"Actuarial Funding Policies and Practices for Public Pension Plans"

This article comes from Conference of Consulting Actuaries Public Plans Community

This CCA PPC “white paper” provides guidance to actuaries, policymakers, and other interested parties on the development of actuarial funding policies1 for public pension plans. It develops a principles-based empirically grounded Level Cost Allocation Model (LCAM) to be used as a basis for funding policies of public pension plans throughout the US. We believe that the funding policies developed herein could serve as a “reasonable actuarially determined contribution” under Actuarial Standard of Practice No. 4 and could be disclosed as the plan’s actuarially determined contribution under GASB 67 and 68.

The distinguishing feature of this approach is that it begins with stated policy objectives and then develops specific policy guidance consistent with those objectives. One of the main results is that an effective funding policy often represents a balancing of policy objectives. Another is that adherence to the policy objectives may lead to a narrower range of acceptable practices than is sometimes found in current practice.

The reader is strongly encouraged to focus not only on the specific practice guidance but also on the detailed discussions and rationales that lead to that guidance. Also note that while this discussion is comprehensive it is not all-inclusive. In addition, there may be other “level cost allocation models” that are appropriate in some circumstances.

Read the full article by clicking the link below:

Read the Full Article Here