Industry News
American Academy of Actuaries Public Plans Committee Releases Practice Note on Fixed Rate Pension Funding
On February 9, 2023, the American Academy of Actuaries (AAA) Public Plans Committee released its Public Policy Practice Note, Fixed Rate Pension Funding. The practice note is intended to serve as a guide to actuaries that advise retirement boards. It provides information for actuaries to consider for working with public defined benefit pension plans that use fixed rate funding.
The practice note states, “In a fixed rate plan, the retirement system usually invests the assets and administers the benefits but has no direct control over either the contributions or the benefit levels… [O}ver time, when investment returns vary, either contributions or benefits need to adjust.” The information covered in the practice note includes: 1) fixed rate funding policy; 2) specifics on the actuarial benchmark contribution; 3) actuarial benchmark contribution (ABC) for tiered fixed rate plans; 4) fixed rate plan design; and 5) fully funded fixed rate plans.
Judith Kermans, President and CEO of GRS, and Brian Murphy, Senior Consultant and past President with GRS, currently serve as members of the AAA Public Plans Committee.
The practice note is available here.