Connecticut State Teachers’ Retirement System
Actuarial Valuation
as of June 30, 2018

SR_ACTVAL18_181114

 Cavanaugh Macdonald
C O N S U L T I N G, L L C

November 7, 2018

The experience and dedication you deserve
Board of Directors
Connecticut State Teachers’ Retirement System
765 Asylum Avenue
Hartford, CT 06105

Members of the Board:
The laws governing the operation of the Connecticut State Teachers’ Retirement System provide that actuarial
valuations of the assets and liabilities of the System shall be made at least once every two years. We have conducted
the actuarial valuation of the System as of June 30, 2018 and the results of the valuation are contained in the following
report.

In performing the valuation, we relied on data supplied by the System and performed limited tests on the data for
consistency and reasonableness. The valuation was prepared in accordance with the funding objectives of the System
as set forth in Chapter 167a, Section 10-183z of the Connecticut General Statutes. The normal cost and accrued liability
of the System are developed using the entry age normal cost method. Under this method, the normal cost is the level
percent of payroll necessary to fully fund the expected benefits to be earned over the career of each individual active
member. The normal cost is partially funded with active member contributions with the remainder funded by employer
contributions.
In determining the System’s liabilities, future events, such as investment returns, salary increases, deaths, retirements,
etc., are anticipated based upon the set of actuarial assumptions as approved by the Board. The assets of the system for
valuation purposes are developed using an asset smoothing technique which spreads the recognition of the unexpected
portion of market related gains and losses over a period of four years with the goal of dampening the impact of market
volatility upon valuation results.

An unfunded accrued liability exists in the amount equal to the excess of accrued liability over valuation assets. The
accrued liability contribution was determined in accordance with subsections (b) and (c) of Section 10-183z of the
Statutes. Based on the current valuation, the expected future contributions together with current assets will be sufficient
to provide the planned benefits. Therefore, in our opinion, the System continues to operate on an actuarially sound basis.

SR_ACTVAL18_181114

3550 Busbee Pkwy, Suite 250, Kennesaw, GA 30144
Phone (678) 388-1700 • Fax (678) 388-1730
www.CavMacConsulting.com
Off GA • Bellevue, NE
Offices in Kennesaw,

 Future actuarial results may differ significantly from the current results presented in this report due to such factors as the
following: plan experience differing from that anticipated by the economic or demographic assumptions; changes in
economic or demographic assumptions; and changes in plan provisions or applicable law. Since the potential impact of
such factors is outside the scope of a normal annual actuarial valuation, an analysis of the range of results is not presented
herein.

This actuarial valuation was performed to determine the recommended funding amount for the System. The asset values
used to determine unfunded liabilities and funded ratios are not market values but less volatile market related values. A
smoothing technique is applied to market values to determine the market related values. The unfunded liability amounts
and funded ratios using the market value of assets would be different. The interest rate used for determining liabilities is
based on the expected return of assets. Therefore, liability amounts in this report cannot be used to assess a settlement
of the obligation.

This is to certify that the independent consulting actuary is a member of the American Academy of Actuaries and has
experience in performing valuations for public retirement systems, that the valuation was prepared in accordance with
principles of practice prescribed by the Actuarial Standards Board, and that the actuarial calculations were performed by
qualified actuaries in accordance with accepted actuarial procedures, based on the current provisions of the retirement
system and on actuarial assumptions and methods that are internally consistent and reasonable, based on the actual
experience of the System.

Respectfully submitted,

John J. Garrett, ASA, FCA, MAAA

Ben D. Mobley, ASA, FCA, MAAA

Principal and Consulting Actuary

Senior Actuary

SR_ACTVAL18_181114

 TABLE OF CONTENTS

Section

Item

Page No.

I

Board Summary

1

II

Membership Data

4

III

System Assets

5

IV

System Liabilities

8

V

Actuarial Valuation Results

11

Accounting Information

12

A

Membership Data

14

B

Summary of Actuarial Assumptions and Methods

16

C

Summary of Plan Provisions

20

D

Glossary

23

VI

Appendices

SR_ACTVAL18_181114

 Section I: Board Summary
The table below summarizes the results of the June 30, 2018 actuarial valuation as compared with the prior valuation.

Table I-1: Comparative Summary of Principal Results
June 30, 2016

June 30, 2018

50,877
$3,949,926

50,594
$4,075,939

36,065
$1,831,946

37,446
$1,950,623

2,085
12,667

2,194
9,291

Assets
Market Value
Actuarial Value
Return on Market Value1
Return on Actuarial Value1
Ratio of Actuarial to Market Value

$15,584,564
$16,712,316
1.70%
7.56%
107.24%

$17,946,839
$17,951,755
10.76%
6.88%
100.03%

Actuarial Information
Unfunded Actuarial Liability (UAL)
Funded Ratio

$13,148,002
55.97%

$13,159,143
57.70%

10.60%
25.84%
36.44%
7.00%
29.44%

10.54%
27.50%
38.04%
6.00%
32.04%

Membership
Active Members
Number
Annual Payroll
Retirees and Beneficiaries
Number
Annual Benefits
Inactive Members
Vested
Non-Vested

Computed Contribution Rates
Normal Cost
Unfunded Accrued Liability
Total
Member*
State
State Contribution Amount for Fiscal Year Ending
June 30, 2018
June 30, 2019
June 30, 2020
June 30, 2021

$1,271,033
$1,292,314
$1,392,183
$1,437,429

All dollar amounts are in thousands.
*Beginning with the June 30, 2018 valuation, employer contribution rate set as though members only contribute
1

6% of pay.
Two-year compound average return.

