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National Organizations Release ASOP 4 Toolkit for Measuring Pension Obligations and LDROM

On March 27, 2023, the National Conference on Public Employee Retirement Systems (NCPERS) released an announcement that, in a collaborative effort with the National Association of State Retirement Administrators (NASRA), National Council on Teacher Retirement (NCTR) and National Institute on Retirement Security (NIRS), they formed a workgroup to develop the ASOP 4 Toolkit: Measuring Pension Obligations and LDROM. The workgroup also comprised over 30 public pension directors, senior staff, actuaries and other communications experts that contributed to the development of the toolkit.

In December 2021, the Actuarial Standards Board (ASB) adopted revisions to ASOP No. 4 entitled Measuring Pension Obligations and Determining Pension Plan Costs or Contributions. The revised standard is effective for any actuarial report with a measurement on or after February 15, 2023 that is issued on or after that date.

The recent updates to ASOP 4 also included a new Low-Default-Risk Obligation Measure (LDROM) calculation and disclosure. The LDROM was added to provide guidance regarding the calculation of this measure when the actuary is performing a pension plan actuarial valuation.

According to the announcement, the toolkit is endorsed by the Government Finance Officers Association (GFOA) and is intended to “help pension funds communicate the new requirements of ASOP 4, avoid the misunderstanding and misuse of the new disclosure, and communicate the benefits of a well-diversified investment portfolio.” It adds that the toolkit “is an essential resource for pension funds to educate policymakers and others on the best use of this new disclosure to help avoid misunderstandings concerning pension funding.”

The toolkit includes:

  • A Fact Sheet on the Low-Default-Risk Obligation Measure (LDROM);
  • Sample LDROM Language for Valuation Reports; and
  • Frequently Asked Questions About LDROM.

Joe Newton, Pension Market Leader and member of the GRS Office of the Chief Actuary, participated in the workgroup.

Further information is available here.