On August 5th, the Pension Review Board’s (PRB) Actuarial Committee met in Austin. The agenda covered three primary topics: (1) reviewing and considering modifications to the PRB Guidelines for Actuarial Soundness; (2) discussing GASB Statement No. 27 preliminary view; and (3) reviewing and considering modifications to the procedures for monitoring the status of actuarially unsound pension systems.
Norman Parrish, the chair of the Actuarial Committee and the actuarial representative on the PRB, noted he does not want the PRB to unnecessarily subject pension systems to negative publicity through the PRB’s actions. Furthermore, Parrish said he does not want to unfairly burden pension systems with onerous compliance requirements when there are less burdensome ways of accomplishing the same objective. However, he did state it is time for a review of the issues.
Chris Hanson, the PRB’s executive director, gave the committee a brief overview of the guidelines, and pointed out that actuarial soundness is not defined evenly in all jurisdictions, but is rather a tool to provide some guidance for plans to review for their funding.
The committee then walked through the guidelines and heard comments on them. Parrish considered the possibility of changing the amortization period from the current 40 years to something closer to 30 years, which would be similar to what other states are moving towards.
Witnesses cautioned the PRB Committee that changing the amortization period would impact the plans and pointed out the PRB already has more systems than can be addressed that currently exceed the 40-year period.
In regards to changes to GASB No. 27, Hanson noted that GASB-27 is moving away from a focus on funding and a move towards looking at how assets compare to liabilities. This brings into question how to calculate pension liabilities, and GASB-27 encourages more aggressive amortization of benefit changes for retirees and members. The PRB decline to offer comments on the proposal currently being considered on GASB 27 but did suggests the committee may want to weigh in if GASB-25 was altered significantly. In regards to GASB 27 the most significant comment made was by the Chair who noted that 27 does not pertain to pension funding but deals with disclosure and was not an issue for the PRB to take up.
Hanson said PRB staff are looking for more guidance from the PRB as to what triggers should be used to put a plan under closer scrutiny. In regards to “unsound pensions”, Parrish again noted he did not want to create a document that would put unnecessary burden and scrutiny on the plans. In regards to guidance on addressing unsound pensions, there were a few suggestions but witnesses also requested and were told they would have more time to submit comments.
There will be more meetings on the topics reviewed above before the committee makes any recommendations to the full board. The next meeting will be held in conjunction with the full board PRB meeting in September.
