GFOA Exam Prep LMS Training: Understanding Pension Plans Flashcards
What guarantees a retiree a fixed benefit in retirement based on age, length of service, and salary?
Defined Benefit (DB) Plans
How are Defined Contribution Plans different from Defined Benefit Plans?
Employee and employer contribute to the individual’s account, and the employee owns the investment risk.
Who typically governs a DB Plan?
An independent board often called plan ‘Trustees’, with duties of loyalty, care, and prudence.
What determines the funding of TRS?
Member and Employer Contributions, and State of Illinois Contributions along with Investment Earnings.
What roles do Employer Services at TRS perform?
Assist employers in filing reports and administer audits as required.
What services are offered by TRS Member Services?
Benefits estimates, health insurance information, and counseling on disability and death benefits.
What types of actuarial assumptions are used in pension planning?
Demographic assumptions (like mortality, retirement) and Economic assumptions (like investment return, salary increases).
What are the components of a Funding Policy?
Actuarial Cost Method, Asset Smoothing Method, and UAAL Amortization Policy.
What does the Actuarial Cost Method determine?
Allocates the present value of a member’s projected benefits to years of service.
What is the purpose of the Actuarially Determined Contribution?
Calculates the contribution amount as required by State statute and ensures adequate funding.
How is the ‘Normal Cost’ defined in pension plans?
The portion of the value of projected benefits for active members that is allocated to each plan year.
What are the goals of TRS Investments?
Fiduciary responsibility for members’ trust funds and investment based on the ‘prudent person rule’.
How does TRS ensure funding basics?
Through Member Contributions, Employer Contributions, State Contributions, and Investment Earnings.
What distinguishes the Defined Contribution Plan offered by TRS?
Optional for any TRS member, offering investment options and based on market performance.
How is the TRS Board of Trustees structured?
15-member board with appointments by the Illinois Governor, elections by members, and specific duties.
What is a primary function of the TRS Research Department?
Actuarial liaison for valuation, experience study, and legislative analysis.
How does TRS address changes in actuarial assumptions?
Through Experience Analysis every 3 to 5 years for demographic and economic factors.
What determines an employer’s contribution rate in a Defined Benefit Plan?
The Actuarially Determined Contribution (ADC) each year.
What is the significance of asset allocation policy in TRS investments?
Determines the long-term allocation targets for managing trust funds.
How does TRS manage employer reporting and contributions?
Through an online Employer Portal and transitioning to a pay-period reporting process called Gemini.
How are TRS member services tailored to different tiers?
Benefits calculation, counseling services, and health insurance information vary by tier.
What is the function of TRS’s Employer Services?
To assist employers with reporting, administer audits, and ensure accurate member data.
What demographic assumptions are considered in TRS actuarial evaluations?
Rates of decrement like mortality, disability, and retirement based on service or age.
How does TRS ensure its investments adhere to fiduciary responsibilities?
By establishing broad policies and objectives for the operation including asset allocation.
Describe the process of setting an Actuarially Determined Contribution in TRS.
Performed by TRS system actuaries based on annual valuation and state statutes.
