§ 384 — Actuarial investigation

§ 384 Actuarial investigation.

The board shall use the services of a consulting actuary to advise it on matters relating to funding and administration of the system and to make actuarial valuations. On or before January 1 of every third year, in accordance with the board's schedule in effect on the effective date of this article as amended, the board shall establish contribution rates for the next succeeding three-year period. Said contribution rates shall be those recommended by the actuary for the system in the actuarial report accepted by the board (except where the board rejects a report) as hereinafter set forth. The actuary for the system either shall be an enrolled actuary under the Employee Retirement Income Security Act of 1974 ("ERISA") or any succeeding law and a member of the American Academy of Actuaries or shall meet such experience and other requirements as are approximately equivalent to those applicable to an enrolled actuary under ERISA and to a member of the American Academy of Actuaries. The actuary for the system shall carry out such valuations of the costs of the system as are required to estimate the contribution rates required to fund the system. Such valuation shall be made not less frequently than every three years. The actuary shall present to the board a valuation report covering the findings of each such valuation, which report shall be accepted by the board or rejected as hereinafter provided. The board may reject a valuation report of the actuary of the system in its sole discretion. In the event that the board should reject a valuation report of the actuary for the system, the board shall forthwith appoint a new actuary for the system. If the new actuary for the system shall be unable to complete his or her report by the date when revised contribution rates are required to become effective or if the board should reject the new actuary's report, then the rejected valuation report by the former actuary for the system shall determine the contribution rates until the board subsequently accepts a valuation report from a new actuary for the system. The board may determine that the contribution rates adopted pursuant to the new actuary's report shall be retroactive to the date when revised contribution rates were required to become effective. No actuarial method or assumption to be used in any actuarial study of the system shall be adopted by the board unless the actuary retained by the board recommends such method or assumption. No method shall be used in any actuarial valuation of the system unless such method is a widely used, sound, and well-recognized actuarial method which is used to establish the cost of pension plan benefits and expenses. The actuary for the system shall develop the actuarial assumptions to be used in evaluating the costs of the system. To the extent deemed appropriate by the actuary, actuarial assumptions shall be based on the experience of the system. The actuary shall use his or her best judgment in interpreting prior experience of the system, similar experience elsewhere, trends, and opinions in his or her development of such actuarial assumptions. Each actuarial assumption shall represent as realistic an appraisal of relevant future experience (including expected inflation) at the time the assumption is made, and all assumptions considered together shall be such that their use shall permit the actuary to make an estimate of costs which he or she believes to be a reasonable one. The actuary shall submit in his or her report a full discussion of all assumptions used in the actuarial valuation. The board shall direct the actuary to determine the amount and character of all unfunded liability of the system using widely used, sound, and well-recognized actuarial methods and shall direct the actuary to determine the contribution rates according to section 385. Neither terminal funding cost method nor the current funding (pay-as-you-go) cost method is an acceptable method, and neither of such methods shall be recommended by the actuary or adopted by the board; provided, however, this section shall not apply to the funding of benefits for service rendered prior to April 1, 1935, or to the funding of benefits provided pursuant to the retirement plans created by former (1976) Charter sections 173, 175, 175.1, 175.13 and to benefits payable to transferred employees as provided in section 374 of this Charter. (Amended June 6, 1989)