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Sustainability Valuation And Actuarial Valuation


A conversation between NCPERS executive director and counsel, Hank H. Kim, and NCPERS director of research, Michael Kahn, Ph.D. about NCPERS new research, Enhancing Sustainability of Public Pensions.

 
 

Sustainability Valuation And Actuarial Valuation


[A conversation between NCPERS executive director and counsel, Hank H. Kim, and NCPERS director of research, Michael Kahn, Ph.D. about NCPERS new research, Enhancing Sustainability of Public Pensions.]

Hank H. Kim: You have all these other tools, and then you have Sustainability Valuation. Some may argue, that Sustainability Valuations may be used by irresponsible plan sponsors, to not make the full contributions that an Actuarial Valuation would say that the plan sponsor needs. How does the Sustainability Valuation and the Actuarial Valuation work hand-in-hand?

Michael Kahn, Ph.D.: So, the idea that, we say this is in addition to what you are already practicing. Using an Actuarial Valuation on a regular basis is a good pension policy. So, we are not saying that you should stop doing that. We are really talking about a drastic event. It throws things off, even if you do everything right. So, this is a new tool, which will help work hand-in-hand and keep this ratio stable going forward. I was thinking after I wrote the paper, it could prevent situations like Puerto Rico, because you are monitoring this ratio between the debt and the economy. In this case, the unfunded liability and the economic capacity of the plan sponsor. This is a new tool, which will help a lot, with Actuarial Valuations and Sustainability Valuations together.

In the coming weeks, NCPERS will release videos between Kim and Kahn discussing different aspects of Enhancing Sustainability of Public Pensions. You can view our previous video: How Can We Enhance Sustainability Of Public Pensions? What Do We Mean By Sustainability Valuation?
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