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SECTION SECTION SECTION SECTION SECTION SECTION SECTION SECTION APPENDIX

Exhib Exhib

N

Mexico LCS\NMLCS01

I. EXECU

II. INTROBackgActua

III. REVIEData PData FNecesBenef

IV. ACTUABackgEconoDemo

V. ACTUAActuaAsset Amort

VI. ACTUASampRevieConteRecom

VII. SOLVE

VIII. CONC

X bit 1 Develbit 2 Asset

NEW MEXI

13111_AuditReport_F

UTIVE SUMMA

ODUCTION .....ground ........rial Process

EW OF MEMBEProcess ......Files ...........ssary Data Efit Calculatio

ARIAL ASSUMground on Acomic Assumographic Ass

ARIAL METHOrial Cost MeValuation M

tization Meth

ARIAL VALUAple Member Cw of Project

ent of the Acmmendation

ENCY ...........

LUSIONS .....

opment of AValuation M

CO LEGIS

TABLE O

inal.docx

ARY .............

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ERSHIP DATA......................................

Elements .....ons ...............

MPTIONS ANDctuarial Assuptions .........

sumptions ...

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PAGE

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SECTIO

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PURPOSE A periodispecificafund is berequest fEmployeBuck wasJune 30, CompanyvaluationMacdonathe informemploy G As an indreasonabmethods The scopprofessioSmith & C

•

• •

•

• •

PRINCIPA We are pbased onreasonabpracticesbut theseThe majoprojectio

ON I.

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E AND SCOPE

ic actuarial rlly for the preing measurfor an actuares Retiremes selected to2009 actua

y (GRS)), thn. Since the ald to complemation for thGRS as their

dependent rebleness and , and valuat

pe of the revonal peer revCompany. T

verifying tcomparindata is acand meetreviewingreviewingwith Actuareviewingvaluation checking reviewingwith Actua

AL FINDINGS

pleased to ren our review ble and perfos. We founde are not areor finding regns leads to a

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13111_AuditReport_F

E OF ACTUAR

review of a project, on a rred as accurrial review ofent Associatio perform thrial valuatione 2008 expeJune 30, 20

ete the annuhe plans admr actuary.

eviewing actaccuracy of

ion results.

view includedview of the aThis review

that the datag it to the fin

ccurate and rts Actuarial Sg recommendg demographarial Standa

g sample mecalculationsnumbers in

g the actuariaarial Standa

eport that Buwith the exc

ormed in acc some areas

eas that wougarding the pan unreason

IVE SUMM

inal.docx

RIAL REVIEW

pension fundregular basisrately as posf the pensioion (PERA) e actuarial rn results preerience stud009 valuationual actuarial ministered by

tuary, we haf the valuatioThis report

d both a techactuarial assinvolved:

a from New Mnal actuarial reasonable aStandards ofdations by Ghic and econrds of Practmber calcula

s the valuatioal value of ard of Practic

uck finds GRception of twcordance wis where we

uld have a mpopulation g

nably optimis

MARY

1

d is typicallys to ensure tssible. The n plans admand the Edu

review. The epared by they, actuarial n, New Mexvaluations.

y PERA for o

ave been askon data, actudocuments t

hnical reviewsumptions an

Mexico PERdata GRS uassumptionsf Practice No

GRS for the enomic assumice Nos. 27 ations from

n report for sset calcula

ce No. 44

RS’s actuariawo major findth generally suggest maaterial impa

growth assumstic asset ac

conducted bthat the actuLegislative C

ministered byucational Reactuarial reve actuaries assumptionsico PERA em Cavanaughour review.

ked to expreuarial assumthe results o

w of the valund methods

RA and ERB used to deters were usedo. 23 for Datexperience s

mptions for reand 35 GRS that sh

accuracy ations and m

al results for dings. We foaccepted a

king changeact on the acmption of 1.5ccumulation.

by a separatuarial conditiCouncil Servy the New Mtirement Boaview include(Gabriel Roes and methomployed Cah MacdonaldNew Mexico

ess an opiniomptions, actuof our review

uation resultsused by Ga

was complermine if the f

d to completeta Quality studies easonability

howed the d

ethodology

ERB generaound the woctuarial princ

es to the curctuarial valua5% per year

te firm, engaon of the pevice issued aexico Publicard (ERB) ines a review oeder Smith &ods used in tavanaugh d supplied mo ERB contin

on regardinguarial cost w.

s and a briel Roede

ete and final valuatioe missing da

and complia

etails of the

for complian

ally reasonaork to be ciples and rent approacation results.r in the

aged ension a c n 2010. of the & the

most of nues to

g the

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ance

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able

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For PERAresults ofthe valua Major Fi1. In o

meAge

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3. GRmopro

4. In osevrateexp

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ation. We ha

indings: our opinion, et GASB reqe Method fo

our opinion, d Volunteer es not converridor as requ

RS used an edel. In our o

ojections usin

our review ofveral groups es are underperience und

on, Buck wasthe solvencyy agreed thaobligations . Buck revie

d prepared pVII of this rep

rojections weions includin. We projecroup membeembers fromby 2033 an

pproach that s, assets ford to be depleble active po5% annuallynably optimis

EXECUT

13111_AuditReport_F

unable to realuation. Th

ave found tw

the Modifiedquirements. r GASB purp

the Market VFirefighters)

erge to Markuired by Act

expected actopinion, this ng a stable a

f the experiewhere the r

rstating the lder both PER

s asked to ay of PERA a

at a pension when due.

ewed informprojections bport.

ere performeng an 8.0% acted the resuership which

m the projectd assets for includes tot

r PERA are eeted at any topulation, buy. As previostic.

IVE SUMM

inal.docx

eceive adequerefore, we o major find

d Entry Age We recomm

poses.

Value Smoo) is not a reaket Value in auarial Stand

tive populatiassumption

active popula

ence analysirates for retirliability and wRA and ERB

assist the Rend ERB. A system is soHence, insoation from pased on this

ed assumingannual rate oults using twh excludes noion. Under tERB are ex

tal contributioexpected to ime in the fu

ut ERB is basusly stated,

MARY

2

uate informaare unable tings in our r

Normal Metmend a chan

othing Methoasonable mea reasonable

dards of Prac

on growth on is aggressiation.

s results on rements arewe recomme

B.

etirement Sysnumber of dolvent if it caolvency woulrojections pe

s information

g all future eof return on o different aormal cost cthis approacxpected to beons and benbe depleted

uture. The osed on an aswe believe t

ation from GRto render anreview regar

hod used bynge to the tr

od used by Gethod since te period of tctice (ASOP

of 1.5% per yve and we r

the retireme not conservend the actu

stems Solvedefinitions wan be expectld occur if therformed by

n. Our proje

experience mthe market v

approaches. contributionsch, assets foe depleted bnefit paymend by 2058 whopen group pssumption ththis assump

RS to confirmn opinion on rding PERA

y GRS for ERraditional Ind

GRS for PERthe Actuarialtime or does

P) No. 44.

year in the Erecommend

ent rates, wevative. Thesuaries furthe

ency Task Foere suggestted to meet ahe fund assey GRS for boctions are in

matches the value of ass One approa

s and benefitor PERA areby 2039. Unnts for all curhile assets foprojection fohat the activ

ption for ERB

m the numethe accuracas noted be

RB does notdividual Entry

RA (PERA Fl Value of As

s not use a

ERB projectioGRS perform

e identified se aggressiv

er review the

orce with ted, but it is all future be

ets are fully oth PERA anncluded in

actuarial sets after Junach uses a t payments o expected to

nder an openrrent and futor ERB are nr PERA is b

ve member gB is

rical cy of elow.

t y

und ssets

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ve

nefit

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ne

of o be n ture not ased

group

SECTIO

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Both DavSociety oQualificacontainedActuarial We woulCavanau Respectf BUCK CO David H.Principa

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vid H. Slishinof Actuaries tion Standard in this repo Standards o

d like to thanugh Macdona

fully submitte

ONSULTAN

. Slishinsky,l, Consulting

EXECUT

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nsky and Micand Memberds of the Amort. This repof Practice a

nk the staff aald for their

ed,

NTS, AN ACS

, FCA, ASAg Actuary

IVE SUMM

inal.docx

chelle Rediners of the Ammerican Acaport has beeand David H

at the State assistance i

S COMPANY

A, EA, MAAA

MARY

3

ng DeLangemerican Acadademy of Acten prepared . Slishinsky

of New Mexn completing

Y

A MichelleDirector

are Enrolleddemy of Acttuaries to rein accordanhas primary

xico PERA ag this report

e Reding Der, Consultin

d Actuaries, uaries and m

ender the actce with all a

y responsibil

and ERB, GRt.

eLange, FSg Actuary

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applicable lity for the re

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BACKGRO New Mexprofessioresponsiemployed We requeJune 30, experienCavanaufor ERB a The obje

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xico PERA isonal and certble for admid by public s

ested copies2007, 2008

ce and beneugh MacDonand PERA.

ectives of our

Assess the vaemographicaluations of

Assess whetheasonable are appropriatated in GRStandards.

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System’s expbjectives.

ort is intendeon reached dendations annd ERB’s ret

AL PROCESS

w Mexico PEed status of ry, along witpayments. T

d future pensre funding nessets are acdvance fund

ncreasing then orderly ma

INTRODU

13111_AuditReport_F

s responsibltified employnistering theschools in th

s of the actu8 and 2009, eefit calculatioald for PERA

r actuarial re

alidity, compand financiaNew Mexico

her the valuand consisten

ate for each S’s valuation

her the actuacepted actuaperience, and

ed to documduring the pend conclusiotirement fund

S

RA and ERBthe systemsh investmenThe valuatiosion paymeneeds. The fuccumulated tding include:

e security ofanner.

UCTION

inal.docx

e for adminiyees in the Se pension plahe State of N

uarial reportsexperience sons. These A. GRS pro

eview can be

pleteness, anal informatioo PERA and

ation and asnt with geneSystem’s str

n reports. W

arial valuatioarial standardd are approp

ent our indeeriod under

ons for improds.

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f promised (a

4

stering fourState of Newan for teache

New Mexico.

s prepared bstudies covereports were

ovided projec

e summarize

nd appropriaon used by thd ERB.

sset methodsrally accepteructure and

We will report

on assumptiods and practpriate for the

ependent anareview, and

oving the futu

prepare an aation date an

d employee cpshot” in timences this “lia

hodology invture benefits

and legislate

pension plaw Mexico. Ners, nurses

by GRS coveering econome supplied toctions and d

ed as follows

ateness of thhe current a

s and proceded actuarial funding objet any deviati

ons are reastices, are ree System’s s

alysis of theprovide Leg

ure funding

annual actuand the emplocontributionse which meaability” with tvolves advans for current

ed) benefits

ans for most New Mexico

and adminis

ering the plamic and demo us by GRSdetailed liabil

s:

he member dctuaries in t

dures used standards a

ective, and aons from ac

sonable andasonable ba

structure and

e work perforgislative Courequirement

arial valuatiooyer contribs, to fund theasures the cthe value of nce funding, employees.

by accumul

general, ERB is strators

n year beginmographic S for ERB anlity calculatio

data, and he actuarial

by GRS are and practicesare applied accepted

d consistent wased on the d funding

rmed and theuncil Servicets of New Me

on to determutions that ae promised urrent valuecurrent asseor prefundin

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SECTIO

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INTRODU

13111_AuditReport_F

the equitabletirement sy

method that aprospective mmbers who t

n involves thRB membery for those bmployee anon model incre experiencf achieving rprovides adement the fun

data – demoure pension

s – structure n retirement,

umptions – tbasis for es

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e treatment ystem costs t

appropriatelymembers of terminate, re

he determinars, the calcubenefits, andd employer corporating te. Typically

reasonably leequate benending policy

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sset valuationet fluctuation

ocedure usemethods aim

rogram overprogram. T

mployers andmade through

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of different to each year

y recognizeseach System

etire, and die

ation of the llation of the the determicontributionsthe New Me

y, a funding pevel contribuefit security. are as follow

ormation is cre determine

d benefits de, disability, o

sent the actuure benefits

dology used lue or somen method whns so that th

ed to allocatem to smooth c

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s costs overm. The infuse makes fun

iabilities for amount of a

ination of thes. Members

exico PERA apolicy is estautions and a The key ele

ws:

collected as ed for each m

efined underor death.

