BICKMORE & ASSOCIATES, INC. 2-2016

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Other Post -Employment Benefit Programs of the City of "" Actuarial Valuation as of July 1, 2015 Addendum 2: Bickmore Mortality Projection Methodology Actuarial standards of practice (e.g., ASOP 35, Selection of Demographic and Other Noneconomic Assumptions for Measuring Pension Obligations, and ASOP 6, Measuring Retiree Group Benefits Obligations) indicate that the actuary should reflect the effect of mortality improvement (i.e., longer life expectancies in the future), both before and after the measurement date. The development of credible mortality improvement rates requires the analysis of large quantities of data over long periods of time. Because it would be extremely difficult for an individual actuary or firm to acquire and process such extensive amounts of data, actuaries typically rely on large studies published periodically by organizations such as the Society of Actuaries or Social Security Administration. As noted in a recent actuarial study on mortality improvement; key principals in developing a credible mortality improvement model would include the following.',.,.,. (1) Short-term mortality improvement rates should be based on racent experience. (2) Long-term mortality improvement rates should,be,based on expert opinion. (3) Short-term mortality improvement rake $hould blend smoothly mto,khe assumed long-term rates over an appropriate transition .porlod: The Bickmore Scale 2014 was developed fror .a blending of data -and methodologies found in two published sources: (1) the Sod ety,of Actuaries-Mortallty Improvement Scale MP -2014 Report, published in October 2014 and (�2), the demographic assumptions used in the 2015 Annual Report of the Board of Trustees,of the, Federal O.ld-Age and Survivors Insurance and Federal Disability Insurance .Trust Funds, joblished July 2015. Bickmore Scale 2014 is a two-dimensional' mortality improvement scale reflecting both age and year of mortality improvement. The underlying base scale is Scale MP -2014 which has two segments — (1); historical improvement rates for the period 1951-2007 and (2) Scale MP - 2014's best estimate of ,future mortality improvement for years 2008 and thereafter. The Bickmore scale uses the same improv6ment rates as the MP -2014 scale during the historical period 195,1-2007. In.additlan,:ahe Bickmore scale uses Scale MP -2014's best estimate of future mortality improvement for years 2008-2010, The Bickmore scale then transitions from the last used MP -2014 improvement rake in 2010 to the Social Security Administration (SSA) Intermediate Scale. This transition to the SSA Intermediate Scale occurs linearly over the 10 year period 2011'-2020. After this transition period, the Bickmore Scale uses the constant mortality improvement rate from the SSA Intermediate Scale from 2020-2038. The SSA's Intermediate Scale has a final step down in 2039 which is reflected In the Bickmore scale for years 2039 and thereafter,Over the ages 100 to 115, the SSA improvement rate is graded to zero. Scale MP -2014 can be found at the SOA website and the projection scales used in the 2015 Social Security Administrations Trustees Report at the Social Security Administration website. Bickmore f7