Actuarial Valuation and Reviews
The actuarial valuation is one of the most important tools SCERS uses to safeguard the long-term sustainability of the retirement system. It is essentially a financial “checkup” conducted each year by SCERS’ independent actuary. This report measures the plan’s liabilities (the benefits promised to members), compares them to the assets currently held in trust, and determines the contributions required from members and employers to keep the system on track.
Actuarial Valuation and Reviews
Annual Actuarial Valuation
Each year, SCERS’ actuary performs a detailed analysis of the system’s financial position. The valuation answers key questions:
- How much have members earned in benefits to date?
- How much has already been set aside to pay those benefits?
- What level of contributions will be needed in the upcoming fiscal year to fund benefits fairly and sustainably?
Based on this analysis, the actuary sets employer and member contribution rates, which are then reviewed and adopted by the SCERS Board of Retirement. This process ensures that contributions are aligned with the true cost of benefits and that the plan remains on a sound financial footing.
Periodic Reviews of Assumptions
While the annual valuation focuses on the current financial picture, SCERS also conducts more comprehensive reviews of the underlying assumptions that drive these calculations. Every three to five years, the actuary performs an experience study, which compares actual member behavior and economic outcomes to the assumptions used in past valuations.
For example, the review may analyze whether members are retiring earlier or later than expected, whether life expectancies are increasing, or whether salary growth trends are keeping pace with inflation. If real-world experience differs from assumptions, the actuary recommends adjustments. Updating these assumptions ensures that future valuations are as accurate and realistic as possible.
The most recent triennial analysis of SCERS’ actuarial assumptions was performed as of June 30, 2022. This review covered both economic assumptions (such as investment return, inflation, and payroll growth) and non-economic assumptions (such as retirement, termination, and mortality rates).
Why These Reports Matter
For members, actuarial valuations and reviews provide assurance that SCERS is not just looking at today’s finances but planning decades ahead. For employers, they provide the basis for contribution requirements and help guide budgeting. For the Board of Retirement, they offer the critical data needed to set policy, manage risk, and uphold fiduciary responsibilities.
Together, the annual actuarial valuation and periodic reviews form the backbone of SCERS’ financial planning, ensuring that retirement benefits are secure, fairly funded, and sustainable across generations.