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s the benefitof revenue uss to fund theg the benefit

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nding a dyna

benefits proassets curree actuarial sship demogrand ERB beablished by t

attaining an aements of th

of the valuamember of t

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ts paid and esed to pay fo

e program, pt payments.

rs by assigni

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omised to Neently availablsoundness oraphic data ienefit structuthe governinasset he valuation

ation date anthe system.

te which are

ure experienabilities.

e current assvalue. The value is to ions is

sed benefitsd for benefit

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As part operformeJune 30, pensioneperforme DATA PR Our obje

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ection is a cson betweend in the GRSe data files invaluation. I

or reasonabn data. Durinng the two fils and client pared the da

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ed membersEach retired a retiree or e year for P

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REVIEW

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tuarial reviewember informw Mexico PEficiary data t

s process we

cessary data

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mpleteness

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ata provided

and ERB cres of members

pay status. s and a sepafile from PEa beneficiaryERA and ER

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OF MEMB

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w of New Memation used RA and ERBhat was use

ere to:

a elements

mber data

of member d

onent of therovided to usaluation repoformat as wad valuation pcompletenes, we can revviewing an overifying databy PERA an

eate data files: active me One file con

arate file conERA and ERB

y. There areRB and deat

supplied by Pcodes and snteer Firefighalso containeprocess for

ermine if thealuation reposystem at the

BERSHIP D

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exico PERAfor the curre

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data elemen

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es for the actembers, termntains the ac

ntains the retB contain fiee also additiths for ERB.

PERA did cosalary. The hters group.ed the samepopulating mir process foort states thae average e

DATA

and ERB, aent actuarial Buck with thene 30, 2009

nts

pically, our dA and ERB, aMexico PERAto GRS to p

e actuary doeas reconcilesa preparationch procedurappear unre

h the valuatio

tuaries that iminated memctive group, tired and beelds to identional files tha

ontain some data provide The valuat

e missing infmissing or uor adjusting at GRS assuntry age. Th

a data analysvaluations c

e same activ actuarial va

data review and the dataA and ERB serform the Jes not audit s with the prin procedurere together weasonable oon data used

include threembers, and mone file conneficiary meify whether aat contain ne

missing infoed by PERAtion data weformation. Wnreasonablesalaries or mumes active his is a reas

sis was completed ave, inactive,aluations

focuses on a summarizesubmitted toJune 30, 200the data butior year’s either by

with sample or incompleted by GRS.

e distinct members anntains the embers in paa member inew terminati

ormation, in A had signific received th

We did not obe informationmissing gendmembers wonable

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ay n pay ions

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SECTIO

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There weincluded GRS (suof active is otherwdiscusserecords wthe Volunof the acmay be rGRS’s acfields to ito an actvaluation The table

MisDate of BGender Service Pay Rate GRS inclon activeto accoucost to beshould clcost or s New Mexprovided dates of GRS assaddition, amountsdescribedmissing d

ON III.

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ere a significin the activepplied by Camembers be

wise deemeded the activeswere actual tnteer Firefigtive data pro

reasonable tctive membeindicate theyuary if PERA

n.

e below deta

ssing Item irth

ludes a 2% le liability andnt for issuese a reasonalarify whetheimply just to

xico ERB: Wby GRS. Tbirth and sa

sumed a hirethey screen. The valuad their procedates of birth

REVIEW

13111_AuditReport_F

cant numbere counts in thavanaugh Mecause the a

d “defective” s with salaryterminationshters. The Vovided by PEo exclude thership if thesy were not inA did not rep

ails the miss

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load on activd normal coss surroundingble approac

er the 2% loa the liability.

We also comhe data suplaries. The

e age of 35 fn the salary ition data fileess for adjush and salarie

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r of active meheir report. acdonald), iannual salarby their valu

y less than $s. GRS alsoVolunteer FiERA and thehese recordsse records ancluded in thport member

ing informat

PERA 7,298 7,151 5,912 9,136

ve liability fost for the Legg data repor

ch in cases wad for Magis

mpared the Eplied by ERfile from GR

for membersinformation ae provided bysting missinges used by G

BERSHIP D

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embers on tUpon reviewt appears thry provided buation system$100 with PEo excluded arefighters va

e records incs; however, iare included he active poprs that shoul

ion reported

Judicial323

20

or Magistrategislative Divirted by PERAwhere data restrate and Ju

ERB active dB did contai

RS did not cos with unreasand make ady GRS did ng or unreasoGRS to be re

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the GRS valw of data quhat GRS excby PERA is m. GRS sta

ERA and it w significant n

aluation repocluded for thit is difficult fon the valuapulation. In ld not be con

d to GRS by

l Ma

e and the Judision of PERA. We find

reporting is inudicial was a

data to the an some miss

ontain any msonable or mdjustments t

not contain thonable data.easonable.

uation file thestions sent

cludes a signless than $1

ates they prewas determinnumber of aort provides e valuation. for another aation file withaddition, it wnsidered as

New Mexico

agistrate 1 2 5 6

dicial FundsRA and Volunloads to liabnconsistent.also applied

active valuatsing informa

missing gendmissing dateto low or nonhese adjustm We find the

hat were not t to PERA bynificant numb100 or the reeviously ned that thosctive recorda reconcilia In both cas

actuary to mhout a field owould be helactive for th

o PERA:

VolunteFirefight

843831

2,262N/A

s, and a 5% lnteer Firefig

bility and nor However, Gto the norm

tion data ation, in partders or services of birth. Inn-annualizedments. Theye adjustmen

y ber ecord

se s for tion ses, it

match or lpful

he

eer ers

3

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load hters

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icular ce. n d y ts for

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Finding:complete Retired a New Mexmissing ioptions a Similar toare not in Finding:determinto the authat are c New Mexinformatiand dateclosely to Finding:complete NECESSA We beliedata filesHowever For the a

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e below deta

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and Inactive

xico PERA:nformation.

and dates of

o the active fncluded for t

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xico ERB: Ton. All retire

es of birth. To the data re

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ARY DATA EL

eve that all nes in order to r, we do hav

active and in

On the activeetermining c

REVIEW

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ails the miss

MiDate of BGender Service Pay Rate

e active datawhat we can

e Members

: The inactiv All retired mbirth.

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MPTIONS

10

the actuary’s a matter oftions. Sincems of salary

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ERIENCE S

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ACTUAR

13111_AuditReport_F

at should alsRB expecte

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Yea199419951996199719981999200020020022003200420052006200720082009

etric Mean fog:

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MPTIONS

11

tent with othe.

ower than inr period endi

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TIP011

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nal yield on tasury bills (Turing the maods as of Ma

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.74%

ERIENCE S

c assumptio

and 1980s. , 2009 was a

dex % % % % % % % % % % % % % % % %)

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Short-tercalculatiousing an In the 20assumptinflation rinflation eas a resuthan 3.00long-term2009 NAopinion, treasonabrecomme Althoughnot appe Valuatioreturn explan’s asconsidereshould coeconomic In 2009, economichistoricalinvestmeto the asunderlyinassumpt The Newprivate eequities-valuationThe inforpublic pla

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ACTUAR

13111_AuditReport_F

ns of inflation term so a h

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MPTIONS

12

ower inflationon assumptio% and 3.50%

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assumption

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formed an exune 30, 2008ns and a proThe actuariesf all expensefor ERB, res

quities-like ( ERB targetson of New

milar regionad Survey pu

ERIENCE S

rently assumappropriate. e.

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ACTUAR

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MPTIONS

13

Rates and A

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o determineused by GR

AND EXPE

Asset Alloca

Valuation nterest Rate

8.00% 8.00% 8.00% 8.00% 8.50% 7.75% 7.75% 8.00% 7.75% 7.75% 8.00% 8.00% 8.00%

sumption is RB’s equity ee average. Rugh some rehave not.

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alysis in the ebest estimateeturn assumsimulation m

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ERIENCE S

ations

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7676777675766

average whexposure is Return expecetirement sys

guidance in e used this sexperience ae range that mption. The models to dev

but have uses a summary

STUDY

et Allocationuity-like vs. ed Income)

73% / 27% 62% / 38%

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hen compareless than thectations of stems have

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SECTIO

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ACTUAR

13111_AuditReport_F

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MPTIONS

14

sis report ind

Expected ReaReturn

(Arithmetic Mean) 6.03% 6.61% 2.23% 4.40% 4.85%

10.85% 3.50% 5.20%

4.50% 4.00%

(0.30%)

8.20%

e experience a

nual returns aal returns.

of annual red the 60th pend the meanulting in a locted this anaults follow:

AND EXPE

dicates that t

Buck al

StaDev

1820

46

1232

716

12

analysis.

and a mean

eturns and thercentile, resn return. Thong-term assalysis for the

ERIENCE S

they have re

andard viation 8.48% 0.07% 4.94% 6.93% 2.50% 2.00% 7.76% 6.91%

2.98%

n. The repor

hen to selectsulting in a 2en we typica

sumption wite PERA and

STUDY

elied on the

GRS (RV Ku

4.12%4.00%

N/A

8.12%

rt does not

t a reasonab20% chanceally recommth at least a ERB plans u

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SECTIO

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Percentile

New MexRate of RInflation:

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ON IV.

Mexico LCS\NMLCS01

e: 5

xico PERA eturn: 4.94.00%

xico ERB eturn: 4.43.00%

ACTUAR

13111_AuditReport_F

5th 25

92% 6.8

RC

48% 6.2

RC

RIAL ASSU

inal.docx

5th 40th

4% 7.69%

Reasonable raConservative r

7% 7.05%

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MPTIONS

15

h 50th

% 8.20%

ange: 7.69%range: 7.69%

% 7.53%

ange: 7.05%range: 7.05%

AND EXPE

60th

% 8.71%

% to 8.71% % to 8.20%

% 8.00%

% to 8.00% % to 7.53%

ERIENCE S

75th

% 9.58%

% 8.80%

STUDY

95th

11.59%

10.66%

SECTIO

P:\Admin\New M

New Mexwere not underlyingross ret

Portfolio (Inflation Expenses

Net Portfo When recrate of reinvestmeeconomicenvironmhistoricalthe next would tak Conclusof 8.00%assumptreal returassumptrecomme4.75%. Areturn as We also reconsideexpected

ON IV.

