Att-08: Fiscal Solvency PlanDefinition of terms for management plan needed to be completed prior to applying for funding.
Management Plan for
Financing Other Postemployment Benefits
Definitions of Terms
Actuarial Present Value of Total Projected Benefits (APVTPB)
This is the present value of the cost to finance benefits payable in the future, discounted to reflect the expected effects of the time value of money and probabilities of payment. It is the amount that would have to be invested on the valuation date so that the amount invested plus investment earnings will provide sufficient assets to pay total projected benefits when due.
Normal Cost is that portion of the APVTPB which is allocated to a valuation year by the Actuarial Cost Method. The presentation of Normal Cost should be accompanied by reference to the Actuarial Cost Method used. Under most actuarial methods, Normal Cost can be thought of as the cost for OPEB being earned by employees in exchange for services now.
Actuarial Accrued Liability (AAL)
AAL is that portion, as determined by a particular Actuarial Cost Method, of the APVTPB which is not provided for by future Normal Costs. The AAL can be thought of as the value of OPEB benefits already earned in exchange for employees’ past service.
Actuarial Value of Assets (AVA)
AVA is the value of cash, investments, and other property belonging to the plan, as used by the actuary for the purpose of an Actuarial Valuation. “Plan” is defined as a trust or equivalent arrangement in which plan assets are dedicated to providing benefits to retirees and their beneficiaries in accordance with the terms of the plan and are legally protected from creditors of the employer or plan administrator.
Unfunded Actuarial Accrued Liability (UAAL)
UAAL is the excess of the AAL over the AVA.
Annual Required Contribution (ARC)
The ARC is the employer’s actuarially determined periodic required contribution to a defined benefit OP EB plan. This is the amount needed to fund the normal cost and to amortize (pay off) the UAAL attributed to past service.