act-2004-0-81•Pennsylvania Act 2004-81 — MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY ACT - CONTENTS OF ACTUARIAL VALUATION REPORT
Pennsylvania Act 2004-81 — MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY ACT - CONTENTS OF ACTUARIAL VALUATION REPORT
act-2004-0-812004 Pa. Act 81Law
Act text
MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY ACT - CONTENTS OF
ACTUARIAL VALUATION REPORT
Act of Jul. 15, 2004, P.L. 715, No. 81 Cl. 72
Session of 2004
No. 2004-81
HB 2467
AN ACT
Amending the act of December 18, 1984 (P.L.1005, No.205),
entitled "An act mandating actuarial funding standards for
all municipal pension systems; establishing a recovery
program for municipal pension systems determined to be
financially distressed; providing for the distribution of the
tax on the premiums of foreign fire insurance companies; and
making repeals," further providing for contents of actuarial
valuation report.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 202(b) of the act of December 18, 1984
(P.L.1005, No.205), known as the Municipal Pension Plan Funding
Standard and Recovery Act, amended December 19, 1997 (P.L.611,
No.61), is amended to read:
Section 202. Contents of actuarial valuation report.
* * *
(b) Contents of actuarial exhibits; defined benefit plans
self-insured in whole or in part.--For any pension plan which is
a defined benefit plan and which is self-insured in whole or in
part, all applicable actuarial exhibits shall be prepared in
accordance with the entry age normal actuarial cost method with
entry age established as the actual entry age for all plan
members unless the municipality applies for and is granted
authorization by the commission to use an alternative actuarial
cost method. Authorization shall be granted if the municipality
demonstrates on an individual pension plan basis that there are
compelling reasons of an actuarial nature for the use of an
alternative actuarial cost method. The commission shall issue
rules and regulations specifying the criteria which the
commission will use to determine the question of the existence
of compelling reasons for the use of an alternative actuarial
cost method, the documentation which a municipality seeking the
authorization will be required to supply and the acceptable
alternative actuarial cost methods which the commission may
authorize. The actuarial cost method shall be used to value all
aspects of the benefit plan or plans of the pension plan unless
the municipality applies for and is granted authorization by the
commission to use approximation techniques other than the
actuarial cost method for aspects of the benefit plan or plans
of the pension plan other than the retirement benefit.
Authorization shall be granted if the municipality demonstrates
on an individual pension plan basis that there are compelling
reasons of an actuarial nature for the use of these
approximation techniques. The commission shall issue rules and
regulations specifying the criteria which the commission will
use to determine the question of the existence of compelling
reasons for the use of approximation techniques, the
documentation which a municipality seeking the authorization
will be required to supply and the acceptable approximation
technique which the commission may authorize. The actuarial
exhibits shall use actuarial assumptions which are, in the
judgment of the actuary and the governing body of the plan, the
best available estimate of future occurrences in the case of
each assumption. With respect to economic actuarial assumptions,
the assumptions shall either be within the range specified in
rules and regulations issued by the commission or documentation
explaining and justifying the choice of assumptions outside the
range shall accompany the report. The actuarial exhibits shall
measure all aspects of the benefit plan or plans of the pension
plan in accordance with modifications in the benefit plan or
plans, if any, and salaries which as of the valuation date are
known or can reasonably be expected to be in force during the
ensuing plan year. The actuarial valuation report shall contain
the following actuarial exhibits:
(1) An exhibit of the normal cost of the benefits
provided by the benefit plan as of the date of the actuarial
valuation, expressed as a percentage of the future covered
payroll of the active membership of the pension plan as of
the date of the actuarial valuation.
(2) An exhibit of the actuarial accrued liability of the
benefit plan as of the date of the actuarial valuation in
total which shall be the actuarial present value of all
projected benefits provided by the benefit plan reduced by
the actuarial present value of future normal costs, and in
particular, which shall include the following required
actuarial present values for pension plan benefits of related
items:
(i) Required actuarial present values on account of
active members:
(A) Retirement benefits.
(B) Disability benefits.
(C) Survivor benefits.
(D) Refund liability due to withdrawal from
active service or death.
(E) Other benefits, specifying the nature of
each type.
This item shall include a footnote indicating the amount
of accumulated member contributions without accrued
interest.
(ii) Required actuarial present values on account of
former members with a deferred, vested or otherwise
nonforfeitable right to a retirement benefit.
(iii) Required actuarial present values on account
of former members who do not have a deferred, vested or
otherwise nonforfeitable right to the retirement benefit
and who have not withdrawn any accumulated member
contributions.
(iv) Required actuarial present values on account of
benefit recipients:
(A) Retirement benefits.
(B) Disability benefits.
(C) Surviving spouse benefits.
(D) Surviving child benefits.
(E) Other benefits, specifying the nature of
each type.
