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Actuarial Experience Studies

Source: Actuary_Article_Experience Study.pdf**

When actuaries talk about experience,” what we’re referring to is what has happened over the past several years to the plan’s membership and the plan’s assets, and how well the actuarial assumptions predicted what happened. “Experience” covers things like turnover and retirement patterns, pay increases, how long the retirees live, and how well the investments performed.

An experience study is completed periodically to review the plan’s actual experience and compare it to the actuarial assumptions. If one of the actuarial assumptions didn’t match up very well with the plan’s actual experience, then the experience study can be used to modify the assumption so that it will hopefully match up better with the plan’s experience going forward.

The actuarial assumptions are used to calculate the plan’s liability, funded status, and actuarially determined contributions, so getting the assumptions right is really important.

The Government Finance Officers Association recommends that an experience study be performed at least once every five years.

Experience studies are used to study two classes of actuarial assumptions. Demographic assumptions estimate the future behavior of a plan’s specific member group, such as rates of retirement, mortality, turnover, and disability. Economic assumptions are generally related to the overall economy and include the investment return, inflation, salary increases, and payroll growth.

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list from [[Actuarial Experience Studies]] AND -"Changelog"