At its January meeting, the Colorado PERA Board of Trustees heard the results of an audit of PERA’s actuarial services.
Milliman, a worldwide actuarial firm, reviewed its findings of the actuarial services provided to PERA by Cavanaugh Macdonald Consulting, LLC, the Board’s retained actuarial firm.
While it may seem unusual for an actuarial firm to review the work of another actuary, Colorado PERA regularly conducts an audit to monitor the quality of the actuarial services it receives.
This is a critical part of the board’s commitment to transparency and careful stewardship of member and employer contributions. In fact, this has become a public pension plan industry best practice, and Colorado PERA has audited its actuary since the early 1980s.
Given that PERA uses independent actuaries to calculate the plan’s liabilities and project the future value of its assets, it is critical that those actuaries provide sound and accurate estimates.
As Cavanaugh Macdonald notes in its letter of response to the Milliman review, “We believe it is prudent to periodically have a second opinion with respect to the actuarial work being performed. An audit is a critical step in maintaining the long term actuarial soundness of the System.”
In 2014, the Government Finance Officers Association (GFOA) adopted a best practice related to actuarial audits noting, “An actuarial audit is a valuable tool for monitoring the quality of actuarial services performed on behalf of the pension plan.”
PERA’s actuarial audits are conducted about every five years and typically result in minor changes to the way the plan’s liabilities are calculated.