Bottom Line Up Front

• Tight municipal budgets and rising pension costs have led some towns to consider Pension Obligation Bonds (POBs) as a funding strategy.
• POBs can improve a plan’s funded status and offer temporary budget relief if investment returns exceed borrowing costs, but that outcome depends heavily on market performance and timing.
• Significant risks remain: poor investment returns, added debt, and shifting costs to future taxpayers can leave municipalities in a worse financial position than before issuance

Many towns and cities today are operating under increasing fiscal pressure. Rising costs, slow revenue growth, and competing demands on limited resources have made it harder than ever to balance municipal budgets. At the same time, long-term obligations such as pension liabilities continue to grow, placing additional strain on financial stability. In response, some municipalities have turned to Pension Obligation Bonds (POBs) as a strategy to address these challenges.

What is a Pension Obligation Bond?

A Pension Obligation Bond is a taxable bond issued by a municipal entity to help fund the unfunded portion of its pension liability. The municipality issues the bond and invests the proceeds alongside the pension plan’s existing assets, typically in higher-yielding investments.

The goal is to earn a rate of return on those invested proceeds that exceeds the interest rate owed on the bond over its term. If that occurs, the municipality can improve its pension funding status and potentially reduce its long-term costs. However, the strategy also introduces additional financial risk.

The Government Finance Officers Association (GFOA) has cautioned municipalities against using POBs in most circumstances. In its official advisory, the GFOA cites the inherent risks of market volatility, timing uncertainty, and added debt burden. While POBs can appear beneficial on paper, they often increase overall financial risk if investment returns fall short of expectations.

Why Consider Pension Obligation Bonds?

Municipalities typically explore POBs for two primary reasons: budget stabilization and potential financial upside.

1. Budgetary Relief

Many local governments are operating under tight budgets and are forced to prioritize limited resources. Issuing debt to fund part or all of the pension liability can temporarily relieve pressure on annual budgets. This may stabilize required pension contributions and free up funds to support other essential public services.

2. Potential Financial Advantage

In theory, municipalities can borrow at a relatively low, fixed interest rate and invest the proceeds in assets expected to earn a higher return over time. If the pension investments outperform the bond’s interest rate, the municipality may realize a net gain.

However, these benefits depend on favorable market conditions and long-term investment performance. If those assumptions don’t hold, the financial outcome can quickly turn negative, leaving the municipality in a worse position than before the bonds were issued.

The Risks

While POBs can offer short-term relief and potential long-term benefits, they are not a cure-all. These transactions carry several significant risks that municipalities should thoroughly consider before proceeding.

1. Investment Risk

The greatest risk is that investment returns fail to exceed the bond’s interest rate.

For example, if a city issues bonds at a 5% interest rate and expects its pension assets to earn 7%, the 2% spread seems advantageous. But market performance is unpredictable, and a few years of underperformance can quickly erase those gains.

It is also important to remember that POBs are taxable instruments. This means issuers pay taxable market interest rates which increases the hurdle rate for the pension fund’s investment returns to exceed the taxable bond’s interest rate to achieve the desired advantage. Because POB proceeds are typically invested immediately, issuing bonds during an overvalued market can magnify the downside if asset values decline soon after.

2. Timing Risk

Timing is critical as POBs tend to be most effective when interest rates are low and market conditions are favorable. However, predicting either is challenging.

Municipalities are often drawn to POBs after periods of strong market performance, when the potential for future underperformance is higher. Conversely, when interest rates are high, borrowing costs increase and the “spread” between the bond rate and expected investment returns narrows. This can undermine the core financial logic behind the transaction.

3. Credit Rating Risk

Credit rating agencies typically view POBs with caution. While a POB may improve a plan’s funded status on paper, it also adds a fixed debt obligation to the municipality’s balance sheet.

This can be seen as a sign of fiscal stress or an attempt to leverage future resources, which may result in a credit rating downgrade. Such a downgrade increases borrowing costs for future projects, offsetting much of the anticipated savings.

4. Shifting Costs to Future Tax Payers

A key concern from a public policy perspective is intergenerational equity. This means the fair distribution of costs between current and future taxpayers.

Issuing POBs can transfer risk to future residents if investment performance falls short of expectations. While today’s taxpayers may experience short-term relief, future taxpayers could be left paying off the debt for assets that failed to meet return assumptions.

This outcome is particularly troubling when POBs are issued primarily as a short-term budget solution rather than as a part of a comprehensive, disciplined pension funding strategy. In such cases, the municipality is effectively kicking the can down the road and betting that future market conditions will deliver enough return to bail it out.