(v) Required actuarial present values for other
benefits provided by the benefit plan, specifying the
nature of each type.
(vi) Actuarial present value of future normal cost.
(3) An exhibit of the unfunded actuarial accrued
liability of the pension plan in total, which shall be the
actuarial accrued liability of the pension plan calculated
pursuant to paragraph (2) less the actuarial value of assets
of the pension plan calculated pursuant to subsection (e)(1),
and which, in particular, shall include the following:
(i) The remaining balance of the unfunded actuarial
accrued liability in existence as of the first actuarial
valuation report required by this section occurring next
following the date of enactment of this section.
(ii) The remaining balance of each increment of
unfunded actuarial accrued liability attributable to
modifications in the benefit plan governing the pension
plan which were applicable to active members, separately
indicating each and designating each by the plan year in
which the benefit plan modification was made effective.
(iii) The remaining balance of each increment of
unfunded actuarial accrued liability attributable to
modifications in the benefit plan governing the pension
plan which were applicable to retired members and other
benefit recipients, separately indicating each and
designating each by the plan year in which the benefit
plan modification was made effective.
(iv) The remaining balance of each increment of net
unfunded actuarial accrued liability attributable to
modifications in the actuarial assumptions used to
calculate the actuarial accrued liability of the pension
plan separately indicating each and designating each by
the plan year in which the actuarial assumption
modification was made effective.
(v) The remaining balance of each increment or
decrement of net unfunded actuarial accrued liability
attributable to net actuarial experience losses or gains,
separately indicating each and designating each by the
plan year in which the actuarial experience loss or gain
was recognized.
(vi) The remaining balance of each increment of
unfunded actuarial accrued liability attributable to the
provision of survivor benefits payable under section
5(e)(2) of the act of May 29, 1956 (1955 P.L.1804,
No.600), referred to as the Municipal Police Pension Law,
separately indicating each and designating each by the
plan year in which the actuarial experience loss was
recognized.
The initial determination of the unfunded actuarial accrued
liability attributable to a modification in the benefit plan
governing the pension plan or to a modification in the
actuarial assumptions used to calculate the actuarial accrued
liability of the pension plan shall be made by calculating
the unfunded actuarial accrued liability of the pension plan
in accordance with the benefit plan provisions and actuarial
assumptions which were in effect prior to the modification
and by calculating the unfunded actuarial accrued liability
of the pension plan in accordance with the modification in
the provisions of the benefit plan governing the pension plan
or the actuarial assumptions used to calculate the actuarial
accrued liability of the pension plan, whichever is
applicable, and the remaining benefit plan provisions and
actuarial assumptions. The initial determination of the
unfunded actuarial accrued liability attributable to an
actuarial loss shall be made in conjunction with the analysis
of increases or decreases in the unfunded actuarial accrued
liability of the pension plan required pursuant to paragraph
(6).
(4) An exhibit of any additional funding costs
associated with the amortization of any unfunded actuarial
accrued liability of the pension plan, indicating for each
increment of unfunded actuarial accrued liability specified
in paragraph (3), the level annual dollar contribution
required to pay an amount equal to the actuarial assumption
as to investment earnings applied to the principal amount of
the remaining balance of the increment of unfunded actuarial
accrued liability and to retire by the applicable
amortization target date specified in this paragraph the
principal amount of the remaining balance of the increment of
unfunded actuarial accrued liability. The amortization target
date applicable for each type of increment of unfunded
actuarial accrued liability shall be as follows:
(i) (A) In the case of a pension plan established
on or prior to January 1, 1985 for the unfunded
actuarial accrued liability in existence as of the
beginning of the plan year occurring in calendar year
1985, at the end of the plan year occurring in
calendar year 2015; or
(B) In the case of a pension plan established
after January 1, 1985, for the unfunded actuarial
accrued liability then or subsequently determined to
be or to have been in existence as of the date of the
establishment of the plan, at the end of the plan
year occurring 30 years after the calendar year in
which the pension plan was established.
(ii) Increment or decrement of net unfunded
actuarial accrued liability attributable to a change in
actuarial assumptions, at the end of the plan year
occurring 20 years after the calendar year in which
actuarial assumption modification was effective.
(iii) Increment of net unfunded actuarial accrued
liability attributable to a modification in the benefit
plan applicable to active members, at the end of the plan
year occurring 20 years after the calendar year in which
the benefit plan modification was effective.
(iv) Increment of unfunded actuarial accrued
liability attributable to a modification in the benefit
plan applicable to retired members and other benefit
recipients, at the end of the plan year occurring 10
years after the calendar year in which the benefit plan
modification was effective.
(v) (A) Increment or decrement of net unfunded
actuarial accrued liability attributable to an
actuarial experience loss or gain, at the end of plan
year occurring 15 years after the calendar year in
which the actuarial experience loss or gain was
recognized.