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xico ERB: Tprovided in

ng capital maturn was 8.2

(Real)

s

olio (Nominal)

commendingeturn on planent data, curc expectatio

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sion: Theref% is reasonab

ions. We surn componenion to 3.50%end increasiAfter reflectissumption of

recommendering the inv

d recovery is

ACTUAR

13111_AuditReport_F

The capital mthe experie

arket assum9% and ave

)

g valuation in assets giverent fixed inc

ons. History followed byMany invest with varying

rong recover

fore, we conble, althoughuggest that Nnts of the inv

% and increang the inflating the expef 8.00% for E

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RIAL ASSU

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market assunce analysis

mptions by foerage expect

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ncur with GRh we would hNew Mexicovestment retsing the reaion assumptnse assump

ERB and a 7

monitoring urn assumpwhenever th

MPTIONS

16

umptions uses report. Theur different cted real retu

Buck 4.83%3.00%

(0.30%)

7.53%

s, actuaries s asset allocrates, historithat a deep During recssionals are Although wete the sever

RS’s proposahave recommPERA and

turn. We recl return to 4.tion to 3.50%ption, Buck re7.75% invest

of the returntion in anothe asset alloc

AND EXPE

ed for the inve report indiconsulting firn net of exp

E(Averag

Cons

)

must considcation policy,cal plan perrecession lik

covery, equitpredicting a

e concur thare market los

al that the invmended a dERB considcommend de.50% for PE

% and decrerecommendstment return

ns and this aher 2-3 yearscation policy

ERIENCE S

vestment reticates that Grms. The avpenses was

ERB ge of Four sultants)

5.41% 2.58%

(0.30%)

7.69%

der the long-, inflation, hirformance, ake our curreties tend to oa recovery wt a recoverysses experie

vestment reifferent set oer changingecreasing th

ERA. For ERasing the re

s a long-termn assumption

assumption, s when the my is changed

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turn modelinGRS relied overage expe5.41%.

-term expectstorical

and future ent economicoutperform th

will occur withy will occur, ienced recen

turn assumpof economic g the inflationhe inflation B, we

eal return to m investmenn for PERA.

and magnitude od.

ng on the ected

ted

c he hin t tly.

ption

n and

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of the

SECTIO

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Salary Seconomictwo pointaccordingrate and The salacomponeassumptproductivprice inflainflation i

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ACTUAR

13111_AuditReport_F

alary scale, on. An analyw does the ruarial assume) internally c

sed for New e of generalherent in the

tion. The geption inhered price inflat

Yea

199419951996199719981999200020020022003200420052006200720082009

etric Mean fog:

12/31/1

12/31/1

12/31/1

12/31/1

12/31/2

Last 50 y

conomy creaons generalty. The tableial Security w

RIAL ASSU

inal.docx

or assumedysis of the aprate of actua

mptions? Secconsistent w

Mexico PERl wage inflate developme

eneral wage ent in the valtion is 3.00%

ar

4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9

or 10 year per

1969

1979

1989

1999

2009

years

ates salary inly range frome below showwage index.

MPTIONS

17

annual rateppropriateneal salary incrcond, are thewith regard to

RA and ERBion. This is ent of the vainflation assuation intere

%. The table

AnnS

riod

ncreases tham 0.50% to ws historica

AND EXPE

es of salary iess of the sareases compe two econoo the underly

consist of twcomprised o

aluation intersumption is 4est rate is 4.e below show

nual increasSecurity Wag

2.68%4.01%4.89%5.84%5.23%5.57%5.53%2.39%1.00%2.44%4.65%3.66%4.60%4.54%2.30%

(1.51)%

4.33%

6.89%

5.76%

4.25%

2.94%

4.83%

at are greate1.50% for ml productivity

ERIENCE S

ncrease, is aalary scale npare with thomic assumpying inflation

wo componeof the price irest rate, plu4.50% for PE00%. For E

ws historical

e in Social ge Index

% % % % % % % % % % % % % % % %

%

%

%

%

%

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er than pricemost plans toy based on i

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another key eeds to con

ose expectedptions (interen assumption

ents. The firinflation us an economERA and the

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e increases o reflect inflation and

sider d est n?

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SECTIO

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10-year P

12/

12/

12/

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Last We find Gfor PERAvery cons0.75% an The otheincreasesfrom 15.02009 me2009 mescale assnot pay r8.50% at The meria combinand gradMexico Pchange tsalary sc Over the Magistramembersproper dalicensureover this than exprecomme Another cspread b“economsystems,high of 5

ON IV.

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Period endin

/31/1969

/31/1979

/31/1989

/31/1999

/31/2009

t 50 years

GRS’s curreA. The 2.00%servative. Ond increase

er componens. As of Jun00% for 1 yerit/step/longrit/step/longsumption dorelated. Thet 0 years of s

it/step/longenation of ageding down ovPERA and Eo the salary

cale assump

analysis pete and shorts for PERA aata to effectie program so

period has ected. It doend that thes

consideratiobetween the ic spread.” , the average.50%, with 4

ACTUAR

13111_AuditReport_F

ng Wag

ent productiv% productivi

Our recommeprice inflatio

nt of the salane 30, 2009,ear of serviceevity compoevity compo

oes not applye current meservice to 0.

evity compone and servicever time to 0RB experienscale assumtion for ERB

eriod, the actt service meand Judicial ively analyzeo no changebeen low, thes not appese compone

on in examinvaluation intIn a 2008 We spread wa4.50% being

RIAL ASSU

inal.docx

ge Inflation

4.33%

6.89%

5.76%

4.25%

2.94%

4.83%

vity assumptiity assumptiendation woon to 3.50%

ary scale var the merit/ste, grading d

onent for Judonent for May to Legislatirit/step/longe00% at 10 o

nent can be ae. We gene.00% to be cnce. We agrmption baseB.

tual rates of mbers in PEmembers.

e the salary to the salar

he results indar that inflat

ents be split f

ing the packterest rate a

Wisconsin suas 4.36%. E the most co

MPTIONS

18

Pr

ion of 0.50%on and gene

ould be to lowfor a total w

ries by servictep/longevityown to 0.50

dicial membegistrate memive or Voluntevity compo

or more year

applied to sarally find thecommon. Wree with the d on the exp

salary increERA but highFor ERB, Gincreases to

ry scale wasdicate that mtion and merfor review fo

kage of econnd the genervey of 87 mconomic spr

ommon. Eco

AND EXPE

rice Inflation

2.32%

7.08% 5.52% 2.92%

2.65%

4.10%

% and generaeral wage inwer the prod

wage inflation

ce and measy component% at 20 yeaers is 0.75%mbers is 0.2teer Firefigh

onent for ERrs of service

alary increasese rates sta

We find the srecommend

perience for

eases were loher than expRS indicatedo implements recommendmerit increasrit increasesor the next st

nomic assumeral wage infmajor public read rangedonomic spre

ERIENCE S

P

al wage inflaflation of 5.0

ductivity assun of 4.25%.

sures merit ot for PERA m

ars of service% for all ages

5% for all aghters since thB members .

ses by age, arting at 5.00cale reason

dation of thePERA and n

ower than expected for lond that they dtation of the ded. Given

ses may haves were split fotudy.

mptions is toflation; also kemployee re

d from a low eads should

STUDY

Productivity

2.01%

(0.19%)

0.24%

1.33%

0.29%

0.73%

ation reason00% for ERBumption to

or step/longmembers rane. The Junes. The June ges. The salhe benefits aranges from

by service, o0% to 6.00%able given N actuaries tono change to

xpected for ng service did not have three-tier that the infle been highor analysis.

look at the known as etirement of 3.25% to directly corr

able B is

evity nges

e 30, 30,

lary are

m

or by %, New o o the

ation er We

a relate

SECTIO

P:\Admin\New M

with the eand henc We beliePERA anPERA anERB. Fo

Increaseaccrued the PERAboth amoplans arerate at was a perc

• the alevel,

• the to This procHoweveris dependpayroll g

ON IV.

Mexico LCS\NMLCS01

expected reace higher ex

eve an econond ERB. GRnd 5.00% forollowing is a

New MeNew MeIdaho PEKansas MinnesoMontanaMontanaNebraskSouth DUtah ReWashingWyomin

e in Total Paliability is amA Plans andortize the une not pay relhich total pacentage of to

ctive payroll, and

otal payroll g

cedure for amr, this methodent on a starowth rate.

ACTUAR

13111_AuditReport_F

al rate of retpected rates

omic spread RS’s recommr ERB. We ftable showi

Reexico PERA exico ERB ERS(1) PERS(1)

ota State Retia Public Empla Teachers(1) ka School(2) akota Retirem

etirement Systgton Departmg Retirement

(1) 2008 W(2) Survey

ayroll: As pamortized ove ERB. The funded accrated. Since

ayroll is expeotal payroll p

l on which th

grows by 4.5

mortizing unodology increationary or gIf active mem

RIAL ASSU

inal.docx

turn of a plans of return, s

between 3.0mended econfind the econng the econ

Econetirement Sy

rement Systeloyees Retire

ment Systemstems(1) ent of Retirem Systems(1)

Wisconsin Comy of Buck Gov

art of determer a 30-year Legislative Drued liability e pay is expeected to increprovided:

he contributio

50% for PER

nfunded accreases the risgrowing activmbership de

MPTIONS

19

n’s asset alloshould result

00% and 4.0nomic assumnomic spreaomic spread

omic Spreaystem

em(1) ment Board(1

s(2)

ment Systems

mparative Stuvernmental Cl

mining the acopen periodDivision of Pas a level do

ected to increease. The a

on is based

RA and 3.75%

rued liabilitiesk of future fve membersecreases, co

AND EXPE

ocation. Higt in higher ec

00% is reasomptions incluad reasonabd of other sim

ad

)

s(1)

udy ients

ctuarial contrd as a level pPERA and thollar amounease, an assamortization

remains at a

% for ERB.

es is commofunding shorship group nontributions m

ERIENCE S

gher allocatioconomic spr

onable for Nude a spreadle for PERA milar retirem

Rate 4.00% 5.00% 3.25% 4.00% 4.00% 3.75% 3.25% 3.50% 3.75% 4.75% 4.50% 4.50%

ribution ratepercent of pahe Volunteert since the bsumption is payment w

a constant o

on for large prtfalls since aeeded to memay need to

STUDY

ons to equityreads.

New Mexico d of 4.00% f

A but high forment plans:

, the unfunday for most or Firefighter benefits for tmade for theill remain lev

or stationary

public plans.adequate funeet the assuo be increase

y,

for r

ded of Fund hese e vel

nding

umed ed in

SECTIO

P:\Admin\New M

order to man assum The tablefrom the

Y22222

Ave

The currerecommegroup witassumptincreased

INVESTMEassumptassumptrecommerecommeexpenses

DEMOGRA

The dema vested decremeNew Mexshould reactuariesand revis

• F• S• F• F• F

We did nthe curre

ON IV.

Mexico LCS\NMLCS01

meet the ammption for po

e below showCAFR for ea

Year 009 008 007 006 005 erage

ent assumptend loweringthin PERA toion of a 3.75d to 4.25% b

ENT AND ADMion, the inveion. The exend that the ended a redus. We agree

APHIC ASSUM

mographic asbenefit), disnts define thxico PERA aeflect each Ss have prepase them as n

our-year inteSix-year inter

ive-year inteive-year inteive-year inte

not receive aent assumpti

ACTUAR

13111_AuditReport_F

mortization peopulation inc

ws the histoach of the pl

PER3.23%1.29%7.65%2.06%1.49%3.14%

tion of a 4.50g this assumo see if diffe5% payroll gby increasing

MINISTRATIVEestments andperience annext experieuction of .30e with this ap

MPTIONS

ssumptions asability and mhe member sand ERB areSystem’s owared a periodnecessary. G

erval endingrval ending Jerval ending erval ending erval ending

an experiencons and the

RIAL ASSU

inal.docx

eriod. Accocreases whe

rical summalans.

