2019 - 2023 PwC. Among the 131 plans that NASRA measured, more than half have reduced their investment return assumption since fiscal year 2020. Under this approach in Figure PEB 2-1, it is appropriate to consider the following: Many pension plans, and some OPEB plans, are pay related, requiring an assumption as to future salary increases. Contributions expected to be made in future years should not be considered in determining the expected long-term rate of return on plan assets. The actuary should disclose any explicit adjustment made in accordance with section 4.1.1. If the actuary determines that an economic assumption is not reasonable as of the measurement date at which it is applied, the actuary should select a reasonable new assumption. http://www.bls.gov/cpi/ The actuary should take into account the following when applicable: Depending on the purpose of the measurement, the actuary may determine that it is appropriate to adjust the economic assumptions to provide for adverse deviation or reflect plan provisions that are difficult to measure. Section 1. The ASB provides guidance for measuring pension and retiree group benefit obligations through the series of ASOPs listed below. stream d. examining annuity prices to estimate the market price to settle pension obligations. By continuing to browse this site, you consent to the use of cookies. IoD Additionally, the expected long-term rate of return on plan assets is an important component when determining the net benefit cost each reporting period. The two most typical are (1) converting the rates from certain published bond indices from a reported semi-annual compound rate basis to an annual discount rate basis and (2) arithmetic rounding. 35. b. In the private single employer plan arena, the IRS, PBGC, and FASB have promulgated rulings that have limited or effectively removed an actuarys judgment regarding the discount rate used for current-year funding or accounting. PDF Fundamentals of pension accounting and funding - American Academy of Historically, actuaries have used various practices for selecting economic assumptions. peb_guide. Due to the uncertain nature of the items for which assumptions are selected, the actuary may consider several different assumptions reasonable for a given measurement. Coates, Crow: Much more to be done on state retirement system reforms Other investment risks may also be present, such as default risk or the risk of bankruptcy of the issuer. In nonprescribed situations, practice is still dependent upon the individual actuary. Different plans . In some circumstances, consistency may be achieved by using the same inflation, economic growth, and other relevant components in each of the economic assumptions selected by the actuary. It is appropriate in estimating those rates to look to available information about rates implicit in current prices of annuity contracts that could be used to effect settlement of the obligation (including information about available annuity rates published by the Pension Benefit Guaranty Corporation). The Pension Funding Council (PFC) adopts economic assumptions for all plans/systems, except LEOFF 2 which are adopted by their Board; these assumptions are then subject to revision by the Legislature. The expected rate of return on assets is the long-term expectation of the annual earnings rate on the assets of the pension fund. However, an employer's plan may have a limit or "cap" on the dollar amount of health care coverage it promises to pay.

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