Glossary of Terms

Actuarial Assumptions

These assumptions are estimates of future experience with respect to rates of mortality, disability, turnover, retirement, rate or rates of investment income and compensation increases. Actuarial assumptions are generally based on past experience, often modified for projected changes in conditions.

Actuarial Valuation Report

The actuarial valuation report determines, as of the actuarial valuation date, the service cost, total pension liability, and related actuarial present value of projected benefit payments for pensions.

Actuarial Valuation Date

The date as of which an actuarial valuation is performed.

Actuarially Determined Contribution (ADC) or Annual Required Contribution (ARC)

A calculated contribution into a defined benefit pension plan for the reporting period, most often determined based on the funding policy of the plan. Typically the Actuarially Determined Contribution has a normal cost payment and an amortization payment. Note: for the purposes of GASB 68, ARC is not a useful or relevant term. GASB 68 is concerned with reporting liabilities and expense and not with how a plan is funded.

Covered Payroll

The employers’ covered payroll is defined by GASB 82 as payroll on which contributions to a pension plan are based; and by GASB 85 as payroll on which contributions to the OPEB plan are based.

For non-university employers, covered payroll represents payroll on which contributions to both plans are based. For university employers, covered payroll for both pension and OPEB is the greater of 1) university payroll on which contributions to the plan are based (member and non-member payroll on which UAAL was required) or 2) the required minimum payroll amount required by PA 136 of 2016 (payroll floor). 

Note: the covered-employee payroll must be determined for two different time periods: the pension plan’s fiscal year (October 1–Sept. 30) and the employer’s fiscal year (July 1 – June 30).

Deferred Inflows and Outflows

The deferred inflows and outflows of pension and OPEB resources are amounts used in developing the annual pension expense and OPEB expense. Deferred inflows and outflows arise with differences between expected and actual experiences; changes of assumptions; and differences between projected and actual returns on investments. The portion of these amounts not included in pension expense or OPEB expense should be included in the deferred inflows and outflows of resources to be recognized in future years (See Note Y).

Discount Rate

For purposes related to GASB 68 and 75, the discount rate is the single rate of return that results in the present value of all projected benefit payments to be equal to the sum of the funded and unfunded projected benefit payments, specifically:

  1. The benefit payments to be made while the plan’s fiduciary net position is projected to be greater than the benefit payments that are projected to be made in the period and;
  2. The present value of the benefit payments not in (1) above, discounted using the municipal bond rate.

GASB

The Governmental Accounting Standards Board is an organization that exists in order to promulgate accounting standards for governmental entities.

Fiduciary Net Position

The fiduciary net position is the value of the assets of the pension trust. With regard to pension plans, this term is only meaningful at the system (plan) level, not at the employer level.

Long-Term Expected Rate of Return

The long-term rate of return is the expected return to be earned over the entire trust portfolio based on the asset allocation of the portfolio.

Market Value of Assets

The cash value of the pension assets at a given time; the price at which a willing buyer and willing seller agree to exchange an asset at a particular time.

Measurement Date

The measurement date is the end date of the plan fiscal year. For MPSERS employers, it is Sept. 30 of the year before it must be included in financial statements. For example, in a school fiscal year ending June 30, 2018, the measurement date is Sept. 30, 2017.

Multiple Employer Cost-Sharing Defined Benefit Pension Plan (cost-sharing pension plan)

A multiple employer defined benefit pension plan in which the pension obligations to the employees of more than one employer are pooled and pension plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. MPSERS is a cost-sharing multiple employer pension plan.

Net OPEB Liability

The net OPEB liability is the liability of employers (reporting units) to members for the premium subsidy benefit. The net OPEB liability equals the total OPEB liability minus the market value of assets.

Net Pension Liability

The net pension liability is the liability of employers (reporting units) to plan members for benefits provided through a defined benefit pension plan. The net pension liability equals the total pension liability minus the market value of assets.

Other Postemployment Benefits (OPEB)

All postemployment benefits other than retirement income (such as death benefits, life insurance, disability, and long-term care) that are provided separately from a pension plan, as well as postemployment healthcare benefits regardless of the manner in which they are provided. Other postemployment benefits do not include termination benefits.

Premium Subsidy Benefit

The premium subsidy benefit provides a subsidy that pays a portion of the monthly insurance premiums when the member retires. Active members with the Premium Subsidy benefit contribute 3 percent of compensation to the Retiree Healthcare Fund. This benefit fits the description of a postemployment benefit (OPEB) and is thus governed by reporting requirements described in GASB Statement No. 75. 

Personal Healthcare Fund (PHF)

Personal Healthcare Fund (PHF) is a portable, tax-deferred fund that can be used to pay for healthcare expenses in retirement.  All members who first worked for a MPSERS employer on or after September 4, 2012, have the Personal Healthcare Fund; members had the option to elect PHF during the 2012 reform. The PHF benefit does not meet the definition of a defined contribution OPEB plan as described in GASB 75.  No additional note disclosures or other action is needed for the PHF benefit when implementing GASB 75.

Retiree Healthcare Fund

Members with the Premium Subsidy benefit contribute 3 percent of compensation to the Retiree Healthcare Fund to retain eligibility for the retiree health insurance premium subsidy offered by the state upon retirement.

Service Cost

The service cost is the portion of the actuarial present value of projected benefit payments that is attributed to a valuation year.  For most purposes the service cost is very similar to the normal cost (the actuarial present value of the pension trust benefits allocated to the current year by the actuarial cost method).

Total OPEB Expense

The total OPEB expense is the sum of the following items that are recognized from the beginning to the end of the MPSERS fiscal year (Sept. 30).

  • Total service cost
  • Interest on the total OPEB liability
  • Current-period benefit changes
  • Employee contributions
  • Projected earnings on plan investments
  • OPEB plan administrative expense
  • Other changes in plan fiduciary net position
  • Recognition of outflow (inflow) of resources due to liabilities
  • Recognition of outflow (inflow) of resources due to assets

Total Pension Expense

The total pension expense is the sum of the following pension expense items that are recognized from the beginning to the end of the MPSERS fiscal year (Sept. 30). Some of the items will be additive and some will be subtractive, depending on each fiscal year.

  • Total service cost (employer and employee)
  • Interest on total pension liability
  • Current-period benefit changes to plan
  • Employee (or member) (service cost) contributions
  • Projected earnings on plan investments
  • Administrative expense
  • Other changes in plan fiduciary net position
  • Recognition of beginning deferred outflows (inflows) due to liabilities
  • Recognition of beginning deferred outflows (inflows) due to assets

Total OPEB Liability (TOL)

The Total OPEB Liability is the portion of the actuarial present value of projected benefit payments that is attributed to past periods of member service.

Total Pension Liability (TPL)

The total pension liability is the portion of the actuarial present value of projected benefit payments that is attributed to past periods of member service.

Unfunded Actuarial Accrued Liability (UAAL)

The UAAL is the difference between actuarial accrued liability and actuarial value of assets.

(Last updated: July 7, 2020)