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Recap of Blue Ribbon Panel Report

The SOA announced the “Report of the Blue Ribbon Panel on Public Pension Plan Funding” earlier this year. Did you miss the report? No problem. You can access everything from right here on the SOA blog. Watch the video introduction below from SOA’s president, Mark J. Freedman and read the complete Summary of Recommendations below. When you’re ready to dig into all the details, you can download the full report.

And if you’re relatively new to the SOA, here is more information on the Blue Ribbon Panel. The Panel was assembled in 2013 “To help further the dialogue on issues related to public pension plans, the Society of Actuaries has commissioned a multidisciplinary blue ribbon panel to consider the causes of underfunding in public pension plans and make recommendations as to how governments can more securely fund plans going forward.”

Summary of Recommendations
The funding of U.S. public sector pension plans has received heightened attention in recent years as states and local government entities have responded to the effects of the 2008 financial crisis and several cities have faced high-profile financial challenges. Some observers react with alarm to the current situation, noting the downward trend of reported funded ratios, the increased propensity of sponsors to not pay all of the recommended contribution, growing risk levels in asset portfolios, and the increased risk that funding assumptions will not be achieved. Others note that today’s funded levels are similar to funded levels in 1990 and that sponsors and trustees have taken action to respond to the recent turmoil. Nonetheless, these trends raise a fundamental question: What changes in plan funding practices, governance and other matters help ensure that public plans can deliver on the benefit promises their sponsors have made to public employees?In April 2013, the Society of Actuaries commissioned the SOA Blue Ribbon Panel (“the Panel”) to address these questions. This paper reports on the results of the Panel’s work.Plan trustees and those responsible for funding pension plans (funding entities) face many challenges in managing the current and future financial health of pension plans. This report provides a set of principles to help guide sponsors and trustees in their plan funding decisions and to ensure that other stakeholders are informed of those decisions and how they have been made.The report does not address the appropriateness of current financial reporting for public plans nor whether those requirements should be re-examined. The report does not address the most appropriate means of assessing the economic value of pension benefits. The report recommends actions to strengthen financial and risk management practices by providing new information to trustees, funding entities and their elected officials, employees and their unions, taxpayers and other stakeholders. This information will help stakeholders better understand the risks being taken and borne by plans and how best to develop a long-term funding program. In addition, the Panel makes recommendations about the actuary’s role in developing funding recommendations and calls for improvements in plan governance, both of which can foster more effective decision making.
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