SR_ACTVAL18_181114

Page 1

 Section I: Board Summary
Summary of Key Findings
The employer contribution rate for the System is used to pay the employer’s portion of the normal cost and to amortize
the unfunded actuarial accrued liability (UAAL).

The actuarially determined normal cost contribution rate was 10.60% as of June 30, 2016 and decreased to 10.54% as
of June 30, 2018. The unfunded actuarial accrued liability increased from $13.148 billion to $13.159 billion over the
two year period. The unfunded actuarial accrued liability rate increased from 25.84% to 27.50%. We note the
following key findings:


The UAAL grew by $2.007 billion due to interest and decreased by $1.968 billion due to the amortization
payments over the two year period.



The System experienced actuarial losses on plan assets of $31 million for fiscal year 2017 and $338 million
for fiscal year 2018 as a result of the investment return on the actuarial value of assets being less than the
assumed rate. Table III-3 provides the calculation of the investment losses for the two- year period.



The System experienced a net actuarial gain of $425 million as of June 30, 2017 and a net actuarial loss of
$30 million as of June 30 2018 on plan liabilities due to non-investment related experience. Table IV-2
provides the reconciliation of the UAAL which is summarized as follows:
1.

The System provides post-retirement Cost-of-Living Adjustments based upon certain criteria set
forth in the statutes. For purposes of the valuation, the benefits paid to eligible retirees and
beneficiaries are expected to increase at a rate of 3.00% annually for members retired before
September 1992 and 2.00% for members retired on and after September 1, 1992 (1.75% for
members hired on or after July 1, 2007). The actual COLAs granted for members retired before
September 1, 1992 were 3.0% for 2017 and 3.0% for 2018. The actual COLAs granted for
members retired on and after September 1, 1992 were 0.3% for 2017 and 2.0% for 2018. This
resulted in a $268 million gain to the System in 2017 and a $46 million gain to the system in 2018.

2.

In years where the salaries of active members increase less than expected, an actuarial gain occurs.
The System experienced a $98 million gain due to salary experience for 2017 and a $128 million
gain due to salary experience for 2018.

3.

In addition, there were other gains and losses primarily attributable to the System demographic
experience. The gain for 2017 was $59 million and the loss for 2018 increased plan liabilities by
$203 million.

SR_ACTVAL18_181114

Page 2

 Section I: Board Summary
Section II of the report provides summarized information on the membership data used in the valuation. Section III
of the report covers the System’s assets and Section IV of the report covers the System’s liabilities. The results of the
valuation are provided in Section V of the report and the accounting information is in Section VI. The appendices
provide additional information on: A) the System members; B) the actuarial assumptions and methods; and C) the
summary of plan provisions. In addition, Appendix D provides a glossary of actuarial terminology. It should be noted
that all information contained in this report for periods prior to June 30, 2009 was produced by a prior actuarial
consulting firm.

SR_ACTVAL18_181114

Page 3

 Section II: Membership Data
Data regarding the membership of the System for use in the valuation were furnished by the Retirement Systems. The
following table summarizes the membership data as of June 30, 2018 and is compared with that reported for the prior
valuation.

Table II-1: Summary of Membership Data
June 30, 2016

June 30, 2018

Active Members
Total Number of Active Members
Total Annual Compensation

50,877
$3,949,926

50,594
$4,075,939

Retirees and Beneficiaries
Number of Service Retirements
Total Annual Benefit Payments

33,920
$1,768,348

35,201
$1,881,545

283
$6,874

301
$7,647

1,862
$56,724

1,944
$61,431

12,667
2,085

9,291
2,194

Number of Disability Retirements
Total Annual Benefit Payments
Number of Beneficiaries
Total Annual Benefit Payments
Inactive Members
Number of Non-vested Inactive Members
Number of Vested Inactive Members
All dollar amounts are in thousands.

SR_ACTVAL18_181114

Page 4

 Section III: System Assets
The following tables provide information on the System’s assets.

Table III-1: Market Value Reconciliation
2016 - 2017

2017 - 2018

$15,594,872*

$17,134,326

Additions
Member Contributions
State Contributions
Local Government Contributions
Total Contributions

$288,251
$1,012,162
$ 0
$1,300,413

$312,150
$1,271,033
$1,244
$1,584,427

Investment Income
Less: Investment Expenses
Net Investment Income

$2,251,063
($51,168)
$2,199,895

$1,295,010
($70,079)
$1,224,931

Net Market Value as of July 1

Other
Total Additions
Deductions
Benefit Payments and Refunds
Other
Total Deductions
Net Increase

$1,679

$ 0

$3,501,987

$2,809,358

($1,962,533)

($1,994,092)

$ 0
($1,962,533)

($2,753)
($1,996,845)

$1,539,454

$812,513

Net Market Value as of June 30

$17,134,326

$17,946,839

Rate of Return on Market Value

14.41%

7.24%

Two Year Compounded Return

10.76%

All dollar amounts are in thousands.