RA % % % % % %

0% payroll gmption to 4.25erent payroll rowth assumg the inflatio

E EXPENSESd administraalysis reportence analys0% to the invpproach and

are the assumortality (destatus change large retire

wn experiencdic experienGRS review

g June 30, 20June 30, 200June 30, 20June 30, 20June 30, 20

ce analysis fo recent chan

MPTIONS

20

unting Standen setting a p

ary of the ave

Magistrate2.29% 12.18% 5.77%

(1.45%) 6.45% 5.05%

growth assum5%. Additiogrowth assu

mption for ERon assumptio

: As part of tive expenset for PERA dis for PERA

vestment retd the results

med rates oath before oges which ef

ement systeme. To this ece study to ed experien

008 for PER09 for ERB 007 for Magi007 for Judic006 for Volun

or the Legislnges follow.

AND EXPE

dards (GASBpayroll growt

erage active

Jud2.31.29.8

(1.96.83.6

mption PERAnally, analysumptions shRB appears on to 3.50%

determininges are offsetdid not reviewinclude sucurn assump look reason

of retirementor after retireffect the payms, the demend, the Newreview the cce for the fo

RA istrate cial nteer Firefig

lative group.

ERIENCE S

B No. 25 & 2th assumptio

e covered pa

dicial 33% 25% 85% 91%) 86% 68%

A appears hsis should beould be madreasonable .

g the investmt from the exw this assum

ch a review. tion for the i

nable.

, withdrawalement or disayment of benographic as

w Mexico PEcurrent actuaollowing:

ghters

. Our comm

STUDY

27) do not aon.

ayroll increas

ERB 3.58%4.74%4.04%2.96%2.36%3.54%

high and we e done by eade. The currbut could be

ment return xpected retumption. We For ERB, G

inclusion of

(with or withability). The

nefits. Sincesumptions

ERA and ERBarial assump

ments regard

llow

se

ach rent e

urn

GRS

hout ese e

B ptions

ing

SECTIO

P:\Admin\New M

Rates ofpaid upoand unre

Pla

PERA

Legislativ

Magistrat

Judicial

VolunteeFirefighte

ERB

Membersbenefit p

It is our eretire, anis higher working ulate retire The retirefor each of serviceage. The retireand are b

ON IV.

Mexico LCS\NMLCS01

f Retiremenn early, norm

educed bene

an

ve

te

H1wH2

r ers 5

TT

s who leave ayments, bu

experience tnd therefore,

than when euntil after beement.

ement rates division ande. Late retir

ement rates based on ag

ACTUAR

13111_AuditReport_F

nt: These ratmal, or late refits for the p

Early

N/A

N/A

N/A

Hired prior to J, 2005: age

with 18 years Hired after Jul2005: N/A

55 with 10 yea

Tier 1: 75 poinTier 2: 80 poin

before eligibut are eligible

hat employe the incidenceligible for a

ecoming elig

used by GRd are based orement rates

used by GRge and servic

RIAL ASSU

inal.docx

es form the retirement. Tplans admini

Retirem

Tier pointTier

July 50

ly 1,

ars

nts nts

Tier withTier with

bility for a see for a future

ees will oftence of retirem

a reduced retible for a ret

RS for PERAon age and

s continue af

RS for ERB ace and eligib

MPTIONS

21

basis of deteThe followinstered by PE

ment EligibilUnreduc

1: 25 years ots table 2: 30 years o

N/A

N/A

N/A

N/A

1: 25 years o75 points 2: 30 years o80 points

ervice retireme benefit if v

n wait until thment after atttirement bentirement ben

A are structueligibility forfter age 65 u

are structurebility for unre

AND EXPE

ermining theng is a summERA and ER

lity ced or graded

or 80 points

or age 60

or age 65

ment are notested.

hey are eligitaining eligibnefit. Membnefit may wo

red to coincr unreduced until age 80,

ed to coincideduced bene

ERIENCE S

e expected fmary of eligibRB:

Tier 1: age Tier 2: age

Plan 1 and age 65 withwith 8 yearyears, age or 14 yearsPlan 2: ageor 10 years64 with 5 yeyears, or 24Hired beforwith 5 yearyears Hired after with 5 yearyears

55 with 25

Tier 1: age Tier 2: age

t eligible for

ble for unredbility for unrebers electingork a number

cide with retirbenefits aftea typical ult

de with retireefits after 25

STUDY

future benefibility for redu

Normal

65 with 5 yea67 with 5 yea

Plan 1 Enhah 5 years, agers, age 63 with60 with 12 ye

s e 65 with 5 yes ears, 60 with 4 years re July 1, 200rs, 60 with 15

July 1, 2005:rs, 55 with 16

years

65 with 5 yea67 with 5 yea

immediate

duced benefeduced bene to continue r of years int

rement eligiber 20 or 25 ytimate retirem

ement eligibi years of

its uced

ars ars

nced: e 64 h 11 ears,

ears,

15

05: 64

64

ars ars

fits to efits to

bility years ment

lity

SECTIO

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service. points. Wfor reduc One waydecremethe actuadivisions analysis PERA

State Ge State Ge State Ge State Ge State Po State Po State Ha State Ha Municipa Municipa Municipa Municipa Municipa Municipa Municipa Magistra Judicial VolunteeERB – MaERB – Fe* These p For retireA/E ratio are over move cloadjustmerecommefor State

ON IV.

Mexico LCS\NMLCS01

However, thWe would reced and unre

y that actuarinting to the

al/expected rand for ERB(if applicable

eneral – Maleeneral – Maleeneral – Femaeneral – Femaolice – Age Baolice – Serviceazardous Corazardous Coral General – Mal General – Fal General – Sal Police – Agal Police – Seal Fire – Age al Fire – Servate

er Firefightersales emale populations ar

ement, an A/between 85100% befor

oser to the acent was less ended a largGeneral and

ACTUAR

13111_AuditReport_F

hey did not acommend re

educed retire

ies analyze number of eratio, or A/E B before ande).

Age Based Service Baseale Age Baseale Service Based* e Based* rections – Agrections – SeMale Age BasFemale Age BService Basedge Based* ervice Based Based* ice Based

s

re small so les

/E ratio unde5% and 100%re and after tctual plan exthan we wo

ger increase d service ba

RIAL ASSU

inal.docx

analyze eligieviewing retement to mo

decrement rexpected me

ratio. Belowd after the ch

ed ed ased

e Based ervice Basedsed Based d

ss weight sho

er 100% is c%. As showthe experienxperience (c

ould have recin the retire

ased rates fo

MPTIONS

22

bility for unreirement rate

ore accuratel

rates is to coembers decrew is a table change in ret

ould be put on

considered cwn above, thence analysis.closer to 100commendedment rates f

or Municipal

AND EXPE

educed benes by all agesly reflect all

ompare the nrementing. Tcontaining thirement rate

A/E rat

111712162962113917102161740129

1010

n experience

conservativeere are man. In general

0%). Howevd. In particulfor male andGeneral, Po

ERIENCE S

efits at age s and serviceligibilities fo

number of aThis ratio is he A/E ratio

es due to the

io before

11% 73% 23% 69%

22% 99% 67% 13% 32%

95% 73% 07% 16%

63% 73% 00% 23% 9% 03% 02% analysis resu

. We wouldny A/E ratios, GRS adjus

ver, in many lar, we woul

d female servolice and Fire

STUDY

60 with 75 ce combinatior benefits.

ctual membreferred to afor all PERA

e experience

A/E ratio a

112%154%116%152%22%84%73%104%117%94%151%107%194%83%148%228%125%17%

No ChanNo Chan

ults.

recommend for PERA th

sted the ratecases, the d have vice based re.

ons

ers as A e

after

ge ge

d an hat es to

rates

SECTIO

P:\Admin\New M

For ERBwith the c25 years the currerecommeIn particu We recom Rates ofwho termcontributterminatiinterest. assumesreceive aterminatecontribut To value and yearalso a fuPolice, aor by a cexperien The portiThe PERrecommemember assumpt Rates ofa disabiliare set o The disamore in lby gendefor ERB. Rates ofthis assuapplies tofor non-dalthough

ON IV.

Mexico LCS\NMLCS01

, GRS recomcurrent set oof service w

ent experiencended an incular, we wou

mmend that

f Withdrawaminates emp

ions with intng with lessTypically, to

s that a portioa vested inaced membersions.

these beners of service nction of gennd Municipaombination oce. We gen

ion of terminRA report andend a reviewwill elect to ion.

f Disability: ty benefit. R

on the basis o

bility rates foine with exp

er for Munici We would

f Mortality: Tumption is a o members

disabled memthat gap ha

ACTUAR

13111_AuditReport_F

mmended noof retirementwhere we sece analysis wcrease to retuld have con

each of the

al (Before anloyment witherest or a ve than five yeo calculate won of terminctive pensions with less th

fits, GRS cufor both PE

nder for the al Fire divisioof age and s

nerally find G

nating membd experience

w of this assureceive the

If a membeRates of disaof age and i

or PERA andperience for Ppal Generalnot recomm

The most impredictor of both before mbers since as been shrin

RIAL ASSU

inal.docx

o change to t rates are cle an A/E ratwere similar tirement ratesidered high

actuaries fu

nd After Elih at least fiveested inactivears of servicwithdrawal liaating membn and the re

han five year

urrently usesRA and ERBState Police

ons of PERAservice, and

GRS’s propo

bers electinge analysis aumption in thmore valuab

er becomes ability are usncrease as a

d ERB appePERA when. GRS did nend any cha

mportant decwhen pensioand after restudies con

nking accord

MPTIONS

23

the retiremelose to 100%tio over 100%r to the last ees for membher rates for

urther review

igibility for e years of seve pension foce receive aability after fers will leav

est will terminrs of service

s withdrawal B. In additioe, State CorrA. Actuaries

may includesed assump

g a refund is re silent reghe future. Foble benefit.

disabled priosed to quantage increase

ear reasonab needed. Th

not recommeanges to this

remental vaon paymentstirement. M

ntinually showding to recen

AND EXPE

ent rates. W%, there are %. They alsexperience sbers with less

members m

w their propo

Vested Benervice may cor both PER

a refund of mfive years of

ve their contrnate and takare assume

rates that aon, GRS userections, Mus will either se gender deptions reason

often an assarding this aor ERB, GRWe find this

or to retiremtify the valuees.

ble. GRS adhey also sepend changess assumption

luation assus stop. The

Most often, gew that femalnt mortality s

ERIENCE S

While the totamany ages

so note that study. We ws than 25 ye

meeting the r

osed retireme

nefits): Currechoose to re

RA and ERB.member contf service, theributions in tke a refund. ed to receive

are a functiones withdrawaunicipal Geneset rates by apending on nable for PE

sumption in assumption.

RS assumes s to be a reas

ment, he or se of this bene

djusted disabparated disas to the disan for PERA o

umption is m mortality asender distincles live longestudies.

