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OREA ANNUAL CONVENTION October 3, 2018 Tom Spencer, Executive Director Teachers’ Retirement System

OREA ANNUAL CONVENTION October 3, 2018 Tom Spencer, Executive Director Teachers’ Retirement System. Client Overview (June 30, 2018). Total Clients – 177,888 88,534 Active Clients 63,796 Retired Clients (incl. beneficiaries) 12,243 Inactive Vested Clients

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OREA ANNUAL CONVENTION October 3, 2018 Tom Spencer, Executive Director Teachers’ Retirement System

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  1. OREA ANNUAL CONVENTION October 3, 2018 Tom Spencer, Executive Director Teachers’ Retirement System

  2. Client Overview(June 30, 2018) • Total Clients – 177,888 • 88,534 Active Clients • 63,796 Retired Clients (incl. beneficiaries) • 12,243 Inactive Vested Clients • 13,315 Inactive Non-vested Clients

  3. Client Overview

  4. Client Overview (FY 2017) • Average Active Client • $46,878 Salary • 46.0 Years of Age • 11.1 Years of Service • Average Retired Client • $20,908 Annual Benefit (regular ret’ees) • $20,443 (reg. & disab. ret’ees, benefic. & spouses)

  5. Client Overview

  6. Financial OverviewActuarial Condition • 2017 Funded Ratio • 70.4% on actuarial basis (65.7% in FY 2016) • 70.1% on a market value basis (62.2% in FY 2016) • Funding Period • 17 Years (23 years in FY 2016) *Board lowered investment return assumption from 8.0% to 7.5% for FY 2016 actuarial report

  7. Financial Overview

  8. Financial Overview • FY-2018 Contributions - $1.07 Billion • Client Contributions - $312.8 M • Employer Contributions - $415.9 M • State Contributions (& grants) - $344.6 M • FY-2018 Expenditures - $1.4 B • Benefit Payments - $1.36 B • Refunds - $42.9 M • Administrative Expenses - $4.2 M *Ratio of Contrib. to Expenditures – 76.2%

  9. Financial Overview

  10. Financial OverviewInvestments • FY-2018 Investment Earnings/Loss $1.49 Billion (10.00% rate of return) • Income: $417.5 M • Appreciation: - $1.14 B • Investment Expenses - $69.3 M

  11. Financial OverviewInvestments

  12. Financial OverviewInvestments • Positives in Recent TRS Performance (thru 6/30/18 • Earned 8.7% for last 10 years (1st percentile) • Earned 9.50% for last 5 years (5th percentile) • Earned 10.00% for last 12 mos. (9th percentile) • Long term returns good from active domestic equity managers and private equity. Very difficult to get returns from fixed income investments as interest rates rise. Source: Oklahoma State Pension Commission, NEPC Consultant

  13. Financial OverviewInvestments • SUMMARY • System is underfunded but trending higher. Very good returns in last two fiscal years. • Funding period is 17 years down from infinity • Long-term financial performance is still very good • Contributions & Revenue almost equal Actuarially Determined Contributions

  14. Legislation 2018 • HB 1340 (Rep. McDaniel, et al; Sen. Treat, et al)One-time stipend to members retired as of 10/1/13. Two percent of the gross benefit up to $1,000. Minimum $350 for those with at least 20 years. (Eff. 10/1/18). • HB 2553 (Rep. McDaniel; Sen. Pugh)TRS request bill. Section One - Permits the TRS Board to gradually wind down the TRS 403(b) plan. Transition to local plans. Section Two - TRS staff approves disability retirements after Medical Board approval. The TRS Board hears denials. Section Three – Eliminates a loophole in ESIP that a few higher education members had. (Eff. 8/2/18). • SB 527 (Sen. Stanislawski; Rep. McDaniel) Permits TRS members employed in higher education to purchase up to two years of service credit toward retirement at full actuarial cost, if within two years of retirement. (Eff. 11/1/18)

  15. “Retirement in America:Out of Reach for Working Americans?”Nat’l Inst. on Retirement Security Nearly 60% of the 100 million working Americans have no retirement account assets Typical worker with retirement account has a balance of $40,000 68.3% of those between ages 55 to 64 have retirement savings less than their annual income Some states are offering retirement savings plans to their residents. (California, Oregon, Washington & Illinois) (President Trump issued executive order (8/31/18) for U.S. Labor Department to look at relaxing regulations to permit employers to create multi-employer plans to hold down costs)

  16. Tom Spencer Executive Director (405) 521-4745

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