Froogle | ASOP 4 | Section 3.5

When measuring pension obligations and determining periodic costs or actuarially determined contributions, the actuary should reflect all significant plan provisions known to the actuary, as appropriate for the purpose of the measurement.

However, if in the actuary’s professional judgment, omitting a significant plan provision is appropriate for the purpose of the measurement, the actuary should disclose the omission in accordance with section 4.1(e).

3.5.1 Adopted Changes in Plan Provisions

Unless contrary to applicable law or not appropriate for the purpose of the measurement, the actuary should reflect plan provisions adopted on or before the measurement date for at least the portion of the period during which those provisions are in effect. Unless the purpose of the measurement requires or prohibits that such plan provisions be reflected, the actuary may, but need not, reflect plan provisions adopted after the measurement date.

3.5.2 Proposed Changes in Plan Provisions

The actuary should reflect proposed changes in plan provisions as appropriate for the purpose of the measurement.

3.5.3 Plan Provisions That are Difficult to Measure

Some plan provisions may create pension obligations that are difficult to appropriately measure using traditional valuation procedures. Examples of such plan provisions include the following:

a. gain-sharing provisions that trigger benefit increases when investment returns are favorable but do not trigger benefit decreases when investment returns are unfavorable;

b. floor-offset provisions that provide a minimum defined benefit in the event a participant’s account balance in a separate plan falls below some threshold;

c. benefit provisions that are tied to an external index, but subject to a floor or ceiling, such as certain cost-of-living-adjustment provisions and cashbalance-crediting provisions; and

d. benefit provisions that may be triggered by an event such as a plant shutdown or a change in control of the plan sponsor.

For such plan provisions, the actuary should consider using alternative valuation procedures, such as stochastic modeling, option-pricing techniques, or deterministic procedures in conjunction with assumptions that are adjusted to reflect the impact of variations in experience from year to year. When selecting alternative valuation procedures for such plan provisions, the actuary should use professional judgment based on the purpose of the measurement and other relevant factors.

The actuary should disclose the valuation procedures used to value any significant plan provisions of the type described in this section 3.5.3, in accordance with section 4.1(f).