FPPA Board of Directors Approve Change in Actuarial Assumptions

Read the full Actuarial Experience Study here for the following FPPA plans:

  • Statewide Defined Benefit Plan
  • Statewide Death and Disability Plan
  • Statewide Hybrid Plan
  • Colorado Springs New Hire Plans
  • Affiliated Old Hire Plans
  • Affiliated Volunteer Plans

 

At least every five years the FPPA Board of Directors, in accordance with best practices, reviews its economic and demographic actuarial assumptions. At its June 2015 meeting, the Board of Directors reviewed and approved recommended changes to the actuarial assumptions. The recommendations were made by FPPA’s actuaries, Gabriel, Roeder, Smith & Co., based upon their analysis of FPPA’s past experience and expectations of the future.

The assumption changes will be effective for actuarial valuations beginning January 1, 2016. The actuarial assumptions will also impact actuarial factors for benefit purposes such as purchases of service credit and other benefits where actuarial factors are used. The date the new actuarial assumptions will be effective for benefit purposes will be October 1, 2016.

The main actuarial factor changes were:

  • Retain the investment return assumption of 7.5%; however adjust it to be net of all investment expenses only (instead of both investment and administrative expenses). This will mimic the approach used in determining the investment return assumption under the accounting rules. Accordingly, an explicit assumption for administrative expenses will now be applied to each plan.

  • Reduce the inflation assumption from 3.0% to 2.5%.

  • Update the post-retirement mortality tables to reflect increased longevity.

  • Increase the rates of both occupational and total disability for members covered under a defined benefit plan.

A number of other actuarial factors had modest changes as well.

These new actuarial assumptions position FPPA more conservatively as it proceeds forward. As always, the assumptions will be reviewed against actual experience each year and gains or losses recognized in accordance with Governmental Accounting Standards Board standards and our actuarial methods and policies.