Procedure for Increasing Benefits for a Local Pension Fund

Arkansas law requires local fire and police pension funds considering an increase in their benefits to process such requests through the Arkansas Fire and Police Pension Review Board (PRB). The following steps will assist funds considering a benefit increase.

• First, the local board of trustees must adopt a resolution stating the amount of the proposed increase (must be in $5 increments for volunteer funds) and to whom it would apply - current retirants; future retirants; current/future retirants; surviving spouses/children; etc. Police funds may include dependent parents.  At least 6 of the 7 board members must sign the resolution.  Minutes of the same board meeting the resolution was adopted and showing which board members voted for/against the increase must be sent with the resolution to the PRB.  The board secretary is to certify the minutes as correct.
• Once the PRB receives the properly completed resolution and minutes, the fund will be invoiced for the valuation fee.  Actuarial work will begin after the payment is received.
• Standard pension funds (have not raised benefits); the valuation fee is $400.  For non-standard pension funds (have raised benefits), the valuation fee is $600 for the first proposal and $300 for each additional proposal in the resolution.  A fund may also ask that if the first proposal cannot be approved, that the actuaries determine the highest amount permitted i.e. a "random search" valuation.  The fee is $425 for standard funds; $900 for non-standard funds.
• Two additional types of benefit increase valuations are also available. Funds with 50 or more participants may use a cash flow projection valuation. The fee for a cash flow valuation is $2,400. Funds with less than 50 participants may use an alternate cash flow projection valuation. The fee for an alternate cash flow valuation is $1,900.  PRB Rules 2 and 4 provide greater details on benefit increases (see Rules and Regulations).
• Benefit increase valuations take approximately six (6) weeks to complete.  The executive director shall certify whether or not the benefit increase is approved.  When approved, the local board must file a copy of the resolution, actuarial valuation, and the executive director's certification with the circuit and city clerk's of the county/city where the pension fund is located.
   

Definition of "Actuarial Soundness"

Under law, the financial objectives of local pension plans shall be to establish and receive contributions which will remain approximately level from year to year and will not have to be increased for future generations of citizens. The law specifies that this objective is achieved when contributions received each year by a pension fund are sufficient both, (1) to fully cover the costs of benefit commitments being made to employees for their service being rendered in such year and, (2) to make a level payment which, if paid annually over a reasonable period of future years, will fully cover the unfunded costs of benefit commitments for service previously rendered. The financial objectives discussed above must be met in order for a fund to be considered "actuarially sound."

Reporting and Disclosures of Local Pension Fund Financial activity

Act 700 of 1979, as amended, (A.C.A. 24-11-101 et. seq.) requires that each local pension fund disclose its annual financial activity to the Pension Review Board. This report, which may be completed by a CPA, registered accountant, city clerk, recorder, or treasurer, is not an audit of the fund, but is a compilation of annual financial activity.

Many funds have now diversified their investment programs by specifically hiring an investment advisor, who manages the assets in the fund. These funds have assets of $100,000 or more and are required to report investment activity, submit a list of securities by type and amount and certain other activities.

State Turnback may be withheld from any fund which does not satisfy the reporting requirements.