* Restated from previous valuation

SR_ACTVAL18_181114

Page 5

 Section III: System Assets
Development of Actuarial Value of Assets
The Actuarial Value of Assets represents a "smoothed" value developed with the purpose to dampen the impact of
market volatility on the assets used in determining valuation results. The Actuarial Value of Assets has been calculated
by spreading the recognition of excess investment income over four years. The amount of excess investment income
in each year is the difference between expected investment income on actuarial value and the actual market value
investment income. Table III-2 provides the development of the actuarial value of assets over the two year period
since the previous valuation.

Table III-2: Development of Actuarial Value of Assets
June 30, 2017

June 30, 2018

1.

Actuarial Value Beginning of Year

$16,712,316

$17,331,839

2.

Market Value End of Year

$17,134,326

$17,946,839

3.

Market Value Beginning of Year

$15,594,872*

$17,134,326

4.

Cash Flow
a. Contributions

$1,302,092

$1,584,427

b. Disbursements

($1,962,533)

($1,996,845)

($660,441)

($412,418)

c. Net: 4a + 4b
5.

Investment Income
a. Market Total: 2 – 3 – 4c

$2,199,895

$1,224,931

b. Assumed Rate of Return

8.00%

8.00%

$1,310,568

$1,370,050

c. Amount for Immediate Recognition: (1 x 5b) + (4c x 5b x 0.5)
d. Amount for Phased-In Recognition: 5a – 5c
6.

$889,327

($145,119)

$222,332

($36,280)

b. First Prior Year

($340,740)

$222,332

c. Second Prior Year

($183,028)

($340,740)

d. Third Prior Year

$260,524

($183,028)

e. Total Recognized Investment Gain

($40,912)

($337,716)

Phased-In Recognition of Investment Income
a. Current Year: 5d * .25

7.

Total Recognized Investment Return: 5c + 6e

8.

Adjustment

9.

Actuarial Value End of Year: 1 + 4c + 7 + 8

10.

Difference Between Market & Actuarial Values: 2 – 9

11.

Rate of Return on Actuarial Value

12.

Two Year Compounded Return

$1,269,656

$1,032,334

$10,308
$17,331,839
($197,513)
7.75%

$17,951,755
($4,916)
6.03%
6.88%

All dollar amounts are in thousands.

* Restated from previous valuation
SR_ACTVAL18_181114

Page 6

 Section III: System Assets
The actuarial valuation assumes the investment income on the assets of the System is 8.00% annually. This
assumption is based upon the reasonable long-term expected return on the assets. In each year, the System will
experience actuarial gains and losses due to the actual investment return of the assets.

Table III-3: Calculation of Actuarial Investment Gain/(Loss)
June 30, 2017

June 30, 2018

$16,712,316

$17,331,839

2. Total Net Cash Flow

($660,441)

($412,418)

3. Expected Return on Actuarial Value of Assets: (1 x 8.00% + 2 x 8.00% x .5)

$1,310,568

$1,370,050

4. Expected Actuarial Value of Assets at End of Year: (1 + 2 + 3)

$17,362,443

$18,289,471

5. Actual Actuarial Value of Assets at End of Year

$17,331,839

$17,951,755

($30,604)

($337,716)

1. Actuarial Value of Assets at Beginning of Year

6. Actuarial Gain/(Loss) Due to Investment Experience: (5 - 4)
All dollar amounts are in thousands.

SR_ACTVAL18_181114

Page 7

 Section IV: System Liabilities
The present value of benefits is the value as of the valuation date of all future benefits expected to be paid to current
members of the System. An actuarial cost method allocates each individual’s present value of benefits to past and future
years of service. The actuarial accrued liability includes the portion of the active member present value of benefits
allocated to past service as well as the entire present value of benefits for retirees, beneficiaries and inactive members.
The unfunded actuarial accrued liability (UAAL) is the difference between the actuarial accrued liability and the
actuarial value of assets. Table IV-1 shows the allocation of the present value of future benefits into components for
future normal cost contributions and actuarial accrued liabilities and the determination of the UAAL as of the valuation
date.

Table IV-1: Calculation and Allocation of Present Value of Future Benefits
Entry Age Actuarial Cost Method
(1)
Present
Value of
Future Benefits
Active Members
Service Retirement
Disability Retirement
Survivors' Benefits
Termination
Total for Active Members
Inactive Members
Non-Vested (Refund only)
Vested
Total for Inactive Members
Retirees and Beneficiaries
Service Retirements
Disability Retirements
Beneficiaries
Total for Retirees and Beneficiaries
Total

(2)
Portion
Covered By
Future Normal
Cost Contributions

(3)
Actuarial
Accrued
Liabilities
(1) - (2)

$14,318,163
158,503
262,102
774,946
15,513,714

$3,209,911
99,265
78,462
664,601
4,052,239

$11,108,252
59,238
183,640
110,345
11,461,475

170,875
377,307
548,182

0
0
0

170,875
377,307
548,182

18,504,247
87,686
509,308
19,101,241

0
0
0
0

18,504,247
87,686
509,308
19,101,241

$35,163,137

$4,052,239

$31,110,898

Actuarial Value of Assets

$17,951,755

Unfunded Actuarial Accrued Liability

$13,159,143

Funded Ratio

57.70%

All dollar amounts are in thousands.

