In the course of conducting our actuarial analysis, we make hundreds of assumptions and apply them over measurement periods that often exceed 50 years. In some cases, small changes in these assumptions, or experience that plays out differently than expected, can lead to significant changes in the measurements. These sensitivities can evolve as the plans grow and mature over time. The Legislature’s response to these changes, and their actions governing the state’s pension system, also affect plan risk.
To help all users of our actuarial measurements better understand these risks and their impacts, the Office of the State Actuary (OSA/we) developed this educational webpage, which serves as a reference guide for certain key risk metrics. The webpage is divided into the following sections, which readers can click to expand/collapse…
Ways to Measure Risk, which summarizes some of the key methods that actuaries use to evaluate risk
Risk Measurements for Washington’s Public Pension Plans, which details a few risk tests that OSA conducts and highlights items like investment returns and contribution rate solvency/affordability
Demographic Risks, which describes the risk of member experience unfolding differently than assumed, particularly member mortality
Historical Information, which provides a resource to track key data and assumption values over the past ten years
Plan Maturity Measures, which explains some of the risks plans face as they grow and mature over time including enterprise risk, contribution rate volatility, and liquidity risk
We illustrate the risks inherent in our actuarial measurements at a system-wide and plan level and consider how our actuarial measurements could vary under different circumstances. Such measurements include contribution rates, funded statuses, and actuarial fiscal notes.
This webpage also serves as our response to Actuarial Standards of Practice (ASOP) Number 51. ASOPs guide actuaries when performing and communicating their work. ASOP 51 stresses the importance of communicating risk in defined benefit pension plans, particularly in how actual future measurements may differ significantly from expected future measurements.
Where applicable, we relied on historical information to display tables and graphs which is documented internally. Unless noted otherwise, we rely on data, assumptions, methods, and assets consistent with the
June 30, 2019 Actuarial Valuation Report (AVR) and assumptions used in our
2019 AVR Projections Model to project figures beyond our June 30, 2019 measurement date. The projections shared below are based on our best estimate assumptions and methods which represents future experience matching our expectations. Actual future experience is unlikely to precisely match our assumptions, but we believe the displayed exhibits are appropriate tools for assessing future risks to the plan. For more information about how some of these results change when future experience does not match our assumptions, please see our
Risk Assessment webpage.
One of the most prominent risks to the Washington State pension plans, since this measurement date, has been the impacts from the COVID-19 health crisis. However, since this event emerged after our actuarial measurement date, the financial and demographic implications of this health crisis are not reflected in the analysis below. Readers who are interested in learning more about how COVID-19 may impact the Washington State pension plans can see our separate
educational webpage devoted to this topic.
In addition to exclusion of the impacts of COVID-19, the analysis found on this webpage does not incorporate investment returns beyond June 30, 2020 which is notable given the very positive investment returns for the fiscal year ending June 30, 2021. Additionally, it does not include impacts from changes to the economic assumptions that were adopted by the Pension Funding Council and LEOFF 2 Board in the fall of 2021. Exclusion of the more recent asset experience and recent assumptions would impact the plan maturity measures found on this webpage; however, we do not believe it will change the long-term trend or key takeaways of the measures.
We intend to update these projections every four years. Actual experience may vary from those assumptions and results may look different under a different set of assumptions. Should you have any questions or interest in seeing other risk topics, please contact us at