Florida Electric Cooperative Accounting Association May 2010

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Points. Retirement Security (RS) Plan UpdateForm 990 CalculationsPost Retirement Benefit Valuation ServicesNew Annuity OptionHealth Care Legislation BTA Coverage. 2. 3. Established in 1948Designed to serve the electric helpful industryAssists with pulling in and holding employeesDesigned on account of the community representative Provides industry portabilityProvides an agreeable standard of retirement li

Presentation Transcript

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Florida Electric Cooperative Accounting Association May 2010

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Topics Retirement Security (RS) Plan Update Form 990 Calculations Post Retirement Benefit Valuation Services New Annuity Option Health Care Legislation BTA Coverage

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The RS Advantage Founded in 1948 Designed to serve the electric agreeable industry Assists with pulling in and holding workers Designed because of the community representative Provides industry conveyability Provides an agreeable standard of retirement living for workers who go through their vocations with the center 870 taking an interest cooperatives with 63,000 individual members 3

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Funding Calculations Two estimations expected to decide required commitments: Regular ERISA financing – typical subsidizing count required every year. Benefits financed over the normal future working lifetime of representatives. Deficiency Reduction Contribution (DRC) – applies just if supported proportion is underneath a specific level. The DRC requires a shorter subsidizing period. The required commitment is the bigger of these two sums.

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Increase in Contribution Rates for 2010 Base commitment rates for 2010 expanded by 35%. Genuine increment for a community will fluctuated with changes in normal age for that center. Because of 26.4% degree of profitability in addition to community prepayment of 2010 commitments, the DRC won't make a difference for 2010.

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Investment Return for 2008 - 2009 2008 Actual Return - 27.2 % Expected Return 8.5 % Difference - 35.7 % 2009 Actual Return 26.4 % Expected Return 8.5 % Difference 17.9 %

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Assets 2008 and 2009 Market Value of Assets 12/31/2007 $4.96 Billion Expected MV of Assets 12/31/2008 $5.19 Billion Market Value of Assets 12/31/2008 $3.47 Billion Unrealized Investment Loss $1.72 Billion Market Value of Assets 12/31/2009 $4.10 Billion

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RS Plan Investment Return History Year Return Year Return 2009 26.4% 2008 (27.2)% 1995 26.0% 2007 4.9% 1994 (0.1)% 2006 14.9% 1993 15.9% 2005 8.6% 1992 9.7% 2004 13.3% 1991 21.1% 2003 23.7% 1990 (0.9)% 2002 (6.6)% 1989 21.0% 2001 2.2% 1988 16.3% 2000 7.3% 1987 3.0% 1999 5.8% 1986 23.9% 1998 13.8% 1985 26.0% 1997 21.4% 1984 6.0% 1996 16.0% 1983 18.4% 1982 24.2% Negative Positive yet not as much as accepted Positive yet not as much as accepted Greater than expected 8.5% Greater than accepted 8.5%

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RS Plan Asset Allocation (Varies after some time) Domestic Equity 50% International Equity 10% Bonds 35% Cash 5%

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Concern for 2011 With proceeded with stage in of the 2008 speculation misfortune, the DRC is probably going to apply for 2011 unless there is predominant venture execution for 2010 and also 2009. Be that as it may, enactment is being sought after to address this issue. We are joining our endeavors with different arrangements which are under PPA and are confronting a significantly more major issue.

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Accounting of DRC – Statement 71 Statement 71 applies to the DRC Contribution. RUS has shown this is worthy to them, with an amortization time of the normal working lifetime of plan members. An amortization time of 10 years ought to be adequate.

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Long – Term Changes: 1982 to 2009 Plan 1982 2009 Age 65 65.8% 12.4% Age 62 15.7% 52.0% Age 62/30 Year 18.5% 34.0% Age 60 - 1.6% COLA 0.0% 19.8% Average Future Benefit Level 1.6% 1.8%

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RS Plan Changes 2006 - 2007 Upgrade Downgrade Benefit Level 39 1 Normal Retirement Age 1 1 COLA 1 1 Employee Contributions 3 6 New Plans 7 New Hires – Reduced Plan 15 New Hires – No Plan 9 Plan Freezes None Plan Terminations None

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RS Plan Changes in 2008 Upgrade Downgrade Benefit Level 10 3 Normal Retirement Age 1 3 COLA 1 1 Employee Contributions 0 4 New Plans 2 New Hires – Reduced Plan 1 New Hires – No Plan 0 Plan Freezes None Plan Terminations None

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RS Plan Changes Effective 1/1/2010 Benefit Level Changes Number of Co-operations Benefit Level Increases 4 Benefit Level Decreases By 0% - 0.5% 41 By 0.51% - 1% 7 By more than 1% 2 50* Decreased Benefit Level for New Hires 11 Plan Freezes 2 * 5 centers downsized their NRD. 2 communities expanded worker commitments.

