a complete copy of the 2012 CAFR Report! - PSERs

Management’s Discussion and Analysis (continued)
FINANCIAL SECTION
Funded Status
PSERS uses an actuarial reserve type of funding that is
financed by member contributions, employer contributions,
and earnings from invested assets. An independent actuarial
valuation of PSERS’ actuarial assets and liabilities is
performed annually. As part of this valuation, the progress
toward funding pension obligations of PSERS is measured
by comparing the actuarial value of assets to the actuarial
accrued liability. This measurement is referred to as the
funded ratio or funded status. The most recent actuarial
valuation reports that PSERS’ pension is 69.1% funded as
of June 30, 2011. The funded ratio decreased from 75.1%
as of June 30, 2010 due to a decrease in the actuarial value
of assets, which is based on a ten-year smoothing period,
employer contributions below the normal cost plus interest,
and an increase in the actuarial accrued liability which was
partially due to a change in actuarial assumptions.
The results of operations for FY 2012 will be reflected in
the actuarial valuation for the year ended June 30, 2012.
Due to the normal lag time for completion of the actuarial
valuation, the resulting funded status will be available at
the end of the 2012 calendar year and will be reported in
the financial statements for the fiscal year ending June 30,
2013 (FY 2013). Based on the investment performance for
the eight-year period ended June 30, 2012, which is below
the investment rate of return assumption during that time
period, and employer contributions below the normal cost
plus interest, the funded ratio at June 30, 2012 is expected to
decrease. FY 2012 is the third year of a five year transition
from five-year to ten-year smoothing of actuarial assets. A
thirty year history of PSERS’ funded status is shown at the
bottom of the page.
PSERS’ State Accumulation Account had a negative balance
at June 30, 2012 and 2011 (See Note 3). The deficit
increased in FY 2012 due to a change in actuarial assumptions
in the June 30, 2011 valuation, which was reflected
in FY 2012, employer contributions below the normal cost
plus interest and investment returns below the rate of return
assumption. Employer contributions and investment earnings
will be used to reduce the deficit in this Account in the
future.
PSERS' Funding Ratio
Funded Ratio = Actuarial Value of Assets / Actuarial Accrued Liability
150%
125%
104.3%
123.8%
104.8%
100%
75%
64.0%
81.7%
85.8%
69.1%
50%
49.3%
25%
0%
1982 1987 1992 1997 2002 2007
Fiscal Year Ended June 30
2011
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