Local Governmental Employees’
Retirement System (LGERS)
North Carolina League of Municipalities Conference
Raleigh, NC
October 25, 2011
North Carolina Department of State Treasurer
3 Topics for Discussion
• LGERS 101 – The Basics
• Comparison to other Pension Plans
• Operational Highlights
LGERS 101 – The Basics
Local Governmental Employees’ Retirement System (LGERS) began in
1945 with 18 participating local governments and 2,102 members
NOW:
• 888 participating governmental entities: (cities, counties, towns, local
commissions, etc.)
•
•
•
•
212,866 Total Participants*
49,204
Retirees and beneficiaries receiving benefit payments
41,077
Terminated participants and beneficiaries entitled to benefits but
not yet receiving benefits
122,585 Active Participants
•
$18.5
Billion in Assets*
*data from actuarial valuation as of 12/31/10
LGERS Plan Provisions
Eligibility
• Employed by a participating unit and works at least 1,000 hours per year
Employee Contributions
• 6% of salary
Employer Contributions
• Approximately 6.88% of salary
• Unfunded accrued liability
Tax sheltering
• Upon employer resolution
Vesting requirements
• 5 years of creditable service
LGERS Plan Provisions (con’t).
Service Required for Full (Unreduced) Retirement
• 30 years of creditable service
• age 60 with 25 years of creditable service
• age 65 with 5 years of creditable service (age 55 with 5 years for law
enforcement officers)
Formula for Full Retirement Benefit
• 1.85% of AFC (Average Final Compensation of the 4 consecutive years of
salary that produce the highest average) times the years of creditable
service.
1.85% x AFC x years of service = annual retirement benefit
Early Retirement & Disability Retirement
• Applicable
3 Funding Sources
The Retirement Systems assets come from 3 sources:
• Full-time employees contribute 6% of each paycheck
• Employers contribute annually based on
recommendations from the System’s actuary and Board
approval
• Earnings from investments made by State Treasurer’s
office
LGERS Funding Sources Illustrated
FUNDING
Employee Contributions 13.3%
Employer Contributions 12.9%
Return on investments 73.8%
For calendar year 2010, these amounts equate to the above percentages of total system
funding.
NC Retirement Systems
•
Continues to be one of the most secure pension systems in the
country
•
Program Evaluation Division (PED) of the NC General Assembly
ranked TSERS 6th out of 84 public plans – Sept 2011 report
•
National Institute on Retirement Security (NIRS) highlighted NC
(TSERS plan) as one of 6 states which has weathered the financial
storms of recent years – June 2011
•
2009 NASRA (National Association of State Retirement
Administrators) Public Pension Fund Survey lists TSERS as having
the 4th highest funding ratio among the 50 states
Current Public Sector Retirement Plan Types by US States
•
Defined benefit (DB) plan – provides lifetime income based on a formula that
includes years of service and salary. The majority of states (38) have this type of
plan & investment risk is borne by the state/employer (i.e. LGERS)
•
Defined contribution (DC) plan – provides income based on the value of the
employee’s account balance. Michigan and Alaska require all new hires to
participate solely in DC plan & investment risk is on the employee
•
Hybrid plans – Employees are required to participate in both a DB & a DC plan.
States include: Georgia, Indiana, Oregon, and Utah
•
Choice plans – Employees choose between DB or DC plan. States include:
Colorado, Florida, Montana, Ohio, South Carolina, and Washington
•
Source: NC General Assembly Program Evaluation Division based on analysis of
Center for Retirement Research’s 2011 report
LGERS Funding Status
Actuarial Valuation Date
• 12/31/04
• 12/31/05
• 12/31/06
• 12/31/07
• 12/31/08
• 12/31/09
• 12/31/10
* Funded ratio = Assets/Liabilities
Funded Ratio*
99.3%
99.4%
99.5%
99.5%
99.6%
99.5%
99.6%
Contribution History
LGERS Contribution History
Base Contribution as % of Pay
8
7
6
5
4
3
2
1
0
1975
1980
1985
1990
1995
2000
Year Beginning July 1,
Series1
Series2
2005
2010
2015
Year
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
85
19
84
LGERS Multiplier
LGERS Multiplier
2.00%
1.80%
1.60%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
October 20, 2011 Board of Trustees Meeting
• Annual Required Contributions
• Unfunded Accrued Liability
• New Local
• 18 basis points gain ($10 million)
Projected Employer Contributions
North Carolina Local Governmental Employees' Retirement System
$400,000,000
20.00%
$300,000,000
15.00%
$200,000,000
10.00%
6.35%
$100,000,000
6.88%
6.74%
7.17%
7.39%
7.55%
7.63%
7.65%
7.63%
7.57%
7.49%
4.80%
0.10%
5.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
$0
0.00%
2009
2010
2011
2012
December 31st Undistributed Gains
2013
2014
2015
COLA Payable July 1st
2016
2017
2018
2019
2020
July 1 Required Base Contribution Rates
A2010
COLAs and Required Base Contribution Rates
Undistributed Gains
Based on December 31, 2010 results with an assumed annual increase in active membership and CPI for
each calendar year after 2010 of 0% and 3%, annual market returns of 7.25% for calendar years after 2010
and a valuation interest rate of 7.25%.
Contribution Benchmarks
• Average public fund: 8.7% of pay
• Neighboring States:
South Carolina: 8.05%
Tennessee:
9.36%
Georgia:
10.39%
Virginia:
varies up to 22%
Source: Public Fund Survey
LGERS & TSERS Plan Features Are Either Less Generous or
Typical Than Other State’s Plans
Less Generous
• Final average salary
• Benefit formula multiplier
Typical
• Employee contribution rate
• Years of service and age for normal retirement
• Vesting (less generous in TSERS) 5 yrs. vs. 10
Source: Wisconsin Legislative Council, 2008 as referenced in General Assembly PED
report – Sept. 2011
Cost of Living Adjustments (COLA’s)
• TSERS and LGERS grant COLA’s on an ad hoc
basis (not automatic)
• Over 50 of the 84 plans examined by the
General Assembly PED report grant COLA’s on
an automatic basis
Many States Have Recently Changed Plan Features
Cost-Saving Measure
Increase employee contributions
Increase normal retirement
age and/or service requirement
Decrease final average salary
Decrease automatic COLA’s
Increase vesting years
Decrease formula multiplier
Number of States
29
27*
25
17
14*
13
*Includes North Carolina
Source:
National Conference of State Legislatures, 2005 – June 2011 as referenced in
General Assembly PED Report - Sept 2011
Operational Highlights
• Call Volume
• Payroll
• Retirements
• Death Notifications
Questions?