(B) Notwithstanding any other provision of this
act or other law, as of the beginning of the plan
year occurring in calendar year 2003, the outstanding
balance of the increment of unfunded actuarial
accrued liability attributable to the net actuarial
investment losses incurred in calendar years 2001 and
2002 may, at the sole discretion of the municipality,
be amortized with the amortization target date being
the end of the plan year occurring 30 years after
January 1, 2003. In order for a municipality to
extend the applicable amortization period pursuant to
this clause, the municipality must file a revised
actuarial valuation report reflecting the
amortization period extension provided for under this
clause with the executive director of the commission
no later than September 30, 2004. Any such revised
actuarial valuation report may not be filed in lieu
of the actuarial valuation report prepared in
compliance with clause (A) and required to be filed
on or before March 31, 2004, and may be used only for
the purposes of recalculating the 2004 minimum
municipal obligation of the municipality and
calculating the 2005 minimum municipal obligation of
the municipality to reflect the amortization period
extension. Any such revised actuarial valuation
report shall not affect distributions under the
General Municipal Pension System State Aid Program
under Chapter 4.
(vi) Increment of unfunded actuarial accrued
liability attributable to the provision of survivor
benefits payable under section 5(e)(2) of the Municipal
Police Pension Law at the end of the plan year occurring
40 years after the calendar year in which the survivor
benefits were first payable.
With respect to any applicable pension plan other than a plan
which comprises all or part of a moderately distressed or a
severely distressed municipal pension system, if the
remaining average period between the current average attained
age of active members as of the valuation date and the later
of their earliest average normal retirement age or their
average assumed retirement age is less than the applicable
period or periods ending with the amortization target date or
dates specified in subparagraph (i), (ii), (iii) or (v)(A),
the appropriate amortization target date for the applicable
subparagraph determined with reference to the longest
applicable remaining average period rounded to the next
largest whole number shall be used. With respect to any plan
year beginning after December 31, 1997, if, as of the
beginning of the plan year, the ratio of the actuarial value
of assets to the actuarial accrued liability exceeds 0.70 and
the governing body of the municipality has passed a
resolution to irrevocably commit the municipality to apply
the limit on the additional funding costs, as provided
herein, in the preparation of the current and all future
exhibits under this paragraph, then the sum of the additional
funding costs for subparagraphs (i), (ii), (iii), (iv) and
(v) above shall not exceed the amount required to amortize
the remaining unfunded actuarial accrued liability as of the
beginning of the plan year over 10 years in level annual
dollar contributions. The exhibit shall indicate the total
dollar amount of additional funding costs associated with the
amortization of any unfunded actuarial accrued liability of
the pension plan applicable for that plan year and any
subsequent plan year occurring prior to the preparation of
the next required actuarial valuation report, which shall be
the total of the additional funding costs associated with the
amortization of each increment of unfunded actuarial accrued
liability. The exhibit shall also indicate the plan year in
which any unfunded actuarial accrued liability of the pension
plan would be fully amortized if the total annual additional
funding cost calculated pursuant to this paragraph were met
continuously without increase or decrease in amount until the
total unfunded actuarial accrued liability currently existing
was fully amortized. In calculating the additional funding
costs associated with the amortization of any unfunded
actuarial accrued liability of the pension plan in any plan
year, any amortization contribution made in the interval
since the last actuarial valuation report shall be allocated
to each type of increment of unfunded actuarial accrued
liability in proportion to the remaining dollar amount of
each type.
(5) An exhibit of the total administrative cost of the
pension plan for the plan year occurring immediately prior to
the plan year for which the actuarial valuation report is
made.
(6) An exhibit containing an analysis of the increase or
decrease in the unfunded actuarial accrued liability of the
pension plan since the most recent prior actuarial valuation
report, including specifically an indication of increases or
decreases due to the following:
(i) Modifications in the benefit plan or plans of
the pension plan.
(ii) Changes in actuarial assumptions.
(iii) Deviations in the actual experience of the
pension plan from the experience expected by virtue of
the actuarial assumptions.
(iv) Presence or absence of payments to amortize the
unfunded accrued liability of the pension plan.
(v) Other reasons.
The analysis shall be based on the best professional judgment
of the approved actuary reached after preparing the various
applicable actuarial exhibits of the actuarial valuation
report. If, in the opinion of the approved actuary, the
inclusion of any portion of this information is not
appropriate, that portion of the analysis may be omitted with
the provision of adequate explanation or justification of the
appropriateness of the omission.
(7) An exhibit summarizing the economic and demographic
actuarial assumptions used in the preparation of the
actuarial exhibits.
(8) A summary of the principal provisions of the benefit
plan of the pension plan upon which the actuarial exhibits
are based.
* * *
Section 2. This act shall take effect in 60 days.
APPROVED--The 15th day of July, A. D. 2004.
EDWARD G. RENDELL
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