Actuarial Assumptions

Definition

Professional predictions about future uncertain events that affect pension costs, such as how long retirees will live, what investment returns the plan will earn, and how many employees will retire early. These are not simple facts but professional judgments that can vary among actuaries, and under the statute they must be 'reasonable' and represent the actuary's 'best estimate' of the plan's anticipated experience.

Examples

• •The key actuarial assumption in dispute was the discount rate—the actuary changed it from 7.5% to 6.5%, reflecting a different prediction about the plan's future investment returns over 20-40 years.

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