The funding of public sector pension plans has become a high-profile topic, fueled by the volatility of investment returns, budgeting pressures and increased scrutiny for not meeting funding obligations. Moreover, the Governmental Accounting Standards Board's clarification that financial reporting standards do not constitute funding policy guidance has created a regulatory vacuum and led many public pension plans to review and, often for the first time, record their funding policies in a comprehensive statement of funding policy used for setting an "actuarially determined contribution." In response, several organizations within the industry have issued guidance for establishing and maintaining actuarially responsible funding policies:
This Public Sector Letter discusses the similarities among these policy papers and points out notable differences.
Many plans will find they already have many of the recommendations in place. Sponsors of plans that are not following all the recommendations may benefit from considering the guidance summarized in this Public Sector Letter, including consideration of any justifiable policy differences.
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