The time draws near when this standard goes into effect on your next valuation. Is your actuary ready? The Ryan ALM Custom Liability Index (CLI) is the perfect tool to help plan sponsors AND participants understand the significance of the low-default-risk obligation measure with respect to the funded status of the plan, future contributions, and importantly, the security of participant benefits. We stand ready to assist you with this effort.
The Actuarial Standards Board (ASB) is responsible for setting standards for actuarial practice in the United States and they accomplish that objective through the development of Actuarial Standards of Practice (ASOPs). One such standard, ASOP No. 4 addresses “measuring pension obligations and determining pension plan costs or contributions”. This guideline is not specific to either FASB or GASB, so this standard should be applied by all actuaries when performing the following tasks:
Measurement of pension obligations, funded status, solvency risk, and the pricing of benefits. There are several other areas of focus, but the assessment of a Low-Default-Risk Obligation Measure was the one that grabbed our attention. Section 3.11 of ASOP No. 4 states that “when performing a funding valuation, the actuary should calculate and disclose a low-default-risk obligation measure of the benefits earned or costs accrued as of the measurement date”. When calculating this measure, the actuary should select…
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