Funding Status of State Retirement Systems The information in this section concerning the Funding Status of State Retirement Systems has been obtained from the OSA, Preliminary Actuarial Valuation as of June 30, 2016, which the University believes to be reliable, but the University takes no responsibility for the accuracy thereof. While the University’s contributions in fiscal year 2017 represented its full current liability under PERS, TRS and LEOFF, any unfunded pension benefit obligations within the systems could be reflected in future years as higher contribution rates. The website of the Office of the State Actuary includes information regarding the values and funding levels of these retirement plans. To calculate the funded status, the DRS retirement plans compare the Actuarial Value of Assets (“AVA”) to the Entry Age Normal (“EAN”) liabilities. The EAN cost method projects future benefits under the plans, using salary growth and other assumptions, and applies the service that has been earned as of the valuation date to determine accrued liabilities. The AVA is calculated using a methodology that smooths the effect of short-term volatility in the Market Value of Assets (“MVA”) by deferring a portion of the annual investment gains or losses over a period of up to eight years. This helps limit fluctuations in contribution rates and funded status that would otherwise arise from short-term changes in the MVA. PERS Plans 2 and 3 are accounted for in the same pension trust fund and TRS Plans 2 and 3 are accounted for in the same pension trust fund and as such, may legally be used to pay the defined benefits of any PERS Plan 2 or 3 or TRS Plan 2 or 3 members, respectively. Assets for other plans may not be used to fund benefits for another plan; however, all employers in PERS and all employers in TRS are required to make contributions at rates (percentage of payroll) determined by the Office of the State Actuary every two years for the purpose of amortizing within a rolling 10-year period the unfunded actuarial accrued liability in PERS Plan 1 and TRS Plan 1, respectively. The State Legislature has established certain maximum contribution rates that began in 2009 and continued until 2015 and certain minimum contribution rates that became effective in 2015 and remain in effect until the actuarial value of assets in PERS Plan 1 and in TRS Plan 1 equals 100% of their respective actuarial accrued liability. These rates are subject to change by future legislation enacted by the State Legislature to address future changes in actuarial and economic assumptions and investment performance. In 2011, the State Legislature ended the future automatic annual increase, which is a fixed dollar amount multiplied by the member’s total years of service, for most retirees in PERS Plan 1 and TRS Plan 1. This action is expected to reduce the unfunded accrued actuarial liability in PERS Plan 1 and TRS Plan 1. The OSA preliminary actuarial valuation as of June 30, 2016, was as follows: Funded Status ($ millions)
Unfunded Actuarial Accrued Liability/(Surplus)
Actuarial Accrued Liability $12,323 34,759
Actuarial Value of Assets $ 6,958 30,262
Funded Ratio
Plan
PERS Plan 1 PERS Plans 2/3 TRS Plan 1 TRS Plans 2/3 LEOFF Plan 2
$5,365 4,497 3,460 1,261
56%
87 61 89
8,900 11,983 9,571
5,440 10,722 10,021
(450)
105
Pension Costs [PFM to update with 2017 financial statements.]At June 30, 2017 the University reported a liability of $38.47 million for its proportionate share of net pension liability. The net pension liability was measured as of June 30, 2016 by an actuarial valuation as of that date. The University’s share was 0.33 percent for PERS Plan 1, 39 percent for PERS Plans 2/3, 0.02 percent for TRS Plan 1, 0.02 percent for TRS Plan 2, and 0.05 percent for LEOFF Plan 2 of the State’s proportionate share of DRS liability.
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