STUDY

al A/E ratios with less thathe results f

would have ears of servicrule of 75.

ent rates.

ently, a memeceive a refu. Members tributions wite valuation the system a The remain

e a refund of

n of both ageal rates that eral, Municipage, by servthe best fit o

ERA and ER

the valuatio We would that a vestesonable

he is eligibleefit. These

bility rates toability experiebility assumor ERB.

mortality becassumption ct rates are uer than male

seen an from

ce.

mber und of

th

and ning f

e are pal vice, of

RB.

on.

ed

e for rates

o be ence ption

ause

used es,

SECTIO

P:\Admin\New M

Mortality New Mexexperien When segood fit tpublishedcommon conservaof conse New Mexmembers In GRS’sproposedadjustmerecommeconservaadequateimprove changes reliable d Totally dmembersrecommeSince theunsure if experienPERA re GRS prodeterminreasonabused. New MexmortalityMortality plan expe For disabexperienconserva

ON IV.

Mexico LCS\NMLCS01

tables can bxico PERA isce, a publish

electing a puo the data ad tables thatamong plan

atism is imporvatism or a

xico PERA:s, post-retire

s experienced for the valuents of a threendation for atism. The pe level of conmortality forto this assu

data for furth

isabled mems. GRS’s disend a change GRS expef the table thce. We recoport.

posed chane if they areble and we r

xico ERB: G. For post-reTable with aerience, the

bled mortalitce for ERB f

atism, the sm

ACTUAR

13111_AuditReport_F

be derived os a very larghed table is

blished tableand providest should be cns but does ortant. Thergenerationa

: A different ement disabl

e analysis reuation are thee-year setbpost-retirem

post-retiremenservatism. r males becamption. We

her review of

mbers can besabled mortae to the posrience analyey have in pommend a b

ges to the ae using a pubrecommend

GRS did notetirement moa setback oftable provid

y, GRS is usfor disabled

mall sample s

RIAL ASSU

inal.docx

on the Systege plan but dpreferable.

e, the most i a reasonabconsidered: not project mefore, it is tyal table whic

set of mortaled members

port, the poshe 1971 Grouback for malement male raent female ra We unders

ause of potee recommenf the mortalit

e expected tality rates ar

st-retirement ysis report aplace for disabetter descri

ctive mortalblished tablea better des

t recommenortality, GRSf three yearsdes an appro

sing the 198mortality. Wsize does no

MPTIONS

24

m’s actual edoes not hav

important seble level of co static and g

mortality impypical to selech improves

ality rates ars and active

st-retirementup Annuity Mes and a sevtes does noates use a stand from Gntial data issd identifyingty for males

to have a shre higher thadisabled mo

nd the valuaabled mortalption of the d

ity tables bye or one basscription in th

d any changS is currentlys for males aopriate level

81 Disabled MWhile the A/Eot necessari

AND EXPE

experience ove enough m

election criteonservatismgenerationalprovement inect a static tamortality ove

re used for pe members.

t non-disableMortality Tabven-year set

ot provide anseven-year s

GRS that theysues. We wg any data isat the next e

horter life expan for all heaortality table

ation report dlity is a publdisable mort

y division, bued on experhe report of t

ges to post-ry using the 1and two year

of conserva

Mortality TaE ratios onlyly warrant a

ERIENCE S

or a publishemembers to p

eria are that tm. There are

. A static tanto the futureable with a 5er time.

post-retireme

ed member ble projectedtback for fem

n appropriatesetback and y made the d

would not recssues now inexperience a

pectancy thaalthy retireese and this sedid not specished table otality be incl

ut we are unarience. The the active m

retirement, d1994 Uninsurs for femaleatism.

ble. There iy provide a s change in t

STUDY

ed table. Sinproduce cred

the table is ae two types oable is very e so 5% to 15% le

ent non-disa

mortality ratd to 2000 wimales. The e level of provide an decision not

commend ann order to haanalysis.

an healthy res. GRS did eems reasoncify, we are or based on uded in the

able to changes ap

mortality table

disabled or aured Pensiones. Based o

is very little small level ofthis assumpt

nce dible

a of

evel

bled

tes th

t to ny ave

etired not

nable.

plan

ppear e

active ners n

f tion.

SECTIO

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GRS revthe numbthere maBased onrecomme Other Asreport anreview thmemberson the liacashflow Recomminclude swe find thcommun

• Fvathins

• Wre

• Waa

• Ina

• Inubso

• Inthfo

ON IV.

Mexico LCS\NMLCS01

iewed the acber of activeay be a data n the small send any cha

ssumptionsnd experienche optional fos expected tability is sma

w results whe

mendations several graphhe report coication of the

or PERA, waluation suchese assumpndicated thathowing the d

We recommeeport contain

We suggest cmortization nd funding m

n the PERA nd withdraw

n Section B onfunded liabe helpful if tho analysis con the PERA hroughout thollow.

ACTUAR

13111_AuditReport_F

ctive mortali deaths comreporting pr

sample size nge to this a

s: Based once analysis aorm electiono elect life o

all, a more reen doing a pr

for the Exphs and tablemplete. Wee report:

e suggest a ch as percenptions will hat they reviewdata that waend includingned this infocommentingmethods formethod. Wereport, addit

wal decremenof the PERAbility, fundedhe impact ofould be donreport, we re

he report for

RIAL ASSU

inal.docx

ty experiencmpared to othroblem and cfor this assu

assumption.

n our review,appear reasons for retireesonly benefitsefined assumrojection.

perience Anes that are use recommend

review and nt married anave a significwed the assuas reviewed fg A/E ratios frmation. on the cont

r PERA. Thee recommentional commnts to explai

A report, the ratio and thf each individe to see if thecommend uactual, curre

MPTIONS

25

ce for ERB. her teacherschose to keeumption and

all other asonable. We s to incorporversus joint

mption on op

nalysis Reposeful in descd the followi

comment ofnd spouse agcant impact umption but for these assfor all decre

tinued approe ERB repord also commentary by grn the justificimpact of th

he annual reqdual demog

he change isusing the saent and prop

AND EXPE

They obsers’ retirementep the curren potential da

ssumptions dwould recom

rate an explt and survivoptional form e

ort: The repcribing the reng changes

f other assuge differenceon the valuano data wassumptions.

ements revie

opriateness ort contained menting on troup would bcation of the he new demoquired contrraphic assum

s reasonableame color forposed assum

ERIENCE S

rved a large t systems. Tnt active moata problems

described in mmend that icit assumptor benefits. election prov

ports preparesults of the

s to further im

mptions usee. It is not eation. The Es provided.

wed for PER

of the asset,this informahe amortizabe helpful onchanges in

ographic assribution is shmption chane. r the lines inmptions to m

STUDY

discrepancyThey believeortality table. s, we would

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e cost of anyoperating thement return efits or admin ultimate costeristics, inveulation proceds of time. A

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HODS

26

y retirement e plan. Thison accumulanistrative cost are determestment exp

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for faster fufunding. Thand therefo

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n actual new

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HODS

27

the actuariacost method

unded actuad on the valu

methods mayre funding ofs additional crs and addin

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ew Mexico Est public emntional Entryar, the normentrants for

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used. It wasby statute. Inor the modifiefore compuo make four

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ws:

his method isod determineated plans) fto the last a

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ermine the ded by past he accrued d by the ass

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d by public eyed systemor Public 010), had 79

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HODS

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ETHODS

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ure of the fungful figure fo

HODS

29

Statements 2ent Plans anapproved m

al Present Vatuarial Valuaindividual buarial Presee portion of the Actuaria

al Accrued L

try Age Met

ve that the mnce with GASeach individuAge Normal al Method. bers who haded in the A

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bility in the coe. Thus, mons in supporon a plan’s a

smoother pate) and smoo

ets is generag pension planores sizeabr fit to markend, but on a or a pension

25, 26 and 2nd Employeemethod unde

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ent Value allothis Actuaria

al Present Vaiability.

thod.

modified EntSB for three ual included Method on tFinally, GRS

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ally felt to bean. Book vable appreciatet value). On

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27 on Pensioes describeser the param

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try Age Methreasons. Fin an Actuarthis hypotheS has set thee hired. Theuation, yet th

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xico PERA n method usey referred to al return on med each yeathat after fouwhere the d, in the curre, 50% and 2rrent year.

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ue can resuot very smoo

arial asset vamportant durin factored inion levels. Iarily a true rclimate or a

stics of an a

should be si

should be eacal underpinnets. The valushould smooconverge toare met. ecisions sho

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(including Med by New Mas a Four-Y

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lt in large fluoth).

aluation meting periods onto the fundin this case,

revaluing of tshort-term re

ctuarial asse

mple to ope

asy to explainings shouldue producedoth the effeco the Market

ould not be a

uld be realistcause other

Magistrate, Mexico PERAYear Smoothe of assets (five percent e entire diffeom the three% of the diffeifference fro

is as expecon MVA are uld result in nthe MVA sin

ed. We find s occurring i

HODS

30

uctuations in

thod is to smof volatile cang valuation“unnecessathe assets ineaction to sp

et valuation

rate. It shou

in to all interd be solid and should accct of market f

Value in a r

affected by t

tic; the pricevariables to

Judicial anA to develop

hed Market V(MVA) and thof this differrence has bee previous yerence from

om two and o

cted, no newexactly equano deferral once all differethis methodn any given

the employ

mooth or redapital marketn, produce sary” implies tnvolved but pecific news

method incl

uld be readil

rested partiend not producount for marfluctuationsreasonable p

he actuarial

e tag placed o be adjusted

nd Volunteep the ActuarValue methohe expectedrence is recoeen recogni

years are par three yearsone year ago

w difference oal to expecte

of gains or lorences that od reasonable

year over th

yer contributi

uce investmts in which audden unnethat the chanrather a fluc

s.

ude the follo

ly calculable

es. ce a long-terket and boosuch that thperiod of tim

asset valua

on assets sd to account

er Firefighterial Value of od. The diffed return on Aognized in thzed. This brtially recogn

s ago is recoo, respective

or deferral ged returns oosses duringoccurred prioe since it leahis year and

ions required

ment fluctuatiabrupt changecessary nge in asset ctuation refle

owing:

e from financ

erm lag to theok values. e smoothed

me if all

ation method

hould be t for unrealis

ers): The asAssets (AVA

erence betweAVA is he AVA eachecomes a ronized. For ognized. ely, is recogn

ain or loss bon MVA for eg this period.or to this fouds to full the next thr

d to

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e fair

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the AVA ins. If the MVAon the unrecf this method

hase-in amoun can be fourned on the tely recognizand the AVAee years. Wd return on th

hodology thaation date bylogy, we ind009 using ahe amountss the sum of

at have not bSee Exhibit 1

xico ERB: Tally referred the actual re

percent of the difference es from the

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the GRS ml year endingof the valuatcally, we sho

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aw with GRSreturn on thestead of the

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ethodology, g 2009 usingion date by ould get the

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S’s applicatioe future phaMVA. Theo

% as expectease-in amouhave projectstimated noit 2 in the Apall residual berest on the fhe MVA whend the assetnized phase-

ploys to dete gains and localculated t

e approach. om the previpriate percencognized. Thendix.

aluation meth-Year Smoo

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ploys to deteeferred from

we indepeng an alternat20% of the gsame answe

smoothing pfour-year smider changin

features of arridor aroun

HODS

31

on of this mese-in amoun

oretically, thisd, a small phnts is immeded the fundin-investmenppendix. It sbase is creatfuture phaseen all current valuation m-in amounts.

rmine the AVosses for thehe AVA for NThis approa

ous three yentage of the oheoretically,

hod used byothed Marketexpected retuzed in the AVThis becomepartially rec

rmine the AVm the previou

ndently calcutive approacgains and loer, and we d

period amongmoothing perng to a five-y

n asset smod MVA. The

ethod. Thernts. Essentis amount is hase-in basediately recogng value wit

nt cash flow.shows that eted under the-in amountsnt phase-in amethod be ch.

