| Ensuring
the integrity of long term pension funding for the 106
contributory retirement systems for public employees
in Massachusetts is a major policy priority for PERAC.
The Actuarial Unit is the focal point for these efforts.
Under law, the unit determines the annual appropriation
for each of the 106 retirement systems.
As part of
the appropriation process, the unit performs an actuarial
valuation of each of the 106 retirement systems every
few years. The valuation is a "snapshot"
picture of how well the plan is funded at that time.
The valuation compares the plan’s liabilities
(current and future payments to be made upon retirement,
death, disability, or termination of employment) with
the plan’s assets (both employer and employee
contributions credited with investment earnings).
The valuation develops a normal cost (which reflects
the liability for amounts expected to be earned in
the current year) and an accrued liability (which
reflects the liability associated with employee past
service). If the accrued liability exceeds plan assets,
an unfunded liability exists.
Based on
the results of the valuation, each retirement board
establishes a funding schedule (or expected series
of payments). The funding schedule is determined so
that each year a payment is made to reflect the normal
cost as well as a portion of any remaining unfunded
liability. The funding schedules are revised at least
every three years to take into account updated asset
and liability amounts. PERAC is responsible for reviewing
and approving funding schedules and assessing the
progress each retirement system has made.
In addition,
the Unit calculates and verifies the amount of each
retirement allowance granted by the local systems. |
