Much of the debate centered on the economic assumptions actuaries use to measure these obligations. NASRA A specific assumption or method that is mandated or that is selected from a specified range or set of assumptions or methods that is deemed to be acceptable by applicable law (statutes, regulations, and other legally binding authority). The actuary should identify the types of economic assumptions to use for a specific measurement. ]7S[A HY7>hlS*M PDF Asset Allocation and the Investment Return Assumption 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions, that relates to the selection and use of economic assumptions; c. supplements the guidance in ASOP No. 25, Credibility Procedures, for additional guidance. As a result, a range of reasonable assumptions may develop, both for an individual actuary and across actuarial practice. For example, the assumed rate of investment return for the pension plans was 7 percent for . 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. March 21, 2023 29 CA Comparison - Funded Ratio 0% 25% 50% 75% 100% The Pension Board voted 8-1, with Mr. Worzalla disapproving, to adopt an assumed rate of return of 7.4% effective January 1, 2024, 7.2% effective Unless the measurement period is short, the actuary should not give undue weight to short-term patterns. 6, Measuring Retiree Group Benefits Obligations and Determining Retiree Group Benefits Program Periodic Costs or Actuarially Determined Contributions, that relates to the selection and use of economic assumptions; and. Select and Ultimate AssumptionsAssumed compensation increases vary by period from the measurement date (for example, x% increases for the first 5 years following the measurement date, and y% thereafter) or by age or service. Interest Rate - For pension funding, this assumption is used to discount future benefits to determine plan liabilities and it should be a reasonable expectation of the future rate of return on the pension plan's assets. https://www.census.gov/library/publications/time-series/statistical_abstracts.html Please see www.pwc.com/structure for further details. (For this, the system will employ the 2017 rates . The investment return assumption, which includes gain-sharing, is currently 7.60%. Many actuaries change assumptions infrequently, while other actuaries reevaluate the assumptions as of each measurement date and change economic assumptions more frequently. A discount rate may be a single rate or a series of rates, such as a yield curve. Assuming pension plans achieve a conservative 3 percent return in fiscal year 2019-2020, Reason Foundation Pension Integrity Project's calculations show that the 20-year aggregate average rate of return would be only about 5.9 percent, falling far short of the current weighted average assumed rate of return of 7.25 percent. 20-7, Financial Reporting Considerations Related to Pension - Deloitte This standard applies to actuaries when performing actuarial services that include selecting economic assumptions to measure obligations under any defined benefit pension plan that is not a social insurance program, as described in section 1.2, Scope, of ASOP No.