VA is to adjue prior four yNew Mexicoach adjusts tears. As meoriginal diffewe should g

y New Mexict Value methurn on MVA VA each yeaes a rolling pcognized.

VA is to adjuus four years

ulated the AVch. This apposses for thedo. See Exh

g public planriod was useyear smooth

oothing methe table below

re is no refleially, the exppart of the M

e will be cregnized. To ith and witho. The resultseven if the ase current mes, no new phamounts arehanged to re

ust the expeyears. To ve

o PERA for tthe MVA as

entioned aboerences fromget the same

co ERB to dehod. The difis determine

ar, so that aftprocess whe

ust the MVAs.

VA for New proach adjuse previous fivhibit 1 in the

ns (57%) baed by 17% ofing period.

hod: the numw details the

ection of pected returnMVA and is ated unless illustrate the

out interest os of this ssumed rateethodology. hase-in is fully recogn

eflect the

ected AVA aserify the GRhe fiscal yeaof the valua

ove, the defem the prior the answer, an

evelop the Afference ed each yeater five year

ere the

A as of the

Mexico ERBsts the expecve years. Appendix.

sed on the 2f the plans.

mber of yearese two featu

n is

e on the

e of By

nized

s of RS ar ation erred hree nd

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idor essentiang too far frowould ordinahave a corr

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nal Actuarial V not less than

nal AVA / MVAcrease to the

standards od values wit

ctuarial standMexico ERB

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h we are not ure Council Sd AVA for thee.

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lan

refighters

ally puts a firom the MVA arily defer. Hridor:

t End of Yearuarial Value aA / MVA ratio Value t Value Value at End n 4 and not grA ratio (6 / 1)Unfunded Lia

of practice inhin a reason

dards but it iB’s ratio, moo of 120%, o

recommendService shoue plans and

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rm limit on thby forcing t

Here is how

New Mexic($ i

r at End of Yea(2 / 1)

of Year reater than 5) ability

ndicate that anable range s suggested

ore than 30%over 20% of

ding New Meuld be awarewhether the

HODS

32

moothing Me

othing Perio

4 years

5 years

4 years

4 years

4 years

he AVA/MVAhe recognitioa 20% corrid

co PERA ann millions)

PERA F $ 8,

ar $ 12, 14 $ 7, $ 10,

) $ 10, 1 $ 2,

a smoothingaround the

d. When the% of the inve

investment

exico PERA e of the signe Legislature

ethod

od

A ratio. Theon of gains odor would w

nd ERB

Fund 796 $575 $43% 037 $555 $

555 $20% 020 $

g method forMVA. A cor

e AVA/MVA restment losse

losses are n

and ERB adificant differe

e Council Se

Corridor

N/A

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20%

20%

N/A

e corridor preor losses tha

work for the p

ERB 7,114 9,366 132% 5,691 8,536

8,536 120%

830

r assets shorridor is not aratio becomees are not bnot being rec

dopt a corridence that ex

ervice is com

r

events the Aat the smootplans that do

Volunteer Firefighters

$ 34.0$ 48.2

142%$ 27.2$ 40.8

$ 40.8120%

$ 7.4

uld produce a requiremees about 13

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on (ARC) cuas the sum oa period not tability for Ne4.5% (no in

ded liability nnum. Such elated benefd to increase

paid into theability over 3

rent approprmmend New for the plans

HODS

33

rrently definof normal costo exceed 30

ew Mexico Pcrease for Vis amortizedpayments s

it plans (levee at the sam

e system are30 years for iations are sMexico PERaffected.

ned under Gost plus an am0 years for f

PERA is amoVolunteer Fird over an opeshould remael dollar for t

me rate.

e not sufficienr New Mexicosufficient for RA and ERB

overnmentamount that wfiscal years bortized over arefighters anen 30-year pin a level pethe non-pay

nt to pay theo PERA, MaVolunteer F

B develop a

l Accountingwill pay off thbeginning afan open 30-

nd Legislativperiod, usingercentage of

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e normal cosagistrate, JuFirefighters a

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TUARIAL V

13111_AuditReport_F

eview discus

uck’s review

uck’s review

e actuarial rata considerhat another a

the informatlosses and tmethods.

with the disc

LCULATIONS

actuarial stae framework dards to comway to makelculated resudegree to whbility (presen. Actuaries ture service

: We receivefor the June

were not comut not one coo render an n addition, wour results aulations werare summari

generally co

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sability beneport indicate

VALUATION

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sses the follo

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of projection

eport with rered, actuariaactuary, unfa

tion providedthe effect of

closure requi

ndards and for calculati

mplex calculae those compults, these dhich results cnt value) rescan differ on, so we will t

ed sample me 30, 2009 Pmplete resultomplete calcopinion on t

we were unaand GRS forre a close maized as follo

orrectly code

rement decrethat it is beg

efits need to es that all dis

N RESULT

34

owing aspec

member calc

ns.

egard to discal methods, vamiliar with t

d in the actuchanges in

irements of G

practices pring the actuaations, differeplex calculatifferences mcan differ to sults that diffn how the liatypically acc

member calcPERA valuatits. We receculation for athe accuracyble to obtainr the active satch. Our cows:

d for retirem

ement is beiinning of the

be reviewedsability bene

TS REVIEW

cts of the act

culations.

closure of acvaluation prothe situation

uarial report wplan provisio

Government

rovide actuaarial results.ences may etions. Althou

may not be mbe consider

fer from anotability valuescept a higher

culations for ion. The sa

eived calculaa single activy of GRS’s cn responses sample calconclusions f

ment, disabili

ng calculatee year.

d to determiefits are assu

W

tuarial valua

ctuarial assuocedures, asn, would requ

with regard ons, actuaria

tal Accounti

ries with the. When it coexist due to ugh this may

material. Thered material.ther actuary

s should be dr difference o

several activmple calcula

ations by decve member. calculations o

to our quesculations. Oufor this revie

ity, death, an

ed in the mid

ne if valuingumed to be n

ation results:

umptions, plassets, and ouire to appra

to analysis oal assumptio

ng Standard

e basic omes to applindividual y lead to ere is no . However, w

y’s calculatiodetermined, of 5% for no

ves and inacations providcrement for Because oof active tions regardur results forw and items

nd withdraw

ddle of the ye

g non-duty non-duty rela

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or actives whefore retirem

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TUARIAL V

13111_AuditReport_F

cipal Fire antead of 30%)enefits are a

cipal Police aay and the adisability be

nt date. General, thccrued beneminimum of cipal Generaof 65% of p

ulated benefw these amobility for a P

33 years at afor all PERA

the different

Police, it doservice per y

perly projecte

fits for option

red benefits

mary of the lember. In thdate instead

ot match theA was delaye

e to terminatermination coho die after tment.

received theald Consultin

9 valuation p

VALUATION

inal.docx

d State Polic) of pay andssumed to b

and Fire, theaccrued beneenefit and us

e disability befit. The rep35% of pay

al and State ay and the a

fits appear toounts were ulan 2 memb

age 60. We A plans.

benefits gen

oes not appeyear) was inc

ed.

nal forms of

s is valued co

iability did nhe detailed cd of being de

e liability for ted too long.

tion benefit vould improvetermination b

e June 30, 2ng, LLC. Beerformed by

N RESULT

35

ce, the deatthe accrued

be non-duty

e disability befit. It appeased projected

benefit was vport does no. Police, the d

accrued ben

o use differeused. For eer was showbelieve 25.3

nerally calcu

ear that the ecluded for el

payment va

orrectly exce

ot match thecalculation, itelayed for 2 the Judicial t

valuation fore accuracy. but before re

010 valuatioelow is a sumy GRS from t

TS REVIEW

th benefit wad benefit. Threlated whic

benefit was vars the bened service ins

valued as tht describe th

disability bennefit.

ent service aexample, for wn with 10.333 years is c

ulated correc

enhanced seligibility purp

alued correct

ept for Judic

e detailed cat appears thcalendar yeterminated v

r active memGRS is not

etirement or

on report frommary of thethe Cavanau

W

as valued ashe report stach has a min

valued as theefit may havestead of serv

he minimum he disability

nefit was va

mounts but Municipal F

33 years of scorrect. This

ctly.

ervice creditposes.

tly.

cial Plan.

alculation fore COLA was

ears. vested mem

mbers for benvaluing anydeferred ve

m PERA’s ce results of tugh Macdon

s the minimuates that all nimum of 30%

e minimum oe been valuevice at the

of 35% of pabenefit as

lued as the

we were unaire, the norm

service at ags situation sh

t (1.2 years o

r the Judicias applying o

mber. It appe

nefits paid uy death beneesteds who d

current actuatheir replicatnald report a

m of

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ay

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eath after teeath benefit

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TUARIAL V

13111_AuditReport_F

Perce

neral ce General Police Fire

ults, it appeaater when cot Cavanaughfrom GRS to

We reviewedo ensure thatculated the

e member cand found ourfollows:

correctly cods correctly cathe different

perly projectecalculated afits for each red benefits

e to terminatermination cos for actives

e to death bef an active m

nt eligible. Gey do for act

VALUATION

inal.docx

ent Change i

rs that GRSompared to th Macdonald

o reconcile th

d sample met they valuedliabilities co

alculations sr results were

ded for retirealculated forbenefits cor

ed. nd projectedoptional for

s is valued cotion benefit vould improves or deferredenefit valuat

member will eGRS may contive member

N RESULT

36

n Value Due

’s valuation the results od was also uhe difference

ember calcud the correctrrectly on an

sent to us bye a close ma

ement, disabr retirement, rrectly calcu

d correctly. m of paymeorrectly. valuation fore accuracy. d vesteds. ion for activeelect a refunnsider valuinrs upon term

TS REVIEW

e to TransitioActuarial Accrued Liability (0.7)% (2.8)% (1.3)% (1.4%) (0.7)%

results wereof PERA’s cuunable to getes between t

ulations fromt benefit leven individual b

y GRS for ERatch. Our co

bility, death, disability, delated.

nt valued co

r active memGRS is not

e members.nd of contribng the greate

mination.

W

on

Normal Amou(2.7)(7.7)(5.4)(4.2)(3.7)

e conservatiurrent actuat detailed sathe results.

m the June 30els, used thebasis.