SR_ACTVAL18_181114

Page 8

 Section IV: System Liabilities
The funded ratio of the System is the ratio of the actuarial value of assets divided by the actuarial accrued liability as
of the valuation date. As of June 30, 2018, the funded ratio of the System is 57.70% as compared to the ratio in the
prior valuation of 55.97%. The ratio is a commonly used measure of the funding progress of a System and can be
useful in reviewing the historical trend of a System’s funding progress. Such a review should also consider the impact
to this measure over the historical period due to changes to plan benefits, changes to the actuarial assumptions and
methods, and the significant impact that investment experience can have on the ratio over short-term periods. We
caution that no single “point in time” measure can provide a universal basis for comparing one System to another.
Although the terminology used to describe the excess of the System’s actuarial accrued liability over the System’s
actuarial value of assets is called the “unfunded” actuarial accrued liability, there is a dedicated source of funding for
this liability. The scheduled employer and employee contributions are expected to completely fund the System’s
liabilities (pay off the UAAL) based on statutory funding requirements.
The calculation of the System’s actuarial liabilities require the use of several assumptions concerning the future
experience of the System and its members. In each valuation, the latest year of actual experience is compared to that
expected by the prior valuation. The differences are actuarial gains and losses which decrease or increase the UAAL.
Table IV-2 provides for the reconciliation of the UAAL and shows the primary sources of this year’s gains and losses
due to actuarial experience.

SR_ACTVAL18_181114

Page 9

 Section IV: System Liabilities

Table IV-2: Reconciliation of the UAAL
1.

UAAL as of June 30, 2016

2.

Expected Amortization Payment

3.

Expected Interest (1 x 8.00% + 2 x 8.00% x 0.5)

4.

Expected End of Year UAAL (1 + 2 + 3)

5.

Actuarial Experience (Gain)/Loss
Asset Experience
COLA
Salary Experience
Post-retirement Mortality

1,017,738
$13,313,187

30,604
(268,200)
(97,563)
4,486
(22,524)

Turnover and Other

(41,392)

6.

UAAL as of June 30, 2017 (4 + 5)

7.

Expected Amortization Payment

8.

Expected Interest (6 x 8.00% + 7 x 8.00% x 0.5)

9.

Expected End of Year UAAL (6 + 7 + 8)

($394,589)
$12,918,598
(1,115,599)
988,864
$12,791,863

Actuarial Experience (Gain)/Loss
Asset Experience

337,716

COLA

(46,031)

Salary Experience
Post-retirement Mortality

11.

(852,553)

Retirements

Total Actuarial (Gain)/Loss

10.

$13,148,002

(127,663)
9,495

Retirements

(30,880)

Turnover and Other

224,643

Total Actuarial (Gain)/Loss

$367,280

UAAL as of June 30, 2018 (9 + 10)

$13,159,143

All dollar amounts are in thousands.

SR_ACTVAL18_181114

Page 10

 Section V: Actuarial Valuation Results
Section IV of this report presented the System’s total present value of future benefits allocated between the present
value of future normal cost contributions and actuarial accrued liability. The portion of the active members’ present
value of benefits allocated to future years of service is funded through annual normal cost contributions comprised of
both active member and employer contributions. The System’s annual normal cost rate is calculated as a percent of
covered payroll, which is expected to remain level over all future years of service. The portion of the total normal
cost rate in excess of the active member contribution rate is the state normal cost rate. The normal cost rate developed
as of the valuation date is presented in Table V-1. Table V-1 also shows the state contribution rates necessary to
amortize the UAAL in accordance with the funding requirements in the statutes.

Table V-1: State Contribution Rate
Normal Cost Rate of Active Members by Expected Benefit Type
Service Retirement
Termination
Disability Retirement
Survivors' Benefits
Total Normal Cost Rate for Active Members

8.35%
1.70%
0.28%
0.21%
10.54%

Less: Active Member Contribution Rate*

6.00%

State Normal Cost Rate

4.54%

Unfunded Actuarial Accrued Liabilities
Plan in effect 6/30/1991 (13 years)
Public Act 87-381 (0 years)
Public Act 92-205 (4 years)
Public Act 98-251 (9 years)
Public Act 07-186 (19 years)
Total

30.51%
0.00%
(5.05)%
0.02%
2.01%
27.50%

State Contribution Rate

32.04%

*

Beginning with the June 30, 2018 valuation, employer contribution rate set as though members only
contribute 6% of pay.

SR_ACTVAL18_181114

Page 11

 Section VI: Accounting Statement Information
The Governmental Accounting Standards Board has issued Statement No. 67 which replaces Statement No. 25 for plan
years beginning after June 15, 2013. The information required under GASB 67 will be issued in a separate report.