Conclusion

On the surface, Pension Obligation Bonds can seem like an attractive shortcut to improve pension funding and ease budget pressures. LIke any investment tool, there is a place for them when used appropriately. However, the GFOA generally advises against POBs unless paired with structural reforms and strict funding discipline.

If your municipality is considering a POB, it’s essential to:

• Use realistic actuarial and investment assumptions
• Conduct robust scenario and stress testing
• Commit to long-term funding discipline to avoid repeating past shortfalls

It is also important to consider whether your municipality may require State approval or changes in local ordinances to allow for the issuance of a POB. To improve the odds of success on your POB issuance, it’s recommended that you obtain the required permissions so that you can “strike while the iron is hot” to take advantage of that period of low interest rate or equity market declines.

If you have questions about Pension Obligation Bonds or your community’s retirement benefit liabilities, please reach out to one of our team members. We’re here to help municipalities make informed, sustainable decisions for the future.

The post What is a Pension Obligation Bond? appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• S&P now gives more weight to debt when evaluating municipalities, making pension and OPEB liabilities more impactful on your Bond Rating. 
• Communities with higher mandated benefits may feel greater pressure on their Individual Credit Profile (ICP) scores. 
• Proactively managing and funding your pension and OPEB obligations is now a critical lever for strengthening your ICP score and protecting your community’s financial position.

When we talk with municipalities across the U.S. about their OPEB and pension plans, one question consistently rises to the top: “How does this impact our bond rating?”

It’s a fair question. Bond ratings influence everything from borrowing costs to long-term capital planning, and most communities are feeling increased pressure to show strong financial management in a challenging fiscal environment.

While many factors play into a rating, long-term liabilities, especially pension and OPEB obligations, have taken on greater importance. This became even more pronounced in September 2024 when S&P updated its municipal rating model and increased the weight of debt to 20%. 

That shift means that the structure, funding, and management of your retirement benefit programs may have a more meaningful impact on your rating than in prior years, particularly for communities in states with more “generous” benefits or limited flexibility to adjust plan designs. 

How S&P Evaluates Municipal Debt

Under S&P’s updated methodology, municipal ratings are built on five equally weighted factors, each contributing 20% to the overall score. Together, they provide a comprehensive view of a community’s financial strength and long-term resilience.

1. Economy
   Evaluates the underlying economic base, including income levels, employment trends, and tax base stability.
2. Financial Performance
   Assesses your ability to generate consistent operating results and manage annual revenues and expenditures.
3. Reserves
   Reviews the strength and reliability of available fund balances and long-term financial flexibility.
4. Liquidity Management
   Measures how effectively your community manages cash flow, short-term obligations, and access to liquidity during financial stress. 
5. Debt & Liabilities
   Captures all forms of long-term obligations—traditional municipal debt as well as pension and OPEB liabilities, which can be significant depending on state policies and benefit levels. 

With the Debt & Liabilities category now carrying increased emphasis in the overall model, pension and OPEB obligations can meaningfully influence your rating trajectory, especially for communities with higher mandated benefit levels or historically underfunded plans.

Why the Increased Debt Weighting Matters

For communities that offer more generous pension and OPEB benefits, these long-term obligations appear as a much larger “debt” on the balance sheet. In contrast, municipalities that offer modest retirement benefits—or none at all—carry a comparatively lighter burden. 

Some factors are within your control. For example, you can:

• Build and follow policies around financial reserves
• Maintain strong liquidity management practices 
• Support healthy financial performance
• Manage traditional municipal construction and infrastructure debt

However, the economy is largely out of your hands. And in many states, so are the benefit levels for pension and OPEB programs. State-mandated designs can lead two communities with similar demographics and income levels to have dramatically different debt loads depending on their state’s pension and OPEB policies. 

For municipalities in more “generous” states, maintaining a AAA rating may become increasingly challenging under S&P’s updated model. 

What Should Municipalities Be Doing?

Despite the current budgetary headwinds, it remains critical to work toward funding the existing pension & OPEB promises. Reducing these long-term liabilities helps decrease your overall “debt” and demographic trends suggest that delaying action will only make future reductions more difficult and more expensive. 
If you have more questions about this update or broader retirement and financial considerations, please reach out to your Odyssey Advisors consultant. We’re here to help you navigate the shifting landscape and strengthen your financial outlook.

The post Impact of Pension and OPEB Debt on Municipal Bond Ratings appeared first on Odyssey Advisors, Inc.

A mix of factors is driving these rising costs, from higher provider rates and the growing use of new therapies like GLP-1 medications to the increasing prevalence of chronic conditions such as cancer and diabetes. For municipalities and public employers already managing long-term retiree healthcare promises, these pressures can quickly escalate OPEB liabilities and strain local budgets.

