The $22 billion state pension system is seeking a review of the approach used to determine how much the accounts will be worth in the future and how much will be needed to pay the bills.
The valuation approach used by Buck Consultants helps set the employer contribution rates for the pensions now and in the future for about 100,000 employees and retirees.
The new request for proposals says a contractor will not duplicate the valuation process that Buck Consultants uses, but the firm will be asked to analyze the underlying process to see if it is reasonable and accurate.
This review is important because the real question about the $12 billion unfunded liability for the pension program is whether the assumptions about future conditions are accurate.
The projections about the size of the unfunded liability will vary greatly depending upon estimates of future earnings, health care costs, life expectancy, etc.
For instance, if the rate of return used in the formula is too high, then the fund would appear to be more financially sound than if a lower rate of future returns is used. The review is to include projections of future health costs and other variables.
There are 76,500 active and retired members in the Public Employees Retirement System defined benefit program, which has been closed to new members since 2006. There are 22,675 active or retired members in the Teachers Retirement System defined benefit program, which is closed to new members since 2006.
There are also 178 active or retired employees in the Judicial Retirement System and 558 people in the National Guard/Naval Militia Retirement System.