We are providing the schedule of funding progress as shown below for informational purposes. This schedule is no
longer required under GASB 67

Table VI-2: Schedule of Funding Progress
Actuarial
Valuation as of
June 30

Actuarial Value
of Assets
(a)

Actuarial
Accrued
Liability (AAL)
(b)

Unfunded AAL
(UAAL)
(b)-(a)

Funded
Ratio
(a)/(b)
65.3%

Covered
Payroll
(c)
$2,930.8

UAAL as a % of
Active Member
Payroll
[( b ) - ( a )] / ( c )

2004

$9,846.7

$15,070.5

$5,223.8

2006

10,190.3

17,112.8

6,922.5

59.5

3,137.7

178.2%
220.6

2008

15,271.0

21,801.0

6,530.0

70.0

3,399.3

192.1

2010

14,430.2

23,495.9

9,065.7

61.4

3,646.0

248.6

2012

13,734.8

24,862.2

11,127.4

55.2

3,652.5

304.7

2014

15,546.5

26,349.2

10,802.7

59.0

3,831.6

281.9

2016

16,712.3

29,860.3

13,148.0

56.0

3,949.9

332.9

2018

17,951.8

31,110.9

13,159.1

57.7

4,075.9

322.9

All dollar amounts are in millions

All figures prior to 6/30/2010 were reported by the prior actuarial firm.

SR_ACTVAL18_181114

Page 12

 Section VI: Accounting Statement Information
The information presented above was determined as part of the actuarial valuation as of June 30, 2018. Additional
information as of the latest actuarial valuation follows.

Table VI-4: Additional Information
Valuation date

June 30, 2018

Actuarial cost method

Entry Age

Amortization period

Level percent closed

Remaining amortization periods
Plan in effect 6/30/1991
Public Act 87-381
Public Act 92-205
Public Act 98-251
Public Act 07-186

13 years
0 years
4 years
9 years
19 years

Equivalent single amortization period

16.6 years

Asset valuation method

Four-year smoothed
market value

Actuarial assumptions:
Investment rate of return (includes inflation)
Projected salary increases (includes inflation)
Inflation
Cost-of-living adjustments
Retirements prior to September 1, 1992
Retirements on or after September 1, 1992
Hired prior to July 1, 2007
Hired on or after July 1, 2007

SR_ACTVAL18_181114

8.00%
3.25% - 6.50%
2.75%
3.00%
2.00%
1.75%

Page 13

 Appendix A: Additional Membership Data

Table A-1: Schedule of Active Participant Data as of June 30, 2018

Years of Service
AGE

Under 5

5 to 9

10 to 14

15 to 19

20 to 24

25 to 29

30 to 34

35 & up

Total

Under 25

487

1

488

Avg. Pay

47,730

77,790

47,791

25 to 29

3,571

698

2

4,271

Avg. Pay

52,345

58,426

122,524

53,372
6,358

30 to 34

2,188

3,443

727

Avg. Pay

56,318

62,978

72,387

35 to 39

1,158

1,749

3,882

664

7,453

Avg. Pay

61,442

67,588

79,144

89,846

74,636

40 to 44

702

943

2,050

3,152

370

7,217

Avg. Pay

63,338

70,888

83,208

93,101

102,029

84,951

61,762

45 to 49

639

737

1,294

2,286

2,262

212

7,430

Avg. Pay

63,450

71,998

83,659

93,052

100,750

104,383

89,449

50 to 54

380

577

993

1,302

1,441

1,006

284

5,983

Avg. Pay

63,551

71,340

82,968

92,299

97,967

101,940

101,051

90,305

55 to 59

225

367

770

1,052

870

662

1,119

162

5,227

Avg. Pay

63,620

71,574

82,026

91,467

96,756

99,585

99,620

97,550

91,323

60 to 64

115

172

496

832

744

506

616

563

4,044

Avg. Pay

69,053

75,381

81,594

91,102

95,430

98,852

99,746

100,860

93,081

65 to 69

39

67

149

354

339

244

255

290

1,737

Avg. Pay

78,740

82,653

84,571

93,329

95,190

100,570

97,925

103,761

95,635

70 & up

7

3

21

52

65

71

55

112

386

Avg. Pay

61,838

78,574

86,117

92,374

97,829

105,235

97,678

101,468

98,051

Total

9,511

8,757

10,384

9,694

6,091

2,701

2,329

1,127

50,594

Avg. Pay

56,720

66,459

80,833

92,414

98,608

100,939

99,597

101,191

80,562

Table A-2: Comparative Summary of Active Data
Average Age
Average Service
Average Pay

SR_ACTVAL18_181114

June 30, 2016
44.6 years
13.7 years
$77,637

June 30, 2018
44.7 years
14.0 years
$80,562

Page 14

 Appendix A: Additional Membership Data

Table A-3: Number of Monthly Retirement Allowances Of
Benefit Recipients as of June 30, 2018

Payee Type

Number

Monthly Retirement
Allowances

14

$32,952

Service Retirement
A (Life Annuity)
B (100% Cash Refund)

