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The opening letter to LACERA’s 2019 Investigation of Experience document, shown below, includes a PDF link to the entire study. The document presents recommendations for changes to demographic, economic, and investment return assumptions, and more.

Click here to access the Investigation of Experience Study Analysis PDF

NOTE: The document contains a Table of Contents with direct links to various sections.

Milliman Letterhead

Milliman, Inc.
1301 Fifth Avenue, Suite 3800
Seattle, WA 98101-2605
Tel +1 1 206 624 7940

January 28, 2020

Board of Investments
Los Angeles County Employees Retirement Association
300 North Lake Avenue, Suite 820
Pasadena, CA 91101-4199

Re: Los Angeles County Employees Retirement Association

Dear Members of the Board:

It is a pleasure to submit this report of our investigation of the experience of the Los Angeles County Employees Retirement Association (LACERA) for the three-year period ending June 30, 2019. The results of this investigation are the basis for recommended changes in actuarial assumptions for the actuarial valuation of retirement benefits to be performed as of June 30, 2019.

The purpose of this report is to communicate the results of our review of the actuarial methods and the economic and demographic assumptions to be used in the completion of the upcoming valuation. Several of our recommendations represent changes from the prior methods or assumptions and are designed to better anticipate the emerging experience of LACERA.

We have provided financial information showing the estimated hypothetical impact of the recommended assumptions if they had been used in the June 30, 2018 actuarial valuation. We believe the recommended assumptions provide a reasonable estimate of anticipated experience affecting LACERA. Nevertheless, the emerging costs will vary from those presented in this report to the extent that actual experience differs from that projected by the actuarial assumptions. Future actuarial measurements may differ significantly from the current measurements presented in this report due to factors such as the following:

  • Plan experience differing from the actuarial assumptions,
  • Future changes in the actuarial assumptions,
  • Increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as potential additional contribution requirements due to changes in the plan’s funded status), and
  • Changes in the plan provisions or accounting standards.

Due to the scope of this assignment, we did not perform an analysis of the potential range of such measurements.

In preparing this report, we relied without audit on information (some oral and some in writing) supplied by LACERA?s staff. This information includes, but is not limited to, statutory provisions, employee data, and financial information. We used LACERA?s benefit provisions as stated in our June 30, 2018 Actuarial Valuation report. In our examination, after discussion with LACERA and making certain adjustments, we have found the data to be reasonably consistent and comparable with data used for other purposes. Since the experience study results are dependent on the integrity of the data supplied, the results can be expected to differ if the underlying data is incomplete or missing. It should be noted that if any data or other information is inaccurate or incomplete, our determinations might need to be revised.

We certify that the assumptions developed in this report satisfy ASB Standards of Practice, in particular, No. 27 (Selection of Economic Assumptions for Measuring Pension Obligations) and No. 35 (Selection of Demographic and Other Non-Economic Assumptions for Measuring Pension Obligations).

This investigation of experience report recommends assumptions to be used in the valuation to provide an estimate of the System?s financial condition as of a single date. The valuation can neither predict the System?s future condition nor guarantee future financial soundness. Actuarial valuations do not affect the ultimate cost of System benefits, only the timing of System contributions. While the valuation is based on an array of individually reasonable assumptions, other assumption sets may also be reasonable and valuation results based on those assumptions would be different. No one set of assumptions is uniquely correct. Determining results using alternative assumptions is outside the scope of our engagement.

Milliman’s work is prepared solely for the internal business use of LACERA. To the extent that Milliman's work is not subject to disclosure under applicable public records laws, Milliman’s work may not be provided to third parties without Milliman's prior written consent. Milliman does not intend to benefit or create a legal duty to any third party recipient of its work product. Milliman’s consent to release its work product to any third party may be conditioned on the third party signing a Release, subject to the following exception(s):

  • The System may provide a copy of Milliman’s work, in its entirety, to the System's professional service advisors who are subject to a duty of confidentiality and who agree to not use Milliman’s work for any purpose other than to benefit the System.
  • The System may provide a copy of Milliman’s work, in its entirety, to other governmental entities, as required by law.

No third party recipient of Milliman's work product should rely upon Milliman's work product. Such recipients should engage qualified professionals for advice appropriate to their own specific needs.

The consultants who worked on this assignment are retirement actuaries. Milliman’s advice is not intended to be a substitute for qualified legal or accounting counsel.

The signing actuaries are independent of the plan sponsor. We are not aware of any relationship that would impair the objectivity of our work.

On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, this report is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices.

We would like to acknowledge the help in the preparation of the data for this investigation given by the LACERA staff. We look forward to our discussions and the opportunity to respond to your questions and comments at your next meeting.

We are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein.

Respectfully submitted,

Signatures for Karen I. Steffen and Nick J. Collier

Mark C. Olleman, FSA, EA, MAAA     Nick J. Collier, ASA, EA, MAAA Consulting Actuary                                             Consulting Actuary