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Employers

Employer Bulletin

All Employers
Vol. 16, No. 5
March 25, 1999

Questions and Answers Regarding Unfunded Accrued Actuarial Liability Balance

Following are some commonly asked questions and answers regarding a proposed actuarial adjustment to the Wisconsin Retirement System Unfunded Accrued Actuarial Liability (UAAL).

I heard that my UAAL balance was going to be reduced. What's happening with that?

On December 15, 1997, the Employe Trust Funds Board (Board) accepted their consulting actuary's recommendations for updates to the system's actuarial assumptions, including a reduction in the future wage growth rate from 5.3% to 4.8%. The actuary also recommended that the Unfunded Accrued Actuarial Liability (UAAL) balance be reduced by approximately 20% in recognition of the lower wage growth assumption.

The Board initially accepted the actuary's recommendation to adjust the UAAL balance, but subsequently tabled the recommendation until they could get clarification of their legal authority to make adjustments to the UAAL.

On January 15, 1999 the Attorney General's Office advised that the Board did not have the authority to make this adjustment to the UAAL. Acting on this advice, the Board rescinded the proposed UAAL adjustment on February 15, 1999.

Does this mean my UAAL balance will never be adjusted?

Although the Board has resolved the questions related to the proposed actuarial adjustment to the UAAL, this does not mean that the UAAL balance is not subject to future adjustments. The Board will be considering whether actuarial reductions to the UAAL implemented in 1990, 1992 and 1994 should be reversed for consistency with the current interpretation of the Board's authority. If the Board takes such an action, it would result in an increase to your UAAL balance, even if the employer had previously paid the full amount due.

It is also possible that the legislature may act to give the Board the authority to apply actuarial adjustments to the UAAL balance. If such authority were proposed, the Department would ask that the Board be allowed to apply the authority in a way which would be fair to employers who had chosen to prepay all or a portion of their UAAL.

Lastly, it is possible that future legislation providing early retirement opportunities or improved retirement benefits would be partially funded through an increase in prior service liabilities. Such an action would increase your balance even if you had previously paid off your entire UAAL balance.

Is there anything I need to do?

You do not need to do anything at this time. You will continue to make contributions toward your UAAL as part of your normal retirement contribution rate. Neither your UAAL balance nor your contribution rates have been changed as a result of the Board's action.

Who can I talk to if I have questions?

If you have questions about your UAAL balance, you can call Nancy Kittleson in the ETF Controller's Office at (608) 267-9034.

 

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