ATRF Funding Objectives
The ATRF Board has established a funding policy focused on sustainability to ensure the plans can pay pensions to members and their beneficiaries, today and over the long term.
The primary funding objective is the security of member benefits, which is a crucial element of a plan’s sustainability. This is achieved by doing regular funding assessments, with the goal of ensuring the plans are fully funded over the long term – meaning there will be enough money to pay current and expected pensions for all plan members.
The plan may not be fully funded in every year depending on the economic and demographic environments. The funding assessments take this into account and target, with a high probability, for the funded ratio to remain above a sufficient level every year to deliver the promised benefits while also ensuring contributions do not increase to unaffordable levels.
The second funding objective is keeping contribution rates stable. The goal is to ensure contributions remain relatively stable from year-to-year, avoiding large up and down adjustments in pension deductions on teachers’ pay.
The cost of the plans must also be sustainable over time, and should reflect the long-term view of the plans’ assets and liabilities. This supports the third funding objective of inter-generational equity. This means that, to the extent possible, each generation of active members funds the benefits accruing for that generation of active members.
To achieve these funding objectives, various risk management tools are used. For example, the funding valuation uses an accepted practice of smoothing fund returns over a five-year period to ‘even out’ the impact from the volatility of market returns on the plans’ funded status and contribution rates. This practice called , produces a funding value of assets that can be higher or lower than the market value in any given year.