RB for severonclusions fo

and withdraeath, and w

orrectly.

mbers for benvaluing any

GRS assuutions if the er of the refu

Cost unt % % % % %

ve and in sory. Our

ample memb

0, 2009 ERBe correct

ral active andfor this review

awal. ithdrawal.

nefits paid uy termination

mes a member wa

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REVIEW O

New Mexratio andand an oappeared

New Mexand amochange itwo assuterminatereasonabfor projecgrow at 1One, Newslightly innot reasoperformesensitivit

CONTENT

The AmecommunknowledgThereforeor plan to

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OF PROJECTI

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umptions we ed membersble approachctions over a1.5% per yeaw Mexico’s tn the next 20onable and ied with no poy of ERB’s p

T OF THE ACT

erican Acadeication shouge and undee, the form ao another.

r, the Acadeng pension o, either direcications. Sorial valuationents listed s

wing is a list

The name of ommunicatio

An outline of ncluded in thA statement a

nd financial nformation. A summary o

ctive, retiredisplay of the

TUARIAL V

13111_AuditReport_F

IONS

: We reviewn rate beginn30-year projee.

We reviewedriod beginnint eligibility fosuggest mo

s will take a rh, we would a period of fiar over the ptotal populat0 years. Thes an aggresopulation groprojection re

TUARIAL REP

emy of Actuauld meet the erstanding ofand content

my has issuobligations actly or by refeome of the en report is th

should be co

t of the spec

the person oon is intendethe benefits

he actuarial das to the effeinformation

of the membed, and termine characteris

VALUATION

inal.docx

wed limited oning June 30ection based

d the outputng June 30, r future new

odifying. Firsrefund in therecommendve to ten ye

projection petion and numerefore, we bsive assumpowth (stablesults to the a

PORT

aries has staneeds of thef the users aof an actuar

ed the Actuaand communerences to plements wou

he most comvered in the

cific element

or firm retained to serve. being discudeterminatioective date owere compi

er informationated-vestedstics of each

N RESULT

37

utput from a0, 2008 based on the June

t from a 30-y2009 based

w hires. The rst, it appearse first year ofd assuming aars. Second

eriod. Basedmber of schobelieve that ption. As a rpopulation

active popul

ated, “The foe particular cand the actuarial report ma

arial Standanicating the rprior commuuld not be pe

mplete picturee report, even

s:

ning the actu

ussed or valuons. of the calculaled, and the

on, separated. Actuariescategory an

TS REVIEW

a 5-year projed on the stae 30, 2009 v

year projectio on the curreresults appes that GRS af the projecta slower payd, the actived on populatool age childan assumptresult, we reonly). We alation growth

orm and concircumstancary’s relationay vary cons

rd of Practicresults. Thenication, in pertinent in ae of the actun if only brie

uary and the

ued and of a

ations, the de sources an

ed into signifs are encournd reconcilia

W

ection of theatutes in plavaluation. T

on of the plaent statutes,

eared reasonassumes alltion. While tyout of refune population tion projectioren is expection of 1.5% ecommend Ealso recommh assumptio

tent of any aces, taking innship to the siderably fro

ce No. 4, whey list specifipension actull communic

uarial status efly.

e purposes th

any significa

date as of whnd adequacy

ficant categoraged to inclation with pri

e plan’s fundace at that timThe results

an’s funded , which inclunable. There non-vestedthis is a nds to this gris assumed

ons from Procted to declingrowth per y

ERB projectimend analyzi

n.

actuarial nto account tusers.”

om one actua

ich deals wic elements tuarial

cations, but sof the plan,

hat the

nt benefits n

hich the memy of such

ories such asude a detaileor reported

ded me

ratio ude the e are

roup to

oximity ne year is ons be ng the

the

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th to be

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not

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A summary oActuaries areeconciliationeturn, and an

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ong-term trenmethods wou

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urpose of thwhich these anformation ref the items u

A disclosure n incomplete

e reviewed thcontained mol informationon. The rep

xico PERA:

Changes in ahould be stairefighters, tf those chan

ENDATIONS F

e the followinn results to in

xico PERA Show detailedShow historic

f Assets. Clarify if payr

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n plan expeDescribe the

TUARIAL V

13111_AuditReport_F

of asset infore encouraged with prior reny other recof the actua

anges in assons should bnd of costs r

uld result in amunicated. of the findinge communic

are based. Tegarding finaunderlying thof any facts e understan

he June 30, ost of the elen and severaports did not

:

assumptions ated and thethe liability imnges was no

FOR THE REP

ng suggestionterested pa

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roll shown inn the valuat

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VALUATION

inal.docx

rmation and d to include eported asseonciliation itarial assumpsumptions anbe stated anresulting froma significantl

gs, conclusiocation and a The communancial reporthese actuariawhich, if noding of the c

2009 actuarements requal additional

contain the

and methodir effects notmpact was not included in

PORT

ons we believarties:

analysis by sValue of Asse

n valuation reion process.g a reconciliae used shoul

ommenceme

N RESULT

38

derivation oan asset su

ets showing ems.

ptions and cond methods d their effecm the continly increased

ons, or recomsummary o

nication shoting. Actuaral determinat disclosed,

communicati

rial valuationuired by ASOsummaries ofollowing re

ds from thosted. For PE

noted for chan the June 30

ve will impro

source. ets and retur

eport is actu. ation of the pd be describ

ent age for d

TS REVIEW

of the actuarimmary by ctotal contrib

ost method afrom those u

cts noted. If nued use of p or decrease

mmendationf the actuari

ould include aries are encoations. might reasoion.

n reports preOP No. 4. Soof the memb

equired elem

se used in prERA, Legislaanges in ass0, 2009 valu

ove the comm

rns on Marke

al reported (

participant dbed as a pre

deferred ves

W

ial value of acategory of inbutions, bene

and the asseused in prevthe actuary present assued cost basi

ns necessaryial determinaapplicable aouraged to in

onably be ex

epared by GRome reportsber data and

ment:

revious comtive Division

sumptions buuation report

munication o

et Value and

(annualized)

data from theescribed tabl

ted member

assets. nvestment aefits, investm

et valuation vious expects tha

umptions ans, this shoul

y to satisfy tations upon

actuarial nclude deriv

xpected to le

RS. The GRs included d asset

municationsn and Voluntut a descriptts.

of actuarial

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e prior year.e or table ba

rs.

nd ment

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ation

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TUARIAL V

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d gain/loss acal Market V

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inal.docx


n valuation reion process.

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N RESULT

39


eport is actu. s is applied tent age for d


eport is actu. s is applied tent age for d


ation of the pent age for d

source.

TS REVIEW

rns on Marke

al reported (

to normal codeferred ves

rns on Marke

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to normal codeferred ves

rns on Marke

participant ddeferred ves

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et Value and

(annualized)

ost as well asted member

et Value and

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et Value and

data from theted member

d Actuarial V

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In additioSystems not PERAboth systnormal cover a 30of each p In Buck’sshould bethat althosufficientsufficientunfundedfuture, as Another tbenefit pthe retirewould thelead to sebudgetab In order tassets, Bcompletegroup proestimatedpayment assumedentrants Either apsolvencymay inste Our projerate of rethe actuaprior lossterm untiequalize.basis foll

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A and ERB wtems indicatost (cost of a0 year periodplan.

s opinion, thee addressedough the 30 t to amortizet assets are d liability is nssets can be

test for insolayments, an

ement systemen be respoerious financble retiremen

to determineBuck requested for both Pojections. Fd the closedprojections

d to be fundewho are like

pproach can y period becaead be used

ections are beturn of 8.00arial value ofses are realizl all prior los. The resultsow.

LVENCY

13111_AuditReport_F

uarial reviewask Force (Rwhere “solveed that statuaccruing bend in accorda

e inability of d, but that doyear amortiz

e the unfundestill expecte

not expectede expected to

lvency is whnd if not, whems would nonsible for mecial hardshipnt contributio

e if PERA or ted and rece

PERA and ERFor PERA, wd group popu

for only curred separatelely to replace

be used to tause assets d to pay bene

based on a p% per year. f assets, cauzed. This ex

sses are reas of our proj

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w of New MeRSSTF) askent”. The reutory contribnefits for act

ance with the

f a retiremenoes not meazation required liability ov

ed to be avaid to be amoro be fully de

hether or not en assets ar

o longer be aeeting benefps for emploons.

ERB could eived informRB. We rec

we received oulation. A clorent active ay. An open e retiring andtest for insolare accumu

efits of curre

projection of This assum

using a lowexplains the rlized, at whiections of fu

40

exico PERA ked Buck to aesults of the Jbutions wouldtive membere funding po

nt system to n the retiremrement is nover a longerlable to mee

rtized over aepleted if all

assets are ere expected able to meet fit payments

oyers if bene

be expectedation from G

ceived informopen group posed group

and retired mgroup proje

d terminatinglvency. An oulated to payent members

f the market mption has ther than expecreduction in ch time mar

und assets m

and New Meassist with aJune 30, 20d no longer rs) and amolicy adopted

meet its funment systemot met, futurer, finite perioet all future bany period, thassumptions

expected to to be complthe benefit

s on a pay-asefit payments

d to reach inGRS from promation on ERprojection inprojection in

members. Beection includeg members open group y for the bens if needed t

value of asshe effect of rcted return othe actuaria

rket and actumeasured on

exico ERB, a determinat09 actuarialbe sufficientrtize the unf

d by the Reti

ding policy im is insolvente contributio

od of time. Ifbenefit oblighen at somes are fully re

be sufficienletely depletobligations, s-you-go bas significantl

nsolvency byojections thaRB for both cnformation onncludes liabienefits for nes an assumover the proapproach w

nefits of new to meet bene

sets earningrealizing defon the actua

al value of asuarial valuesn a market a

the Retiremion of wheth valuations ft to fund the funded liabilirement Boa

is a concernt. It is possins may still f this is the cations. If the

e point in theealized.

nt to meet futted. In this cand employ

asis. This couy exceed

y fully depletat were closed and only and lity and beneew entrants

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will extend theentrants, bu

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SECTIO

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New Mex The folloGRS andpayment benefit pincludes Employeyears theand 14.7

ON VII. SO

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xico PERA

wing graph d a 4.5% pay

on new entayments or the actual rae contributio

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LVENCY

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is based on yroll growth rant payroll fnormal cost ate of returnons were ass

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estimated cassumptionfor memberscontribution of 15.02% fsumed to beributions weter.

