Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Tier5 Reform topic
No spam. Unsubscribe anytime.
Board hears Tier 5 options — no short‑term fix for legacy unfunded liability, but options improve long‑term sustainability
Summary
Actuarial models presented three Tier 5 design families (board‑approved DB variant with no guaranteed COLA, reduced multiplier with guaranteed COLA, and a hybrid DB/DC) and showed that while new tiers can reduce future benefit growth and improve long‑term funded status, they do not eliminate the existing unfunded liability without additional recurring contributions.
After reviewing the independent valuation results, the committee discussed options commonly described as 'Tier 5' for new hires. Staff and CABMAC presented three representative Tier 5 designs and multi‑decade projections comparing benefit payments, cash flow, and funded ratios across options.
Option summaries given by actuaries: (1) a board‑approved DB‑style Tier 5 with no guaranteed COLA (or a variant with a 1% guaranteed COLA) and a lower new‑hire member contribution (example presented: 7% for new members); (2) a reduced DB multiplier (1.5%) with a 2% guaranteed COLA and a lower member contribution; and (3) a hybrid plan splitting member contributions (example given: 5% to a DB account + 4% to a DC account), a lower DB multiplier (1.0%), extended eligibility ages, no guaranteed COLA, and portability/vesting features.
CABMAC showed sample retiree outcomes under each design for a hypothetical worker with ~30 years of service and final pay near $60,000; replacement‑ratio estimates ranged in the low 70s to high 80s depending on COLA and multiplier assumptions, and the hybrid option produced comparable long‑run replacement ratios when DC accumulation was annuitized in the example used.
Presenters emphasized that Tier 5 changes mainly affect future hires and that the existing unfunded liability must still be addressed via recurring contributions or other policy choices. Modeling showed Tier 5 designs lower the growth of future benefit payments and can improve funded ratios by years to decades relative to current law, but CABMAC and Chiron warned the near‑term unfunded liability will continue to grow under current funding practice unless recurring additional funds are dedicated to amortization.
Board members raised workforce considerations (recruitment and retention for employers such as the medical center), employer cost capacity, and the political feasibility of statutory changes. Staff recommended further outreach with legislative and executive leadership and additional modeling to inform potential board recommendations. No votes were taken during this session; staff described the material as work‑in‑progress and suggested November meetings for follow‑up.
