Actuarial Accrued Liability
Computed differently under different funding methods, the actuarial accrued liability generally represents the portion of the
present value of fully projected benefits attributable to service credit earned (or accrued) as of the valuation date.
Factors that actuaries use in estimating the cost of funding a defined benefit pension plan. Examples
include the rate of return on plan investments, mortality rates, and the rates at which plan
participants are expected to leave the system because of retirement, disability, termination, etc.
Actuarial Cost Methods
An actuarial method
that defines the allocation of pension costs (and contributions) over
a member's working career. All standard actuarial cost methods are comprised of two components: normal
cost and the actuarial accrued liability. An actuarial cost method determines the incidence of pension costs, not
the ultimate cost of a pension plan; that cost is determined by the actual benefits paid less the actual investment income.
A benefit having the same present value as the benefit it replaces. Also, the amount of annuity that can be
provided at the same present value cost as a specified annuity of a different type or a specified
annuity payable from a different age.
Actuarial Gain or Loss
Experience of the plan, from one year to the next, which differs from that assumed results in an actuarial gain or loss.
For example, an actuarial gain would occur if assets earned 10 percent for a given year since the assumed interest rate in the valuation is
Actuarial Present Value
The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the
application of a particular set of actuarial
assumptions (i.e. interest rate, rate of salary increases, mortality, etc).
Actuarial Valuation Report (AVR)
Actuarial valuations are technical reports providing full disclosure of the financial and funding status of public
retirement systems administered by the Department of Retirement Systems. Valuations for odd-numbered years are also used
to set contribution rates for the ensuing biennium. For those valuations, the Pension Funding Council oversees an
actuarial audit of the results by an outside actuary.
Actuarial Value of Assets
The value of pension plan investments and other property used by the actuary for the purpose of an actuarial valuation (sometimes referred to as
valuation assets). Actuaries often select an asset valuation method that smooths the effects of short-term volatility in the market value of assets.
The method of adjusting a benefit received at an early date so that the expected total cost to the retirement system is equivalent to the cost if the
benefit did not begin until later.
Normal retirement dependent upon attainment of a specified age.
Aggregate Funding Method
The aggregate funding method is a standard actuarial funding method. The annual cost of benefits under the
aggregate method is equal to the normal cost.
The method does not produce an unfunded
actuarial accrued liability. The normal cost is determined for the entire group rather than on an individual basis.
Paying off an interest bearing liability by gradual reduction through a series of installments, as opposed to
paying it off by one lump sum payment.
One who receives periodic payments from the retirement system. This term includes service and disability retirees,
and their survivors.
A series of periodic payments, usually for life, payable monthly or at other specified intervals. The term is
frequently used to describe the part of a retirement allowance derived from a participant's contributions. Compare with "pension".
The tendency of a person to recognize his/her health status in selecting the option under a retirement system which is most favorable to him or herself.