TRS 2011 Comprehensive Annual Financial Report

TEACHER RETIREMENT SYSTEM OF TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT 2011
Actuarial Information TRS-Care
Actuarial Methods and Assumptions
The actuarial valuation of TRS-Care (Retired Plan) is prepared by Gabriel, Roeder, Smith & Company. The actuary relies on membership
data and asset information provided by TRS staff. While not verifying the data at their source, the actuary performs such tests
for consistency and reasonableness as deemed necessary to be satisfied with the appropriateness of using the data supplied.
A summary of the actuarial assumptions and methods used by the actuary are as follows:
The projected unit credit method of valuation was used in determining liabilities and normal costs. Differences in the past between
assumed experience and actual experience (“actuarial gains and losses”) become part of the actuarial accrued liabilities. Unfunded
actuarial accrued liabilities are amortized to produce payments (principal and interest) which are level percents of payroll contributions.
A schedule of Funding Progress including a 5-year Summary of Actuarial Accrued Liabilities (AAL) and Unfunded Actuarial Accrued
Liabilities (UAAL) can be found in the Required Supplementary Information found immediately following the Notes to the Financial
Statements.
Schedule of Retirees and Beneficiaries Added to and Removed from Rolls
Added to Rolls Removed from Rolls Rolls - End of Year
(1) (8) (9)
Valuation (3) (5) (7) % Increase Average
as of (2) Annual (4) Annual (6) Annual in Annual Annual
August 31 Number Allowances Number Allowances Number Allowances* Allowances Allowances
2008 $ $ 198,968 $ 605,932 252 NA $ 3,045
2009 12,158 54,271,769 8,192 19,365,868 202,934 694,017,558 14.5% 3,420
2010 14,996 71,136,696 7,924 21,837,784 210,006 757,979,912 9.2 3,609
2011 20,467 109,331,023 8,019 24,802,618 222,454 898,001,599 18.5 4,037
* Expected employer provided claims and expenses (net of retiree premiums).
Annual Allowances in Column (7) include increases due to health care inflation for continuing retirees. Therefore, the annual allowance is not equal to the
beginning of year allowance plus the “Added to Rolls” allowance minus the “Removed from Rolls” allowance.
Solvency Test
A short-term solvency test is one means of checking a post-employment benefit fund’s progress under its funding program. The
following schedule provides a historical illustration of a short-term solvency test for TRS-Care wherein present valuation assets are
compared with: (1) active member contributions on deposit; (2) the liabilities for future benefits to members who have retired or
for terminated members with vested benefits; (3) the liabilities for service already rendered by active members.
In a system that has been following the discipline of level contribution rate financing; the liabilities for future benefits for terminated
employees will be fully covered by present assets, except in rare circumstances. The liabilities for services rendered by members
will be at least partially covered by the remainder of present assets. Generally, if the system has been using level contribution rate
financing, the funded portion of liability will increase over time. A decrease generally occurs in those years when substantial benefit
improvements are granted, when full recommended contributions have not been made, or when there are actuarial experience losses.
The funded ratio of the system based on total actuarial accrued liabilities provides an indication of how well the system is funded.
122 ACTUARIAL SECTION