[Vision2020] Fwd: FW: PERSI - Utah Model Overview

Tom Trail ttrail at moscow.com
Wed Jun 29 15:45:42 PDT 2011


During the last Legislative Session there were rumors that several legislators
wanted to make changes in the PERSI Program.   PERSI Director, Donald Drum,
told me about three weeks ago that Rep. Jeff Thompson of Idaho Falls plans to
introduce legislation that would make the Idaho program similar to that of the
Utah retirement program.

I've included a letter that Director Drum sent out to all legislators about
the Utah program.  He will be touring Idaho during the next several months
and talking to legislators.  PERSI ranks as either ! or 2 nationally at the
top of similar type retirement programs.   My overview of potential changes
to the program are simply a solution in search of a problem.

If I get a call from Director Drum about a potential meeting here in District
6 I'll work with other legislators and elected officials to set up a public

Rep. Tom Trail

>June 27, 2011
>Dear Legislator:
>As promised in my last letter, enclosed is the 
>report prepared by PERSI comparing Idaho to the 
>Utah model. This comparison report was prepared 
>after conducting extensive research on the URS 
>fund, its history, how it differs from PERSI, 
>and the reason it needed to change. (As a 
>private organization, Utah is not subject to 
>Freedom of Information Act disclosures, so a 
>complete comparison was not possible.)
>Our goal is to provide a useful comparison to 
>Idaho legislators as Idaho considers if any 
>changes are needed to the PERSI fund.  Some key 
>points included in the report are listed below.
>The numbers for Utah's system were obtained from 
>actuarial reports requested by Senator 
>Liljenquist and from presentation materials 
>created by the Senator.  PERSI's actuaries 
>duplicated the Utah scenarios for Idaho using 
>PERSI data and identical projections.
>·      Funding projections using baseline return 
>of 7.75% annually showed that Utah (URS) would 
>be required to raise employer contribution rates 
>to 23.1% by 2016.  The same projection for PERSI 
>showed employer contribution rates at 11.6% in 
>2016. Current year returns would lower this 
>projected rate. (Charts on page 7 of report)
>·      Also using a set return rate of 7.75% URS 
>projected funding ratio drops to 70.5% in 2013 
>and their UAAL increases to more than $6 
>billion.  By 2050 URS's funding status was 
>projected to drop to 0%.  The same projection 
>for PERSI has a funding level in 2013 of 83.7% 
>(IF return were no higher than 7.75%. Currently 
>Idaho is almost 90% funded) and the UAAL 
>continues to decrease.  Using the projections 
>and 2010 data, by 2050 PERSI's projected funding 
>status would be almost 120%. This would be even 
>higher if we consider FY11 returns. (Charts on 
>page 6 of report)
>·      URS uses a 5 year smoothing process to 
>limit the effect market volatility has on the 
>funding status.  PERSI is one of 2 systems that 
>do not use smoothing.  In 2010 PERSI reported a 
>funding level of 78.9%.  URS reported a level of 
>85.7% actuarial return.  In our estimation their 
>true funding level at the end of 2010 was only 
>75%.  URS's funding status will continue to drop 
>for the next 3 years to recover from 2008 
>losses. (Further details on page 3 of report)
>·      URS employees do not contribute to their 
>retirement fund.  Although employer rates appear 
>to be locked in at 10% they are actually at 14% 
>and will most likely continue to rise until the 
>UAAL has been eliminated.  (Pages 2 and 5 of 
>I also wanted to mention there was a delay in 
>the release of the Sensible Solutions, Model 
>Public Pension Funding Practices: Lessons from 
>Six Well-Funded Systems, which I cited in my 
>last communiqué.  The new release date is June 
>29, 2011.  PERSI will add a link to the report 
>on its website 
>when it becomes available.
>In the coming weeks, I will begin traveling 
>throughout the state to meet with legislators, 
>employers and constituency groups. You may 
>receive a call from my assistant to arrange a 
>convenient time for us to meet so we can discuss 
>in detail the information I've been providing. 
>If you do not hear from us soon, please feel 
>free to contact me and I will accommodate your 
>schedule as best I can.  My goal is to continue 
>providing information that will be useful to 
>you.  If you have any specific topic/questions I 
>have not covered please let me know and we will 
>be happy to develop the information for you.  As 
>always, if you have questions about these 
>reports or the earlier ones, please give me a 
>Best regards,
>Don Drum
>Executive Director
>A hard copy of this  letter and report have been mailed to you.
>message contains information from the Public 
>Employee Retirement System of Idaho (PERSI) and 
>may contain information that is confidential or 
>privileged under law. The information is 
>intended solely for the use of the individual(s) 
>or entity(ies) named above.  If you have 
>received this e-mail in error, any use, 
>dissemination or copying is strictly prohibited. 
> If you have received this electronic message in 
>error, please notify the sender immediately by 
>reply email or at the telephone number contained 
>herein and immediately delete this message. 
> Thank you.
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Dr. Tom Trail
International Trails
1375 Mt. View Rd.
Moscow, Id. 83843
Tel:  (208) 882-6077
Fax:  (208) 882-0896
e mail ttrail at moscow.com
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