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

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

Client Overview

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

Client Overview

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

Financial Overview

Financial Overview FY-2018 Contributions - $1.07 Billion Client Contributions - $312.8 M Employer Contributions - $415.9 M State Contributions (& grants) - $344.6 M FY-2018 Expenditures - $1.4 B Benefit Payments - $1.36 B Refunds - $42.9 M Administrative Expenses - $4.2 M *Ratio of Contrib. to Expenditures – 76.2% Actuarial Line Share Allocation Total -959 1.391065 36.02858 -995.029 269.6 -0.39106 -10.1286 279.7286 -25.9

Financial Overview

Financial Overview Investments FY-2018 Investment Earnings/Loss $1.49 Billion (10.00% rate of return) Income: $417.5 M Appreciation: - $1.14 B Investment Expenses - $69.3 M FY-2008 Investment Return was -7.5%

Financial Overview Investments

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

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

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

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

Tom Spencer Executive Director (405) 521-4745 What other questions am I likely to get that I haven’t addressed in the presentation or the notes?