At the March 25th meeting, LAGERS Board of Trustees approved new actuarial assumptions to be used in the calculation of employer contribution rates.
These new assumptions will likely result in an increase to your 2017 employer contribution rate(s).
The increases in 2017 are primarily a result of changes to the disability and mortality assumptions. An actuarial experience study found that LAGERS retirees are living longer than they did a few years ago and are projected to continue living longer into the future. This means that benefits will be paid to retirees for a longer period of time, and will require a contribution adjustment to ensure that there are enough funds set aside to pay for these longer retirements. The study also concluded that the number of disability retirements have also increased and so upward adjustment to the disability component of your contribution rate will also be made depending on which departments your employer provides LAGERS coverage for (general, police, and/or fire) and the elected benefit program of your employer.
LAGERS Board of Trustees follows a funding policy that requires an experience study to be completed every five years by LAGERS’ actuaries reviewing each of the assumptions used in calculating employer contribution rates. The purpose of this study is to determine if the assumptions used in the calculation remain appropriate given past and anticipated experience. LAGERS takes this process very seriously in order to ensure that future benefits are being properly pre-funded so that members today and tomorrow can continue to enjoy the security of their hard earned retirement benefits.
While it is likely that for the first time in five years many employers will see an increase instead of a decrease in their contribution rates, LAGERS contribution rates are designed to remain stable over the long-term to allow local municipalities predictability in budgeting for these important benefits. Other experiences of your employer, such as turnover and pay raises, can also create upward or downward pressure on a contribution rate, as well as the investment performance of the LAGERS portfolio; therefore every employer will have a slightly different rate experience in 2017.
If your employer’s rate needs to increase next fiscal year, a 1% annual cap is placed on the rate, so that no employer in 2017 should expect more than a 1% increase to contributions rates (unless you are making an upgrade). If, however, an employer’s rate needs to increase more than 1%, the rate will continue to rise 1% each year until it reaches its true rate.
Employers can expect to see more information on their individual rates in July with their annual actuarial valuations. This valuation will not only provide information regarding your upcoming 2017 rates, but also additional information if your rate was capped.