Overview• What is an actuarial liability?• What impact do actuarial liabilities have on
Financial Reporting?• How are Actuarial Liabilities determined?• Recent Developments related to Actuarial
Liabilities.
• An actuary is a professional who analyzes the financial consequences of risk. They use statistics, mathematics and financial and social theory to make assessments of future financial obligations in the present.
• A liability is simply an action or event that will require financial resources in the future.
• An actuarial liability is a liability that is dependant on input from an enrolled actuary.
Significance of Actuarial Liabilities• Actuarial Liabilities account for nearly 40% of all
liabilities on the Balance Sheet of the United States Government.
• Pension Programs (accrued pension benefits) comprise over 50% of all Actuarial Liabilities.
Actuarial Liabilities include:
• Pension Programs (CSRS, FERS)
• Post-Retirement Health Benefits
• Life Insurance
• FECA Benefits
• Other Agency programs
How are Actuarial Liabilities Determined?• Actuaries perform annual studies (valuations) to determine
what financial impact current conditions (assumptions) will have on future benefit payments.
• Assumptions fall in to two categories: Economic (long term) and Demographic (short term).
• Experience Study – Demographic assumptions versus actual data for the year in review.
• An actuarial gain or loss is derived from these valuations and will impact the Statement of Net Cost of the Administrative Agency.
• Historically some of the most significant changes in amounts on the Statement of Net Cost for the consolidated Financial Report of the U.S. Government have been a
result of Actuarial assumption changes.
Statement of Federal Financial Accounting Standards 33
“Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses
from Changes in Assumptions and Selecting Discount Rates and Valuation Dates”
SFFAS #33 - Summary• Requires a more transparent display of actuarial
assumption changes.
• Provides a written standard for selecting valuation dates and discount rates.
• Applies only to agencies that administer pension plans – OPM is the administrative entity for CSRS and FERS.
• Does not apply to Actuarial FECA
• Effective beginning in Fiscal Year 2010.