§ 203.3. Range of economic actuarial assumptions.
(a) Selection of actuarial assumptions. The actuarial valuation report shall be prepared using actuarial assumptions selected jointly by the actuary of the municipal pension plan and the governing body of the municipal pension plan. The actuarial assumptions shall represent the best available joint estimate of the actuary and the governing body of future occurrences in the case of each actuarial assumption. The economic actuarial assumptions shall additionally be either within the range for economic actuarial assumptions specified in subsection (b) or accompanied in the actuarial valuation report with the documentation specified in subsection (c) that explains and justifies the choice of one or more assumptions outside of the range.
(b) Range of economic actuarial assumptions. No explanatory or justificatory documentation as specified in subsection (c) is required to accompany the actuarial valuation report if the following conditions are met:
(1) Economic actuarial assumptions reflect annual percentage increase amounts.
(2) The actuarial assumption as to interest or investment earnings is not less than 5% or more than 9%.
(3) The actuarial assumption as to salary projection or individual pension plan member salary increase for municipal pension plans with a salary related benefit plan is not greater than the actuarial assumption as to interest or investment earnings and is not less than the amount of the actuarial assumption as to interest or investment earnings reduced by 3%. If the actuarial assumption as to salary projection or individual pension plan member salary increase applicable to the municipal pension plan is in the form of probability rates that differ for various ages, the rate to be used for this comparison shall be calculated by the actuary preparing the report, with appropriate accompanying documentation, and shall be the average rate under the probability table for the ages 30 through 50.
(4) The actuarial assumption as to total covered payroll increase, for a municipal pension plan of a municipality that has been determined to be financially distressed and to which a remedy of delayed implementation of the funding standard under section 607(g) or (h) of the act (53 P. S. § 895.607(g) or (h)) is applicable, is not greater than 4% nor less than .0%.
(5) The actuarial assumption as to inflation, for a municipal pension plan that provides for automatic cost-of-living postretirement adjustments based on increases in the Federal consumer price index or other recognized measure of inflation, is not greater than the amount of the actuarial assumption as to interest or investment earnings reduced by 2% and is not less than the amount of the actuarial assumption as to interest or investment earnings reduced by 5%.
(c) Documentation required for certain actuarial assumptions.
(1) If the economic actuarial assumptions used to prepare the actuarial valuation report are outside the range of economic actuarial assumptions specified in subsection (b), or if the economic actuarial assumptions utilize annuity rates or differ between preretirement experience and postretirement experience, the actuary preparing the actuarial valuation report shall submit documentation that explains the choice of economic actuarial assumptions made by the actuary and the governing body of the municipal pension plan and justifies their use in preparing the actuarial valuation report.
(2) The documentation, at a minimum, shall cite aspects of the benefit plan of the municipal pension plan in question that affect the choice of the particular economic actuarial assumptions in question and the particular circumstances and specific experience of the municipal pension plan and its investment performance and of the municipality and its salary structure that caused the actuary and the governing body of the municipal pension plan to conclude that a set of actuarial assumptions within the range specified in subsection (b) is inappropriate and to conclude that the particular economic actuarial assumptions chosen are appropriate.
Cross References This section cited in 16 Pa. Code § 205.8 (relating to Supplemental State Assistance).
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