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RS Plan Changes Effective 1/1/2010 Normal Retirement Date Changes Number of Co-operations Age 62/30 Years Actual to Normal 9 Age 62/30 Years Actual to Age 62 6 Age 62/30 Years Actual to Age 65 1 Age 62/30 Years Normal to Age 62 1 Age 62/30 Years Normal to Age 65 1 Age 62 to Age 65 6 24

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RS Plan Changes Effective 1/1/2010 Other Plan Changes Number of Co-operations Add COLA 1 Remove COLA 6 Add 100% Death 1* Remove 100% Death 10** Increase Employee Contributions 3 Decrease Employee Contributions 1 * Also downsized NRD ** One center likewise minimized NRD and expelled COLA

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Form 990 Calculations From 990 must demonstrate the actuarial estimation of the expansion in benefits for specific members If asked for, NRECA will ascertain these sums or talk about option assesses once the community gives the names of the members Requests can be made with the names of the proper members through rs990@nreca.coop

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Post Retirement Benefit Valuation Services NRECA gives valuations, ponders, and budgetary explanation exposures of post-retirement (other than annuity) benefits on an expense for administration premise Applicable monetary gauges are FAS 106, FAS 112, FAS 132, and FAS 158 Most regular advantages considered are post retirement medicinal, medication, dental, and life Consulting administrations on conceivable arrangement changes to control expenses are additionally given

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Post Retirement Benefit Valuations The charge charged relies on upon the many-sided quality of the center's arrangement and the quantity of members Approximately 33% of centers pay a segment of the retiree therapeutic premium for in any event a few representatives Contact Howard Van Houten at 703-907-6453 or howard.vanhouten@nreca.coop

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New Optional Form of Benefit Distribution During 2010, the RS Plan will build up another decision, the "Full Cash Refund Annuity," to offer to workers upon retirement at no extra cost to Co-operations The retiree gets an ensured pay forever and, upon death, any overabundance of the singular amount sum the retiree could have gotten at retirement over installments really gotten is paid in a single amount to the recipient

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Use of Lump Sum Option Over 92% of retirees pick a singular amount Is the singular amount the best decision for the member? Is the single amount the best decision for the arrangement?

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Lump Sum Concerns and New Annuity Option Retiree who takes singular amount is wagering he will kick the bucket within the near future Outliving retirement pay is a genuine probability From the viewpoint of the arrangement, the single amount is the most costly alternative Does another annuity frame exist that is useful for members and useful for the arrangement?

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A New Alternative: Full Cash Refund Annuity (FCRA) The Full Cash Refund Annuity will give another option that addresses some of these worries The retiree gets an ensured pay forever and, upon death, any abundance of the singular amount sum the retiree could have gotten at retirement over installments really got is paid in a single amount to the recipient FCRA will be joined with Life just and one J&S Annuity The accompanying slide shows the new annuity decision for a speculative retiree at age 62

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A New Alternative: Full Cash Refund Annuity Following is theoretical month to month benefit*: $855 forever, and demise advantage of $146,000 less installments got * Approximate sums; change figure for this choice has not yet been chosen; beginning passing advantage registered utilizing 2009 rates

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A New Alternative: Full Cash Refund Annuity Example 1: Suppose the retiree on the past slide kicks the bucket at age 67 in the wake of getting 60 regularly scheduled installments of $855: Initial demise advantage: $146,000 Payments got amid retiree's lifetime: $855 x 60 = $51,300 Death advantage to recipient: $146,000 - $51,300 = $94,700

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A New Alternative: Full Cash Refund Annuity Example 2: Suppose the retiree on the past slide bites the dust at age 82 subsequent to accepting 240 regularly scheduled installments of $855: Initial passing advantage: $146,000 Payments got amid retiree's lifetime: $855 x 240 = $205,200 Death advantage to recipient: $0, in light of the fact that installments got surpass starting singular amount that member could have chosen

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A New Alternative

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