Institutional Federal Compliance Report 2021

110 • Notes to Basic Financial Statements _________________________________________________________________________ Expected Rate of Return

produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation for ERS and PFRS as of April 1, 2017 are summarized below: Long-Term Target Expected Rate

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected return, net of investment expenses and inflation) are developed for each major asset class. These ranges are combined to

Asset Class

Allocation

of Return*

Domestic equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Absolute return strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Opportunistic portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds and mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inflation-indexed bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36% 14% 10% 10% 2% 3% 3% 17% 1% 4%

4.55% 6.35% 7.50% 5.55% 3.75% 5.68% 5.29% 1.31% (0.25%) 1.25%

100%

*Real rates of return are net of long-term inflation assumption of 2.5 percent.

Discount Rate The discount rate used to measure the ERS and PFRS total pension liabilities as of March 31, 2018 was 7 percent, unchanged from the discount rate of 7 percent for the March 31, 2017 measurement date. The projec- tion of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contri- butions from employers will be made at statutorily required rates, actuarially determined. Based upon these assumptions, the ERS and PFRS fiduciary net positions were projected to be available to make all projected future

benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The following presents the current period net pension liability of the State governmental activities, SUNY and Lottery calculated using the current period discount rate assumption of 7 percent, as well as what the net pension liability (asset) would be if it were calcu- lated using a discount rate that is 1 percentage point lower (6 percent) or 1 percentage point higher (8 percent) than the current assumption (amounts in millions):

1%

Current

1%

Decrease

Assumption

Increase

(6%)

(7%)

(8%)

Governmental activities ERS net pension liability (asset) . . . . . . . . . . . . . . . . . . . . . . $ Governmental activities PFRS net pension liability (asset) . . . . . . . . . . . . . . . . . . . . . $ SUNY—ERS net pension liability (asset) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ SUNY—PFRS net pension liability (asset) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Lottery net pension liability (asset) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

9,742 $ 975 $ 1,330 $ 55 $ 13 $

1,288 $ 199 $ 176 $ 11 $

(5,864) (452) (801)

(25) (8)

2 $

Voluntary Defined Contribution Plan The Voluntary Defined Contribution Plan (VDCP) is offered though the Teachers Insurance and Annuity Association (TIAA, formerly known as TIAA-CREF). TIAA is an Optional Retirement Program (ORP) and provides retirement and death benefits through annuity contracts to those employees who elected to participate in the ORP. The VDCP is a defined contribution pension plan. The SUNY ORP is the administrator of the VDCP. Prior to March 16, 2012, a limited number of employees, most notably employees of SUNY and CUNY Senior Colleges, had the option of enrolling in this plan. Legislation signed into law on March 16, 2012, made the existing VDCP available to all eligible State employees who choose the plan as their retirement

selection. The VDCP is available to unrepresented employees of New York State public employers who were hired on or after July 1, 2013 and who earn $75,000 or more on an annual basis. The VDCP includes a 366- day vesting period, after which a participant has full and immediate vesting in all retirement benefits pro- vided by the annuities purchased through the employee and employer contributions. The employer and employee contributions are not deposited into accounts until the completion of the 366-day vesting period. Until that time, the funds are held in escrow by the Office of the State Comptroller. A participant who does not complete the vesting period is entitled to a refund of contributions, plus interest, upon request. The VDCP is the employee’s personal retirement account, and is