue, NE Board of Trustees July 18, 2018 Page 2 Future actuarial results may differ significantly from the current results presented in this report due to such factors as the following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in economic or demographic assumptions; increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status); and changes in plan provisions or applicable law. Since the potential impact of such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented herein. Respectfully submitted, Larry Langer, ASA, FCA, EA, MAAA John J. Garrett ASA, FCA, MAAA Principal and Consulting Actuary Principal and Consulting Actuary Micki R. Taylor, ASA, FCA, EA, MAAA Matthew Yonz, ASA, FCA, MAAA Senior Actuary Actuary TABLE OF CONTENTS Section Item Page No. I Introduction 1 II Summary of Collective Amounts 3 III Financial Statement Notes 4 IV Required Supplementary Information 25 V Pension Expense 29 State Cost Sharing Plan Schedules A Proportionate Share of Contributions 33 B Deferred Inflows and Outflows and Pension Expense 38 C Amortization of Deferred Inflows and Outflows 43 D Net Pension Liability 48 Teacher Cost Sharing Plan Schedules A Proportionate Share of Contributions 54 B Deferred Inflows and Outflows and Pension Expense 57 C Amortization of Deferred Inflows and Outflows 61 D Net Pension Liability 64 VaLORS Cost Sharing Plan Schedules A Proportionate Share of Contributions 67 B Deferred Inflows and Outflows and Pension Expense 69 TABLE OF CONTENTS, continued C Amortization of Deferred Inflows and Outflows 71 D Net Pension Liability 73 Political Subdivision Plans Schedules B Deferred Inflows and Outflows and Pension Expense 75 C Amortization of Deferred Inflows and Outflows 89 D Net Pension Liability 101 E Total Pension Liability and Fiduciary Net Position 113 Other Schedules F Summary of Main Plan Provisions 137 G Statement of Actuarial Assumptions and Methods 179 REPORT OF THE ANNUAL GASB STATEMENT NO. 68 REQUIRED INFORMATION FOR THE VIRGINIA RETIREMENT SYSTEM PREPARED AS OF JUNE 30, 2017 SECTION I – INTRODUCTION The Governmental Accounting Standards Board issued Statement No. 68 (GASB 68), “Accounting and Financial Reporting for Pensions,” in June 2012. GASB 68’s effective date is for an employer’s fiscal year beginning after June 15, 2014. This report, prepared as of June 30, 2017 (the Measurement Date), presents information to assist the Virginia Retirement System (VRS) in providing the required information under GASB 68 to the participating employers of VRS. Much of the material provided in this report is based on the results of the GASB 67 report for the Virginia Retirement System which was issued on November 10, 2017. See that report for more information on the member data, actuarial assumptions and methods used in developing the GASB 67 results. In addition, this report includes information on the actuarial valuations of the Political Subdivisions participating in VRS as of June 30, 2016. We have prepared and provided separately, actuarial valuation reports as of June 30, 2016 for each of the Political Subdivisions. Please refer to the individual reports for the valuation results, summary of actuarial assumptions and methods, and plan provisions for each of the Political Subdivision plans. The Net Pension Liability (NPL) shown in the GASB Statement No. 67 Report for the Virginia Retirement System prepared as of June 30, 2017 and submitted November 10, 2017 is the collective NPL used for purposes of GASB 68. Please refer to that report for the derivation of the collective NPL. Pension Expense (PE) includes amounts for service cost (the normal cost under the Entry Age Normal actuarial cost method for the year), interest on the Total Pension Liability (TPL), changes in benefit structure, amortization of increases/decreases in liability due to actuarial experience and actuarial assumption changes, and amortization of investment gains/losses. The actuarial experience and assumption change impacts are amortized over the average expected remaining service life of the plan membership as of the Measurement Date, and investment gains/losses are amortized over five years. The development of the collective PE is shown in Section V. The unamortized portions of each year’s experience, assumption changes and investment gains/losses are used to develop deferred inflows and outflows, which also must be included in the employer’s financial statements. The development of the collective deferred inflows and outflows is shown in Section III. Page 1 These collective amounts have been allocated based on actual contributions made to VRS during the measurement period to determine the proportionate share to each participating employer. Schedule A of this report shows the total amount of employer contributions for the year ending June 30, 2017 from each participating employer and the proportionate share percentages that have been determined based on these contributions. Based on these percentages we have determined the proportionate share amounts of the NPL, PE and Deferred Inflows and Outflows for each participating employer. These amounts are shown in Schedules B and D. Section II of this report is a summary of the principal results of the collective amounts under GASB 68. Sections III and IV provide the results of all the necessary calculations, presented in the order laid out in GASB 68 for note disclosure and Required Supplementary Information (RSI). Page 2 SECTION II – SUMMARY OF COLLECTIVE AMOUNTS ($ thousands) State Virginia Law Political Employees Teachers State Police Judicial Officers Subdivisions Valuation Date (VD) June 30, 2016 June 30, 2016 June 30, 2016 June 30, 2016 June 30, 2016 June 30, 2016 Measurement Date (MD) June 30, 2017 June 30, 2017 June 30, 2017 June 30, 2017 June 30, 2017 June 30, 2017 Reporting Date (RD) June 30, 2018 June 30, 2018 June 30, 2018 June 30, 2018 June 30, 2018 June 30, 2018 Single Equivalent Interest Rate (SEIR): Long-Term Expected Rate of Return 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% Municipal Bond Index Rate N/A N/A N/A N/A N/A 3.56% Fiscal year in which Plan's Fiduciary net position is projected to be depleted from future benefit payments for current members N/A N/A N/A N/A N/A N/A Single Equivalent Interest Rate* 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% Net Pension Liability: Total Pension Liability (TPL) $23,617,412 $45,417,520 $1,047,402 $646,275 $2,002,184 $21,564,004 Fiduciary Net Position (FNP) 17,789,888 33,119,545 796,073 512,749 1,345,887 19,250,247 Net Pension Liability (NPL = TPL - FNP) $5,827,524 $12,297,975 $251,329 $133,526 $656,297 $2,313,757 FNP as a percentage of TPL 75.33% 72.92% 76.00% 79.34% 67.22% 89.27% Pension Expense (PE) $397,520 $906,386 $16,529 $16,804 $49,632 $242,296 Deferred Outflows of Resources $207,796 $435,367 $0 $11,907 $24,944 $71,266 De fe rre d Inflows of Re s ource s $564,219 $1,573,505 $84,773 $25,297 $85,488 $616,190 * The Single Equivalent Interest Rate for two Political Subdivision plans—Town of Stuart (55356) and Upper Valley Regional Park Authority (55490)—was the municipal bond index rate of 3.56%. Page 3 SECTION III – FINANCIAL STATEMENT NOTES The material presented herein will follow the order presented in GASB 68. Paragraph numbers are provided for ease of reference.