41

closed group. The projecs hired after ns for new hifor FY 2010 e 10.99% forere assumed

p projectionsction includer June 30, 20ired membeand 8.00%

r FY 2010 and to be 13.97

s using data es the unfund010, but doers. The assfor all yearsnd 2011, and7% for FY 20

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The folloGRS andprojectiothereafte10.25% f2010 and

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LVENCY

13111_AuditReport_F

is based on he new benehe actual rate contributiothereafter. 14.71% for

inal.docx

open group efit structure te of return oons were assEmployer coall years the

42

projections for member

of 15.02% fosumed to beontributions ereafter.

with no poprs hired afteror FY 2010 ae 10.99% forwere assum

pulation growr June 30, 20and 8.00% for FY 2010 an

med to be 13

wth provided010. The asor all years nd 2011, and3.97% for FY

d by sset

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SECTIO

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New Mex The follo3.75% panew entrpaymentprojectiothereafte7.90% foand 2011

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is based on h assumptionor memberscost contribhe actual rate contributiohereafter. Eor FY 2012 a

inal.docx

closed groun. The proje

s hired after Jutions for mte of return oons were assEmployer conand 13.90%

43

up projectionction includeJune 30, 20embers hireof 18.60% fosumed to bentributions wfor all years

ns using dataes the unfun10, but does

ed after Juneor FY 2010 ae 9.40% for Fwere assumes thereafter.

a supplied bynded liability s not includee 30, 2010. Tand 8.00% foFY 2010 anded to be 10.9

y GRS and apayment on

e the benefit The asset or all years d 2011, and 90% for FY 2

a n

2010

SECTIO

P:\Admin\New M

The folloby GRS aasset prothereafte7.90% foand 2011

We belieaccumula

ON VII. SO

Mexico LCS\NMLCS01

wing graph and includesojection incluer. Employeeor all years th1, 13.15% fo

eve that the 1ation would

LVENCY

13111_AuditReport_F

is based on s the new beudes the acte contributiohereafter. Eor FY2012 an

1.5% per yeabe less if low

inal.docx

open group enefit structuual rate of re

ons were assEmployer connd 13.90% f

ar populatiower populati

44

projections ure for membeturn of 18.6sumed to bentributions wfor all years

n growth asson growth is

with 1.50%bers hired a60% for FY 2e 9.40% for Fwere assume

thereafter.

sumption is s experience

population gfter June 302010 and 8.0FY 2010 anded to be 10.9

very aggresed.

growth provi0, 2010. The00% for all yd 2011, and 90% for FY 2

ssive. Asset

ided e years

2010

t

SECTIO

P:\Admin\New M

As indeprecommeactuariesCouncil Sactuarial and procfairly disc From ourGRS fairWe havevaluationthe inform The solvebenefit lereach insthe long insolvencgroup ap2039, anthrougho1.5% perassumptcontributERB withcomparis

ON VII. CO

Mexico LCS\NMLCS01

pendent revieendations fos. The purpoService that assumption

cedures, the closes the ac

r review of thly represent

e made suggn process anmation nece

ency review evels and allsolvency at sterm, and ascy is reached

pproach. Fod is not inso

out the projecr year. As wion is unrealions that res

h an open grson purpose

NCLUSION

13111_AuditReport_F

ewing actuarr the improvose of this rethe valuatio

ns and methosample memctuarial posi

he plan, we s the actuar

gestions thrond reports of ssary to ren

indicates th assumptionsome point issumes an id in 2033 unr ERB, the p

olvent under ction period.

we discussedlistic, and thsult in a solvroup projectis.

N

inal.docx

ry, Buck hasvement of theeview is to pns were conods were comber calculaition of New

believe the arial position aoughout this f the actuarieder an opini

hat if there arns are exactln the future.nvestment rnder the clospoint of insol

the open gr. This is a red in Section Vis leads to a

vent open groion using a n

45

s been askede actuarial v

provide assunducted usinnsistent with

ations are acMexico PER

actuarial valand funding report that w

es. For Newon on the ac

re no changly realized, b. This is depeturn of 8.00sed group apvency unde

roup approacesult of an aVI, we believ

an optimistic oup projectiono growth (i.

d to provide valuations perance to the

ng complete h generally accurate, andRA and ERB

luation of Nerequiremen

we believe ww Mexico PEccuracy of G

es to statutoboth PERA apendent on m0% per yearpproach, andr a closed gch, with ass

active membve a 1.5% mprojection o

on. We reco.e. stable po

an opinion aerformed by e New Mexic

and valid inaccepted acd the actuariaB retirement

ew Mexico Ets of the reti

will enhance ERA, we werGRS’s 2009

ory contributand ERB cameeting the r. For PERAd in 2058 unroup approaets expectedership grow

membership of future salaommend tha

opulation) as

and the retained

co Legislativeformation, th

ctuarial standal report fullyfunds.

ERB prepareirement systthe actuaria

re unable to valuation re

tion rates or n be expecteassumption

A, the point onder the opeach is reached to grow

wth assumptiogrowth

aries and at GRS provssumption fo

d e he dards y and

ed by tem. al get sults.

ed to ns in of en ed in

on of

ide or

APPEND

P:\Admin\New M

1. Actua2. 75% o3. 50% o4. 25% o5. Total 6. AVA a7. GRS 8. Differ



DIX

Mexico LCS\NMLCS01

De

al MVA at EOYof prior year (of second prioof third prior yunrecognizedat EOY (1 + 5AVA at EOY

rence (7 - 6)


rence (7 - 6)


rence (7 - 6)

13111_AuditReport_F

evelopment o

Y (gain)/loss or year (gain)year (gain)/losd (gain)/loss (5)

Y (gain)/loss or year (gain)year (gain)/losd (gain)/loss (5) (before corrid

Y (gain)/loss or year (gain)year (gain)/losd (gain)/loss (5) (before corrid

inal.docx

of Actuarial VUsing Al

PE

)/loss ss (2 + 3 + 4)

M

)/loss ss (2 + 3 + 4)

dor)

)/loss ss (2 + 3 + 4)

dor)

46

Value of Assternative Me

ERA Fund

Magistrate

Judicial

sets as of Junethod

ne 30, 2009

$ 8, 3, 1, ( $ 3, 12, 12,

$ $

$ $

Exhi

795,819,080040,473,176018,853,020

(280,003,152)779,323,044575,142,124575,142,126

2

26,270,170

8,989,7603,071,369(882,631)

11,178,49837,448,66837,448,668

0

60,967,62719,889,855

6,789,840(1,902,685)24,777,01085,744,63785,744,639

2

ibit 1

)

)

)

APPEND

P:\Admin\New M


1. AVA

2. MVA

3. Cont

4. Bene

5. Expe

6. Expe

7. Expe

8. Actu

9. Gain

10. 20%

11. 20%

12. 20%

13. 20%

14. 20%

15. Tota

16. AVA

17. GRS

18. Diffe

DIX

Mexico LCS\NMLCS01

De


rence (7 - 6)

A at BOY

A at BOY

tributions

efit Payments

ected return a

ected MVA at

ected AVA at

al MVA at EO

n / (Loss) on M

recognition f

of 2008 gain

of 2007 gain

of 2006 gain

of 2005 gain

l Recognized

A at EOY (7 +

S AVA at EOY

erence (17 – 1

13111_AuditReport_F

evelopment o

Y (gain)/loss or year (gain)year (gain)/losd (gain)/loss (5)

s

at 8%

t EOY (2 + 3 +

EOY (1 + 3 +

OY

MVA (8 – 6)

for current yea

n / (loss)

n / (loss)

n / (loss)

n / (loss)

(10 + 11 + 1

15)

Y

16)

inal.docx

of Actuarial VUsing Al

Volunte

)/loss ss (2 + 3 + 4)

+ 4 + 5)

+ 4 + 5)

ar (20% x 9)

2 + 13 + 14)

47

Value of Assternative Me

eer Firefighte

ERB

sets as of Junethod

ers

ne 30, 2009

$ $

$ 9,

8,

(

$ 9,

9,

7,

$ (2,

(

(

$ (

9,

9,

Exhi(contin

34,036,30011,412,239

3,787,235(1,043,513)14,155,96148,192,26148,192,255

(6)

272,828,135

770,044,039

538,793,240

(647,391,550)

697,259,591

358,705,320

861,489,416

113,651,700

245,053,620)

(449,010,724)

(265,137,838)

140,369,391

58,098,017

20,463,050

495,218,104)

366,271,312

366,271,312

0

ibit 1 nued)

)

)

)

)

)

)

)

A

P

APPENDIX

P:\Admin\New Mexico LCS\N

Year EndingJune 30th

2009 (3$ 2010 (2 2011 (1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

NMLCS013111_AuditReport_

Existing MarkeBases Valu

3,779,323,046) 8,795,8$ 2,763,168,013) 9,338,0 1,330,454,064) 9,897,2 (265,940,427) 10,469,84 (124,437,950) 11,053,4 (44,712,977) 11,642,9 (12,979,107) 12,235,4 (5,056,027) 12,828,0 (1,716,788) 13,419,7 (564,833) 14,009,34 (203,684) 14,594,2 (69,151) 15,170,9 (23,595) 15,737,8 (8,258) 16,294,6 (2,825) 16,839,84 (974) 17,370,6 (339) 17,885,3 (118) 18,382,8 (42) 18,862,4 (16) 19,321,3 ‐ 19,755,64

Current

_Final.docx

New

et Actuarial ue Value

19,080 12,575,142,12$ 76,771 12,101,244,78 28,367 11,227,682,43 47,175 10,735,787,60 21,729 11,177,859,67 87,619 11,687,700,59 14,906 12,248,394,01 75,819 12,833,131,84 25,936 13,421,442,72 49,935 14,009,914,76 21,572 14,594,425,25 75,241 15,171,044,39 25,053 15,737,848,64 32,271 16,294,640,52 41,591 16,839,844,41 94,620 17,370,695,59 28,818 17,885,329,15 84,918 18,382,885,03 24,390 18,862,424,43 88,855 19,321,388,87 40,467 19,755,640,46

t Asset Valuation Method

4

w Mexico PERA

Difference

26 (3,779,323,046)$ 83 (2,763,168,012) 31 (1,330,454,064) 02 (265,940,427) 79 (124,437,950) 96 (44,712,977) 14 (12,979,108) 46 (5,056,027) 24 (1,716,788) 68 (564,833) 56 (203,684) 92 (69,151) 48 (23,595) 29 (8,258) 16 (2,825) 94 (974) 57 (339) 36 (118) 32 (42) 71 (16) 67 ‐

48

A (including Jud

ExistingBases

(3,775,200,559)$ 8$ (2,521,838,967) 9 (995,496,643) 9

‐ 10 ‐ 11 ‐ 11 ‐ 12 ‐ 12 ‐ 13 ‐ 14 ‐ 14 ‐ 15 ‐ 15 ‐ 16 ‐ 16 ‐ 17 ‐ 17 ‐ 18 ‐ 18 ‐ 19 ‐ 19

Asset Valuation Met

dicial)

Market ActuValue Va

8,795,819,080 12,57$ 9,338,076,771 11,85 9,897,228,367 10,89 0,469,847,175 10,46 1,053,421,729 11,05 1,642,987,619 11,64 2,235,414,906 12,23 2,828,075,819 12,82 3,419,725,936 13,41 4,009,349,935 14,00 4,594,221,572 14,59 5,170,975,241 15,17 5,737,825,053 15,73 6,294,632,271 16,29 6,839,841,591 16,83 7,370,694,620 17,37 7,885,328,818 17,88 8,382,884,918 18,38 8,862,424,390 18,86 9,321,388,855 19,32 9,755,640,467 19,75

hod Recognizing Expecteuarial alue Difference

71,019,639 (3,775,200$ 59,915,736 (2,521,838 92,725,010 (995,496 69,847,175 53,421,729 42,987,619 35,414,906 28,075,819 19,725,936 09,349,935 94,221,572 70,975,241 37,825,053 94,632,271 39,841,591 70,694,620 85,328,818 82,884,918 62,424,390 21,388,855 55,640,467

d Return on Existing Base

Exhibit

Difference inActuarial

e Value

0,559) (4,122,48$ 8,965) (241,329,04 6,643) (334,957,42 ‐ (265,940,42 ‐ (124,437,950 ‐ (44,712,97 ‐ (12,979,108 ‐ (5,056,02 ‐ (1,716,788 ‐ (564,83 ‐ (203,684 ‐ (69,15 ‐ (23,59 ‐ (8,258 ‐ (2,82 ‐ (974 ‐ (339 ‐ (118 ‐ (4 ‐ (1 ‐ ‐

es*

2

7)7)1)7)0)7)8)7)8)3)4)1)5)8)5)4)9)8)2)6)

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