2021 Schedule Form Liability Change

When completing the 2021 Schedule Form this year, you may notice that the accrued liability amounts calculated for active members are different than the amounts calculated in prior years. Now that the threshold for full vesting can be as low as 10 years of active service, the previous methodology could understate plan liabilities for members who are hired at older ages in relief associations with shorter vesting requirements. To accommodate shorter vesting schedules without systemically understating liability estimates, a new method for calculating the liabilities was proposed. 

The new method is based on the current age and length of service of each member, and the requirement for full-vesting defined in the relief association’s bylaws. Liabilities for members who are younger than 50 are discounted, using an assumption that the relief association will earn three percent on its investments each year. Investment returns help fund the future benefit payable to each member.

Published last in the February 2021 Pension Newsletter