Atlantic connection conference Public pensions assumed rate of return & pension deficits:

1. Government Employees’ Retirement System of the Virgin Islands Atlantic connection conference Public pensions assumed rate of return & pension deficits: new ideas new solutions? Wednesday, July 10, 2013 Presented by: Austin L. Nibbs, CPA, CGMA Administrator

2. overview • INTRODUCTION/ACTUARIAL FACTS.…………………………………………………..………………………...Pages 3 • MEMBERSHIP…………………………………………………………….……………………….……….…............Pages 4-5 • CONTRIBUTIONS VS. BENEFIT PAYMENTS & EXPENSES……...............…...........................Pages 6-7 • DEBT OF GOVERNMENT OF THE VIRGIN ISLANDS……………...............…................................Page 8 • PRIOR BOND LEGISLATION.……...............…...........................................................................Page 9 • ASSUMED RATE OF RETURN………………………………...............…............................................Page 10 • UNFUNDED LEGISLATIVE MANDATES……………………………………….……………………................Page 11 • THE ROAD TO PENSION REFORM…..……………..….………………….………………………………..Pages 12-18 • PROJECTION OF MARKET VALUE OF ASSETS CURRENT PLAN………..………………..………..…..Page 19 • PROJECTION OF MARKET VALUE OF ASSETS OPTION A….……………..………….……………..…..Page 20 • PROJECTION OF MARKET VALUE OF ASSETS OPTION B….……………..…………………….…..…..Page 21

3. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • INTRODUCTION/ACTUARIAL FACTS • Established October 1, 1959 • Cost Sharing Multiple – Employer Defined Benefit Plan (DB) • Plan Sponsors – Central Government and 13 Autonomous Agencies • Two TIERS – TIER II established October 1, 2005 • Actuarial Accrued Liability - $3.2 Billion • Actuarial Value of Assets - $1.4 Billion • Unfunded Actuarial Accrued Liability - $1.8 Billion • Funded Ratio – 45.74%

4. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • MEMBERSHIP • Total Membership as of May 31, 2013 – 17,648 • Active – 9,241 • Retirees and Beneficiaries – 8,407 • Ratio of Active to Retirees – 1.10 to 1 • Average Age of Active Member 45.3 • Average Annual Salary - $38,693 • Average Age of Retiree Member 68.9 • Average Monthly Benefit- $2,248 • Between FY 2011 and FY 2013 (May 31, 2013), 951 members were forced to leave the System due to central government’s budget deficits. • 539 retired (50% given incentive to retire in September 2011) • 412 laid off or terminated

5. May 31, 2013 MEMBERSHIP UA = Unaudited

6. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • CONTRIBUTIONS VS. BENEFITS PAYMENTS AND EXPENSES • FY 2013 (May 31, 2013) • Total Contribution – $57.7 Million • Benefit Payments & Expenses – $161.3 Million • Deficit ($103.6) Million

7. CONTRIBUTIONS VS. BENEFIT PAYMENTS & EXPENSES

8. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • DEBT OF THE GOVERNMENT OF THE VIRGIN ISLANDS (JUNE 10, 2013) • Bonds/Loans Outstanding Balances $2.1 Billion • Annual Debt Payment – FY 2013 $152.3 Million

9. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • Prior Bond Legislation – December 2005 • Pension Obligation Bond (POB) - $600 Million • (This bond was dedicated to provide funding to the GERS and was never issued.)

10. GOVERNMENT EMPLOYEES’ RETIREMENT SYSTEM OF THE VIRGIN ISLANDS • Assumed Rate of Return • Reduced from 8.0% to 7.5% (October 1, 2011)

11. UNFUNDED LEGISLATIVE MANDATES *Based on review conducted by the U.S. Inspector General, the GERS lost $121 million in contributions because of this legislation. The Legislature appropriated and GERS was paid a total of $31 million resulting in a loss of $90 million in contributions.

13. THE ROAD TO PENSION REFORM

14. THE ROAD TO PENSION REFORM

15. THE ROAD TO PENSION REFORM

16. THE ROAD TO PENSION REFORM

17. THE ROAD TO PENSION REFORM

18. THE ROAD TO PENSION REFORM

22. 3438 KronprindsensGade GERS Complex, 3rd Floor St. Thomas, VI 00802-5750 Bus.: 340.776.7703 Fax: 340.776.4499 #3004 Orange Grove Christiansted St. Croix, VI 00820-4313 Bus.: 340.718.5480 Fax: 340.718.5498 www.usvigers.com