Current through Register Vol. 54, No. 44, November 2, 2024
(a)
Application for authorization. A separate application to the
Commission for authorization to utilize an alternative actuarial cost method
for the actuarial valuation report shall be made by a municipality that desires
the authorization. A separate application shall be made for each municipal
pension plan for which the authorization is sought. The application shall be
filed by the chief administrative officer of the municipality following
adoption by the governing body of the municipality of a resolution requesting
the authorization. No application filed on behalf of more than one municipality
or more than one municipal pension plan or filed by a person other than the
chief administrative officer of the affected municipality will be a valid
application.
(b)
Deadline
date for filing application for authorization. The application for
authorization to utilize an alternative actuarial cost method for the actuarial
valuation report shall be filed by the last business day occurring 6 months
prior to the date on which the actuarial valuation report is due to be filed
with the Commonwealth.
(c)
Contents of the application for authorization. The application
for authorization to utilize an alternative actuarial cost method for the
actuarial valuation report shall be prepared by the actuary of the municipal
pension plan for which the authorization is sought. The application for
authorization shall request a particular alternative actuarial cost method and
shall indicate, in general, the impracticality, difficulty and undesirability
that would result from utilizing the actuarial cost method prescribed in
section 202(b) of the act (53 P. S. §
895.202(b)) and the greater
practicality, facility and desirability of utilizing the requested alternative
actuarial cost method. The application for authorization shall include the
following:
(1) Reasons why use of the
prescribed actuarial cost method is not in the best interests of the
participants and beneficiaries of the municipal pension plan and why use of the
requested alternative actuarial cost method is in the best interests of the
participants and beneficiaries of the municipal pension plan.
(2) An algebraic demonstration of the
conditions under which the alternative actuarial cost method recognizes
accruing pension plan liabilities on a level basis over time as a percentage of
covered payroll and produces stability in the annual actuarial cost of the
pension plan from year to year. Alternatively, if the Commission recognizes the
actuarial cost method as a budgeting tool for municipal government for this
particular expenditure item, an algebraic demonstration that the requested
alternative actuarial cost method will produce a cost incidence pattern over
time that corresponds to the adquately documented likely future revenue
availability pattern of the municipality. Algebraic demonstrations shall be
based on the actuarial assumptions used for the most recent prior actuarial
valuation unless clearly unreasonable and on the demographics of the current
active and benefit recipient pension plan population.
(d)
Additional documentation to
accompany application. An application for authorization to utilize an
alternative actuarial cost method for the actuarial valuation report shall also
include additional documentation that may be used by the Commission in
evaluating the application. The additional documentation shall be supplied by
the actuary of the municipal pension plan. The additional documentation shall
be as follows:
(1) An indication of the number
of instances in the prior practice of the actuary during which the actuary had
occasion to use the requested alternative actuarial cost method.
(2) If the requested alternative actuarial
cost method has been used previously by the actuary, an indication of the key
relevant factors or attributes of the pension plan involved in a prior
occurrence and a comparison of those factors or attributes with the pertinent
factors or attributes of the municipal pension plan covered by the
application.
(3) A copy of a
published professional article, study or similar work known to the actuary that
analyzes the requested alternative actuarial cost method and compares it to the
actuarial cost method prescribed in section 202(b) of the act.
(e)
Acceptable alternative
actuarial cost methods. An acceptable alternative actuarial cost
method shall be an actuarial cost method that meets the following criteria:
(1) Is considered to be a generally accepted
actuarial method by the American Academy of Actuaries.
(2) Is permitted under regulations issued by
the Internal Revenue Service for the determination of minimum funding
requirements under section 412 of the Internal Revenue Code (26 U.S.C.A. §
412).
(3) Results in the accumulation of plan
assets equal to or in excess of the present value of accrued pension plan
benefits, which shall be demonstrated by the actuary of the applicable
municipal pension plan.
(f)
Criteria for authorization.
The authorization of an alternative actuarial cost method for the
actuarial valuation report shall be granted only if the following occurs:
(1) A valid application for authorization of
an alternative actuarial cost method has been filed by the
municipality.
(2) The application
is filed in a timely fashion.
(3)
The application specifies an alternative actuarial cost method that meets the
requirements of subsection (e)(1) and (2), and for which the required
demonstration specified in subsection (e)(3) has been prepared.
(4) The application, with clear specific
identification of each item, includes the various application contents items in
subsection (c) and relevant items of additional documentation in subsection
(d).
(5) The application, on its
face, presents the required indication of the reasons or the demonstration of
results for each contents item set forth in the applicable paragraph of
subsection (c).
(6) The application
presents the following:
(i) Reasons with
respect to the contents item in subsection (c)(1) that, in the opinion of a
majority of the Commission members considering the question, are
compelling.
(ii) A demonstration
with respect to the contents item in subsection (c)(2) that, in the opinion of
a majority of the Commission members considering the question, is clear,
reasonably probable and compelling.
