PSPRS Pension Funding Policy

This pension funding policy is done in accordance with ARS § 38-863.01. The following terms used throughout this policy are defined as:

  • Unfunded Actuarial Accrued Liability (UAAL): This is the difference between trust assets and the estimated future cost of pensions earned by employees.
  • Annual Required Contribution (ARC): This is the annual amount required to pay into the pension funds, as determined through annual actuarial valuations. It is comprised of two primary components: normal pension cost - which is the estimated cost of pension benefits earned by employees in the current year; and, amortization of UAAL - which is the cost needed to cover the unfunded portion of pensions earned by employees in previous years. The UAAL is collected over a period of time referred to as the amortization period. The ARC is a percentage of the current payroll.
  • Funded Ratio: This is a ratio of fund assets to actuarial accrued liability.