23

74,239

610

2,290,178

D (Joint and Survivor)

7,510

36,204,662

N (25% Cash Refund)

27,044

118,193,434

35,201

$156,795,465

A (Life Annuity)

0

$0

B (100% Cash Refund)

0

0

C (Period Certain and Life)

2

3,789

D (Joint and Survivor)

0

0

C (Period Certain and Life)

Total
Disability Retirement

N (25% Cash Refund)

1

1,907

W (Disability)

298

631,556

Total

301

$637,252

Beneficiaries

1,944

$5,119,226

GRAND TOTAL

37,446

$162,551,943

SR_ACTVAL18_181114

Page 15

 Appendix B: Actuarial Assumptions and Methods
Investment Rate of Return
Assumed annual rate of 8.00% net of investment expenses.
Rates of Annual Salary Increase

Rates of Annual Salary Increase
Assumption
Years of Service
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21+

SR_ACTVAL18_181114

6.50%
6.50
6.25
6.25
6.25
6.25
6.25
6.25
6.25
6.25
5.50
5.50
5.00
5.00
5.00
4.75
4.50
4.25
4.00
3.75
3.50
3.25

Page 16

 Appendix B: Actuarial Assumptions and Methods
Active Member Decrement Rates
a.

Table below provides a summary of the assumed rates of service retirement.
Annual Rates of Retirement

Age

Unreduced
Male
27.5%
38.5%
22.0%
36.3%
100.0%
100.0%
100.0%

50
55
60
65
70
75
80

b.

Female
27.5%
27.5%
27.5%
32.5%
32.5%
32.5%
100.0%

Proratable
Male

6.0%
13.0%
30.0%
30.0%
100.0%

Reduced

Female

Male
1.00%
4.00%

Female
1.00%
4.75%

5.5%
12.5%
14.5%
18.0%
100.0%

Table below provides a summary of the assumed rates of mortality while actively employed and disability.
Annual Rates of Death and Disability
Age
20
25
30
35
40
45
50
55
60
64

SR_ACTVAL18_181114

Pre-Retirement Mortality
Male
0.0377%
0.0412%
0.0404%
0.0448%
0.0539%
0.0818%
0.1476%
0.2800%
0.4557%
0.6572%

Female
0.0147%
0.0162%
0.0205%
0.0272%
0.0375%
0.0622%
0.1116%
0.1927%
0.2914%
0.4272%

Disability
Male
0.0341%
0.0341%
0.0341%
0.0341%
0.0536%
0.1219%
0.2438%
0.5363%
0.9604%

Female
0.0500%
0.0500%
0.0410%
0.0410%
0.0720%
0.1200%
0.2630%
0.4380%
0.5000%

Page 17

 Appendix B: Actuarial Assumptions and Methods
c.

Table below provides a summary of the assumed rates of withdrawal for active members prior to eligibility
for retirement.
Annual Rates of Withdrawal
10 or more years of service

Years of Service
0
1
2
3
4
5
6
7
8
9

Male
14.00%
11.00
8.00
6.50
4.50
3.50
3.00
2.75
2.50
2.50

Female
12.00%
10.50
8.75
7.50
6.75
6.00
5.25
4.75
4.25
4.00

Age
25
30
35
40
45
50
55
59

Male
1.50%
1.50
1.50
1.50
1.59
2.04
3.44
4.00

Female
4.00%
4.00
3.50
2.30
1.50
2.00
2.50
2.90

Post-Retirement Mortality
For healthy retirees and beneficiaries, the RPH-2014 White Collar table with employee and annuitant rates blended
from ages 50 to 80 projected to the year 2020 using the BB improvement scale and further adjusted to grade in
increases (5% for females and 8% for males) to rates over age 80. For disabled retirees, the RPH-2014 Disabled
Mortality table projected to 2017 using the BB improvement scale. The following are sample rates for the retirees,
beneficiaries, and disabled:
Annual Rates of Death
Healthy
Age
50
55
60
65
70
75
80
85

Male
0.1476%
0.2800%
0.4557%
0.7214%
1.1906%
2.0499%
3.6764%
6.9254%

Disabled
Female
0.1116%
0.1927%
0.2914%
0.4747%
0.8584%
1.5897%
2.9756%
5.4419%

Male
1.8406%
2.2661%
2.7070%
3.2573%
4.0909%
5.4230%
7.5768%
11.1066%

Female
1.1487%
1.3727%
1.5886%
1.9356%
2.6165%
3.8159%
5.7047%
8.5219%

Marriage Assumption
85% of males and 75% of females assumed to be married, with female spouses 3 years younger than males.
Asset Valuation Method
The actuarial value of assets recognizes a portion of the difference between the actual market value of assets and
the expected actuarial value of assets, based on the assumed rate of investment return. The amount recognized each
year is 25% of the difference between market value and expected actuarial value.

