| Volume 4 Issue 4 |
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Actuarial
Valuation of the FSMSSA as of January 1, 2004
Section 707 of Title 53 if the FSM Code mandates that
an actuarial valuation of the FSM Social Security System not less frequently
than every three years. The purpose of an actuarial valuation is to
compared the accrued liability to the market value of trust assets in
order to determine the current funded status and to provide a basis
for determining the effect of any future proposed changes to the system.
Pension Administration Services, Inc. conducted an actuarial valuation
of the FSMSSA as of January 1, 2004, with the results of the year ending
December 10, 2003. This marked the ninth actuarial valuation of the
FSMSSA and is the first by Pension Administration Services, Inc.
The accrued liability represents the current value of benefits already
earned, or accrued, as of the valuation date including benefits currently
in pay status.
The unfunded liability of the system is the amount of money needed to
pay off all existing and potential beneficiaries (working citizens who
would get benefits one day) if the program were to shut down.
The deficiency is calculated as the accrued liability less the market
value of trust assets and further reduced by the estimated value of
future employee contributions in excess of that needed to fund future
benefits and system expenses.
The results of the valuation showed that as of January 1, 2004, the
total accrued liability stood at $240,247,000 and the market value of
trust assets was $37,347,000 resulting in an unfunded accrued liability
of $202,900,000.
To lessen the unfunded liability, the actuarians suggested implementing
a maximum benefit amount to limit the size of the benefit that may be
earned. Another suggestion involved increasing the retirement age which
is currently at 60.
The FSMSSA will work diligently to come up with ways that will lessen
the liability without putting beneficiaries at a disadvantage. It is
therefore necessary to understand that any proposed amendment to the
current SS Act that has to do with the benefit formula (changing benefit
amounts), or change that would allow certain groups to receive benefits
is not advisable at this time.
The FSMSSA’s objective at this time is to ensure that the system’s
fund ratio increases.
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