Actuaries: 2024 payroll and assumption changes raised measured liabilities but improved funding path for S.C. retirement plans

Actuarial consultants from GRS presented the July 1, 2024 actuarial valuations to the Retirement System Investment Commission on Feb. 13, saying measured liabilities for both the South Carolina Retirement System (SCS) and the Police Officers Retirement System (PORS) rose in 2024 largely because of assumption changes and larger-than-expected salary increases.

GRS principal Joe Newton said the valuation shows a liability increase tied in part to assumption changes adopted in mid-2024 and to payroll gains, but added that increased payroll and the phase-in of higher contribution rates improved the funded ratio and reduced the calculated amortization period. "Our recommendation as it's been for a while now is just stay the course; we think that the current strategy has high probability [of] success," Newton said.

Why it matters: the commission’s 2017 reform established a glide path for employer contributions and a down‑walk of the maximum amortization period toward 20 years. Consultants explained that, even when liabilities rise because payroll and nominal benefits rise, the additional contributions generated by higher payrolls can shorten the funding period over time.

GRS actuarial lead Danny White walked commissioners through the mechanics: salary-driven increases first raise liabilities because average retiring benefits are a function of payroll, then the higher payroll produces additional contributions that improve cash flow and, over subsequent years, the funding position. White confirmed the statutory employer contribution rate capped by the 2017 law had been reached in FY2024 and that future dollar increases in contributions will come from payroll growth rather than higher statutory percentages.

The consultants gave a numerical breakdown showing roughly $900 million in additional SCS payroll last year, primarily from raises for continuing employees rather than net new members, and about $300 million in increased payroll for PORS. GRS noted prior events that affected cash flow (for example, a 2018 one-time cash-out) and emphasized smoothing conventions that temper short-term asset volatility in the valuation.

Projections and risk: GRS presented probabilistic projections and stress tests. Under the plan’s stress scenario — a multiyear low-return path that was built into the 2017 contribution design — the probability of requiring additional statutory contribution increases in the near term remains low. Newton said the chance of exceeding the statutory trigger at any point is small under the current assumptions, and probability estimates of reaching greater than 85% funded by 2035 have improved since 2022.

What the commission will do next: commissioners discussed planning a glide path for potential future reductions in contribution rates once funded thresholds are met and raised the need for advance planning to avoid abrupt changes that could stress plan management or have uneven distributional effects across employers. GRS said that, based on current experience and projected cash flows, the unfunded liability is likely to begin to decline in the coming year, though outcomes remain subject to investment returns, payroll trends and demographic experience.

The valuation presentation and projection slides were provided to the commission for follow-up and further planning discussions.