SR_ACTVAL18_181114

Page 18

 Appendix B: Actuarial Assumptions and Methods
Actuarial Cost Method
The Entry Age Normal actuarial cost method allocates the plan’s actuarial present value of future benefits to various
periods based upon service. The portion of the present value of future benefits allocated to years of service prior to
the valuation date is the actuarial accrued liability, and the portion allocated to years following the valuation date is
the present value of future normal costs. The normal cost is determined for each active member as the level percent
of payroll necessary to fully fund the expected benefits to be earned over the career of each individual active
member. The normal cost is partially funded with active member contributions with the remainder funded by
employer contributions.
The unfunded accrued liability is determined by subtracting the actuarial value of assets from the actuarial accrued
liability.

Future Cost-of-living Increases
Members who retired prior to September 1, 1992 are assumed to receive an annual Cost-of-Living Adjustment
(COLA) of 3.0%. Members who retired on or after September 1, 1992 and were hired prior to July 1, 2007 are
assumed to receive an annual Cost-of-Living Adjustment (COLA) of 2.0%. Members who retired on or after
September 1, 1992 and were hired on or after July 1, 2007 are assumed to receive an annual Cost-of-Living
Adjustment (COLA) of 1.75%.
Administrative and Investment Expenses
The investment return assumption represents the expected return net of all administrative and investment expenses.
Payroll Growth Rate
The total annual payroll of active members is assumed to increase at an annual rate of 3.25%. This rate does not
anticipate increases in the number of members.
Changes from Prior Valuation
None

SR_ACTVAL18_181114

Page 19

 Appendix C: Summary of Plan Provisions
Outlined below are the principal provisions of the system which were reflected in the results shown in this report.
Covered Employees
Any teacher, principal, superintendent or supervisor engaged in service of public schools, plus
professional employees at State schools of higher education if they choose to be covered.
Annual Salary
Annual Salary rate for service as a Connecticut teacher during a school year excluding amounts paid for extra
duty assignments, coaching, unused sick time, unused vacation or terminal pay.
Average Annual Salary
Average of Annual Salary received during three years of highest salary.
Credited Service
One month for each month of service as a teacher in Connecticut public schools, maximum 10 months for each
school year. Ten months of credited service constitutes one year of Credited Service. Certain other types of
teaching service, State employment, or war-time military service may be purchased prior to retirement, if the
Member pays one-half the cost.
Normal Retirement
Eligibility - Age 60 with 20 years of Credited Service in Connecticut, or 35 years of Credited Service including
at least 25 years of service in Connecticut.
Benefit - 2% of Average Annual Salary times years of Credited Service (maximum benefit is 75% of Average
Annual Salary)
In addition, amounts derived from the accumulation of mandatory contributions made prior to
July 1, 1989 and voluntary contributions by the teacher are payable.
Minimum Benefit: Effective January 1, 1999, Public Act 98-251 provides a minimum monthly retirement
benefit of $1,200 to teachers who retire under the Normal Retirement provisions and who have completed at
least 25 years of full time Connecticut service at retirement.
Early Retirement
Eligibility - 25 years of Credited Service including 20 years of Connecticut service, or age 55 with 20 years of
Credited Service including 15 years of Connecticut service.
Benefit - Reduced normal retirement benefit. The early retirement factors currently in effect are 6% per year
for the first five years by which early retirement precedes the minimum normal retirement age and 4% per year
for the next five years by which early retirement precedes the minimum normal retirement age. Effective
July 1, 1999, the reduction for individuals with 30 or more years of service is 3% for each year by which early
retirement precedes the minimum retirement age.

SR_ACTVAL18_181114

Page 20

 Appendix C: Summary of Plan Provisions
Proratable Retirement
Eligibility - Age 60 with 10 years of Credited Service.
Benefit - 2% less 0.1% for each year less than 20 years of Average Annual Salary times years of Credited
Service in Connecticut, plus 1% of Average Annual Salary times years of additional Credited Service time.
Disability Retirement
Eligibility - 5 years of Credited Service in Connecticut if not incurred in the performance of duty and no service
requirement if incurred in the performance of duty.
Benefit - 2% of Average Annual Salary times Credited Service to date of disability, but not less than 15% of
Average Annual Salary, nor more than 50% of Average Annual Salary. In addition, disability benefit under this
plan (without regard to any cost-of-living adjustments) plus any initial award of Social Security benefits and
workers’ compensation cannot exceed Average Annual Salary.
Termination of Employment
Less than 5 years of Credited Service - Return mandatory contributions with interest.
5 or more years of Credited Service - Return employee mandatory contributions with interest and 1%
contributions made prior to July 1, 1989 without interest.
10 or more years of Credited Service - Member is 100% vested in the accrued benefit based on Credited Service
and Average Annual Salary as of the date of termination of covered employment. Benefits are payable at age
60 and early retirement reductions are based on the number of years of service the member would have had if
they had continued to work until age 60.
Member may elect return of all contributions plus interest on employee mandatory contributions in lieu of
vested benefit.
Pre-Retirement Death Benefits
A lump sum plus one of the following: survivor’s benefit, return of all contributions with interest, or surviving
spouse’s benefit.
 Lump Sum: $1,000 for the first 5 years of Connecticut service plus $200 per year thereafter. Maximum
benefit: $2,000.
 Survivor’s Benefit: For active teachers who die while in service, the family maximum benefit payable
to survivors is $1,500 per month. Each minor child is entitled to $300 per month. The surviving spouse’s
benefit is $300 per month if the member has 12 or less years of service. For each additional year of
service, the surviving spouse’s monthly benefit is increased $25, up to a maximum of $600.
 Accumulated contributions with interest plus dependent children’s benefits as described in the
“Survivor’s Benefit” paragraph.
 Surviving Spouse’s Benefit: An active member who is eligible for immediate retirement and who has
named his or her spouse as primary beneficiary will be covered by a 100% Plan D co-participant option
in the event of his or her death prior to retirement.

