Institutional Federal Compliance Report 2021

Actuarial Methods and Assumptions (Used for the State, SUNY and Lottery) 120 • Notes to Basic Financial Statements _________________________________________________________________________ assumption begins at 6.25 percent and decreases to 4.50 percent long-term trend rate for all health care benefits after eight years. The trend assumption for post-65 begins at 5.20 percent and decreases to a 4.50 percent long-term trend rate for all health care benefits after eight years. The drug assumption begins at 9.50 percent and decreases to a 4.50 percent long-term trend rate after eight years. Additionally, a trend start- ing at 9.50 percent and decreasing to 4.50 percent after eight years has been assumed for the employer group waiver plan benefits. The State recognized a total OPEB liability of $50.9 billion for the fiscal year ended March 31, 2019. The total OPEB liability as of March 31, 2019 was mea- sured as of March 31, 2018 and was determined using an actuarial valuation as of April 1, 2017, with update procedures used to roll forward the total OPEB lia- bility to March 2018. The total OPEB liability was calculated using the Entry Age Normal cost method. The actuarial valuations included the following actu- arial assumptions:

Mortality rates used in the valuation assume dif- ferent pre-retirement and post-retirement mortality assumptions based on the experience under the New York State and Local Retirement System and the New York State Teacher’s Retirement System. In order to reflect future mortality improvement, the mortality is projected generationally using the Society of Actuaries MP-2014 projection scale. In accordance with GASBS 75, A ccounting and Financial Reporting for Postemployment Benefits Other Than Pensions , the actuarial valuation of OPEB also includes the value of sick leave that will be converted to reduce the retiree’s share of health insurance premiums. Annual OPEB Cost and Net OPEB Obligation Governmental Activities: The State’s changes in total OPEB liability as of March 31, 2019 are as follows (amounts in millions):

Assumptions

March 31, 2018

Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discount Rate . . . . . . . . . . . . . . . . . . . . . . . .

2.50% 3.89%

The discount rate is based on the Bond Buyer 20- year general obligation municipal bond index rate at March 31, 2018. The salary increase rate varies by system. The salary increase rates for ERS vary by years of service, starting at 8 percent and decreasing to 3 percent after 18 years of service. The salary increase rates for PFRS vary by years of service, starting at 27 percent and decreasing to 3.3 percent after 18 years of service. The salary increase rates for TRS vary by duration, starting at 10 percent and decreasing to 1.76 percent after 38 years. Health care trend rates were split to reflect separate trends for pre-65 and post-65 claims. The pre-65 trend

Total OPEB Liability, Beginning Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Difference between expected and actual experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total OPEB Liability, Ending Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

53,506 1,682 2,100 (4,608) (227) (1,567) (2,620) 50,886

Changes in assumptions and other inputs include a change in the discount rate from 2.64 percent under GASBS 45 to 3.86 percent in fiscal year 2018 and 3.89 percent in fiscal year 2019. The medical trend and excise tax assumptions were updated based on current anticipation of future costs, and projected claim costs were updated based on the recent claims experience for the Preferred Provider Organization (PPO) plans and premium rates for the Health Maintenance Orga- nization (HMO) plans. There were no significant

changes between the March 31, 2018 measurement and March 31, 2019 that will have a significant effect on the total OPEB liability as of March 31, 2019. Sensitivity of total OPEB liability to changes in discount rate. The following presents the total OPEB liability of the State as of March 31, 2019 using the current year’s discount rate, as well as what the total OPEB liability would be if it were calculated using rates that are 1 percentage point higher and 1 percentage point lower than the current year’s rate (amounts in millions): 1% Current 1% Decrease Rate Increase (2.89%) (3.89%) (4.89%)

Total OPEB Liability as of March 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

60,467 $

50,886 $

43,401