TRS 2011 Comprehensive Annual Financial Report

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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
TEACHER RETIREMENT SYSTEM OF TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT 2011 Actuarial Information TRS-Care Aggregate Actuarial Accrued Liabilities For Solvency Test (AMOUNTS SHOWN IN MILLIONS) Portion of Aggregate Actuarial Accrued Liabilities Covered By Valuation Assets (8) (4) (6) (7) Members (1) (2) (3) Members Active Beneficiaries (Employer Valuation Active Beneficiaries (Employer (5) Member and Vested Financed as of Member and Vested Financed Valuation Contributions Terminations Portion) August 31 Contributions* Terminations Portion) Assets (5)/(2) [(5)-(2)]/3 [(5)-(2)-(3)]/(4) 2007 NA $ 8,329 $ 11,419 $ 623 NA 7.5% 0.0% 2008 NA 9,318 12,944 729 NA 7.8 0.0 2009 NA 9,642 14,716 800 NA 8.3 0.0 2010 NA 10,918 14,889 815 NA 7.5 0.0 2011 NA 13,710 16,075 891 NA 6.5 0.0 * Active member contributions are non-refundable. Analysis of Financial Experience (AMOUNTS SHOWN IN MILLIONS) Valuation New Benefit as of Asset Liability Assumptions Changes Contributions Net August 31 Gain/(Loss) Gain/(Loss) Gain/(Loss) Gain/(Loss) Gain/(Loss) Gain/(Losses) 2011 $ (36) $ (44) $ (2,003) $ 0 $ (1,243) $ (3,326) ACTUARIAL SECTION 123
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TRS 2011 Comprehensive Annual Financial Report

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