Local Plan Provisions
Procedure for Increasing Benefits for a Local Pension Fund
Arkansas law requires local fire and police pension funds considering an increase in their benefits to process such requests through the Arkansas Fire and Police Pension Review Board (PRB). The following steps will assist a Local Plan that is considering a benefit increase. PRB Rules 2 and 4 provide greater details on benefit increases (see Rules and Regulations).
- First, the local board of trustees must adopt a resolution stating the amount of the proposed increase (must be in $5 increments for volunteer Local Plans) and to whom it would apply - current retirants; future retirants; current/future retirants; surviving spouses/children; etc. (Police Local Plans may include dependent parents). At least 6 of the 7 trustees must sign the resolution. Minutes of the same board meeting the resolution was adopted and showing which trustees voted for/against the increase must be sent with the resolution to the PRB. The board secretary is to certify the minutes as correct.
- Once the PRB receives the properly completed resolution and minutes, the Local Plan will be invoiced for the valuation fee. Actuarial work will begin after payment is received for the valuation.
- For standard Local Plans (have not raised benefits), the valuation fee is $500. For non-standard Local Plans (have raised benefits), the valuation fee is $750 for the first proposal and $500 for each additional proposal in the resolution. A Local Plan may also ask that if the first proposal cannot be approved, for the actuary to determine the highest amount permitted i.e. a "random search" valuation. The random search valuation fee is $600 for standard Local Plans; $1,250 for non-standard Local Plans.
- Two additional types of benefit increase valuations are also available depending on the size of the Local Plan. For a cash flow projection, for Local Plans with 50 or more participants, the fee is $3,000. For an alternate cash flow, for Local Plans with less than 50 participants, the fee is $2,500.
- Benefit increase valuations take approximately six (6) weeks to complete. The executive director shall certify whether or not the benefit increase is approved. When approved, the local board must file a copy of the resolution, actuarial valuation, and the executive director's certification with the circuit and city clerk's office of the county/city where the Local Plan is located.
Definition of "Actuarial Soundness"
Under law, the financial objectives of Local Plans shall be to establish and receive contributions which will remain approximately level from year to year and to not increase for future citizens. The law specifies that this objective is achieved when contributions received each year by a Local Plan are sufficient both, (1) to fully cover the costs of benefit commitments being made to employees for their service being rendered in such year and, (2) to make a level payment which, if paid annually over a reasonable period of future years, will fully cover the unfunded costs of benefit commitments for service previously rendered. The financial objectives discussed above must be met in order for a Local Plan to be considered "actuarially sound."
Reporting and Disclosures of Local Plan Financial activity
Act 700 of 1979, as amended, (ACA 24-11-101 et. seq.) requires that each Local Plan disclose its annual financial activity to the PRB. This report, which may be completed by a CPA, registered accountant, city clerk, recorder or treasurer, is a compilation of annual financial activity of the Local Plan. Reporting requirements are addressed in PRB Rule 3.
Premium Tax may be withheld from any Local Plan which does not satisfy the reporting requirements.