SR_ACTVAL18_181114

Page 21

 Appendix C: Summary of Plan Provisions
Benefit Options
Normal form: Partial Refund Option – 75% of total benefit is paid as a life annuity. If 25% of the benefits paid
prior to death do not exceed the Member’s mandatory contributions plus interest frozen at the date of the benefit
commencement, the difference is paid to the Member’s beneficiary.
Optional Forms: 5-, 10-, 20-, or 25-year certain and life and 33-1/3%, 50%, 66-2/3%, 75%, or 100% coparticipant annuity (if co-participant dies first, benefit reverts to unreduced amount).
Amounts payable under the optional forms are determined on an actuarially equivalent basis. Actuarial
equivalence is determined using mortality as described in Section F of the report, 8.5% interest, and 2%
compound COLA. A unisex mortality blend of 60% male was used for certain benefit forms, and a blend of
80% male was used for co-participant annuity forms.

Cost-of-Living Allowance
For teachers who retired prior to September 1, 1992, pension benefit adjustments are made in accordance with
increases in the Consumer Price Index, with a minimum of 3% and a maximum of 5% per annum.
For teachers who were members of the Teachers’ Retirement System before July 1, 2007, and retire on or after
September 1, 1992, pension benefit adjustments are made that are consistent with those provided for Social
Security benefits on January 1 of the year granted, with a maximum of 6% per annum. If the return on assets
in the previous year was less than 8.5%, the maximum increase is 1.5%.
For teachers who were members of the Teachers’ Retirement System after July 1, 2007, pension benefit
adjustments are made that are consistent with those provided for Social Security benefits on January 1 of the
year granted, with a maximum of 5% per annum. If the return on assets in the previous year was less than
11.5%, the maximum increase is 3%, and if the return on the assets in the previous year was less than 8.5%, the
maximum increase is 1.0%
Teachers’ Mandatory Contribution
Effective July 1, 1992, each teacher is required to contribute 6% of annual salary for the pension benefit.
Beginning January 1, 2018, each teacher is required to contribute 7% of annual salary.
State Contribution
The State’s contribution requirement is determined in accordance with Section 10-183z (which reflects Public
Act 79-436 as amended). The additional 1% teachers’ required contribution (above) offsets State required
contribution only for the biennium ending June 30, 2019.
Early Retirement Incentive
A local or regional board of education may establish a retirement incentive plan. The plan shall provide for
purchase of additional credited service by a board of education and a member of the system who chooses to
participate in the plan, of additional credited service for such member and for payment by the board of education
of not less than fifty per cent of the entire cost of such total cost. Any such plan shall specify a maximum
number of years to be purchased, not to exceed five. Members must have attained age 50 and be eligible for
retirement with the additional purchased service. The amount of service purchased cannot exceed the lesser of
five years and one-fifth of the member’s credited service.

SR_ACTVAL18_181114

Page 22

 Appendix D: Glossary
Actuarial Accrued Liability - The difference between the actuarial present value of future benefits payments and the
actuarial present value of future normal costs. Also referred to as “accrued liability.”
Actuarial Assumptions - Estimates of expected future experience with respect to rates of mortality, disability,
turnover, retirement, rate or rates of investment income and salary increases. Demographic estimates (rates of
mortality, disability, turnover and retirement) are generally based on past experience, modified for projected changes
in conditions. Fiscal estimates (salary increases, inflation and real investment return) consist of the underlying rates
in an inflation-free environment plus a provision for a long-term average rate of inflation.
Actuarial Cost Method - A mathematical budgeting procedure for allocating the dollar amount of the “actuarial
present value of future benefit payments” between future normal cost and actuarial accrued liability.
Actuarial Present Value - The amount of funds currently required to provide a payment or series of payments in the
future. It is determined by discounting future payments at predetermined rates of interest and by probabilities of
payment. Also referred to as “present value.”
Actuarial Value of Assets - The value of current plan assets recognized for valuation purposes.
Amortization - Paying off an interest-discounted amount with periodic payments of interest and principal, as opposed
to paying off with a lump sum payment.
Experience Gain (Loss) - A measure of difference between actual experience and that expected based upon a set of
actuarial assumptions during the period between two actuarial valuation dates, in accordance with the actuarial cost
method being used.
Normal Cost - The annual cost assigned, under the actuarial funding method, to current and subsequent plan years.
Unfunded Actuarial Accrued Liability - The difference between the actuarial accrued liability and actuarial value of
assets. Also referred to as “unfunded accrued liability.”
.

SR_ACTVAL18_181114

Page 23