But the good news is, there are steps you can take. Whether it’s reassessing plan design, prefunding liabilities, or revisiting actuarial assumptions, proactive management can help stabilize costs before they spiral further.

How This Affects Local Governments

1. Soaring OPEB Liabilities 

For many municipalities, healthcare benefits represent a significant portion of their OPEB obligations. As healthcare premiums continue to rise, these liabilities will increase, directly affecting government financial statements. Higher liabilities lead to increased annual contributions, which can severely strain budgets that are already dealing with other priorities like public safety, education, and infrastructure. 

2. Budget Strain and Taxpayer Burden

With healthcare costs rising at twice the rate of general inflation, local governments may need to raise taxes or cut services to cover the escalating OPEB liabilities and stay within budget. This puts them in a difficult position, especially those already struggling with tight budgets. Unfortunately in this situation there are no easy answers – push costs to employees, narrower networks, fewer covered services, etc. The reality is that as healthcare premiums grow, they consume a larger share of the budget, leaving less room for essential services. 

3. Increased Financial Volatility

As mentioned, OPEB liabilities are especially sensitive to healthcare inflation. When costs rise unexpectedly, local governments must adjust their contributions, leading to financial volatility. This unpredictability complicates long-term financial planning and can lead to larger-than-expected liabilities, which may disrupt bond ratings and their overall financial health. 

The Ripple Effect: Retirees Feel The Impact Too

Rising healthcare premiums not only impact local governments but also their retirees who depend on these benefits. For retirees with fixed incomes, higher premiums could mean paying more out-of-pocket for healthcare services, reducing their overall financial security. 

Local governments may feel pressured to shift more healthcare costs to retirees through increased cost-sharing or reduced benefits, which could lead to dissatisfaction among retirees and even legal challenges. 

So What Should You Do?

The first step, decide that now is the time for action. Here are some key strategies you can explore: 

1. Reassess Your OPEB Plans

You can explore options to reduce OPEB liabilities by adjusting your plan design – be aware that benefits may be protected by statute or State law. Are there opportunities to increase cost-sharing with retirees or introduce tiered benefits that offer more affordable options? Reviewing your plan now can help you find ways to mitigate the impact of the rising premiums before they become unmanageable. 

2. Consider Prefunding Your OPEB Liabilities

One of the most effective ways to manage growing OPEB liabilities is by pre-funding them through an OPEB trust. This allows governments to invest contributions and potentially earn returns, which can be used to offset future costs. Pre-funding is a proactive way to reduce long-term financial pressure. 

3. Update Financial Projects and Actuarial Valuations 

Rising healthcare costs should signal immediate updates to actuarial assumptions. If you fail to adjust for these healthcare cost increases, it could lead to unpleasant surprises in your financial reporting. Regularly reviewing and updating these valuations will provide a more accurate outlook and better inform your budget planning. 

4. Explore Group Purchasing 

If you are a smaller municipality, you may want to consider joining regional purchasing cooperatives to negotiate better healthcare rates. Collaborating with other local governments can increase bargaining power with insurers and help lower premium costs, reducing the burden on retirees and your municipality. 

Long-Term Outlook: Expect More Increases

Unfortunately, experts project that healthcare costs will continue to climb beyond 2025. Many hospitals have renegotiated contracts with insurers that include higher reimbursement rates, and new medical innovations, which are adding further pressure to employer health plans.

At the same time, some insurers are scaling back or exiting the Medicare Advantage market altogether, leaving fewer options for retirees and local governments that rely on these plans to manage post-employment healthcare costs.

For municipal employers, this means preparing for yet another year of elevated costs and increasing OPEB liabilities. Without proactive planning, these rising expense can quickly lead to budget strain and difficult decisions about the level of benefits you can realistically sustain.

The Bottom Line

Healthcare inflation isn’t a short-term hurdle, it’s an ongoing challenge that can quickly reshape long-term liabilities if unchecked. As you prepare your FY 2026 budget, now is the time to revisit your OPEB funding strategy, review actuarial assumptions, and assess whether your plan design still makes sense in today’s cost environment.

If you have concerns about how these changes will affect your municipality, or if you’d like help managing your OPEB liabilities, our team can help. Contact Odyssey Advisors to start the conversation.

The post Healthcare Inflation: What It Means For Local Governments appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Rising inflation drives up healthcare costs, increasing your OPEB liability.
• Inflation-driven interest rate changes may partially offset liability increases, depending on your plan’s funding status.
• You can better manage inflation risk by pre-funding OPEB obligations.

Other Post-Employment Benefits (OPEB) liabilities represent the projected future costs of benefits promised to your retired employees, with retiree healthcare expenses typically making up the largest share. Because these obligations often span decades, it’s critical to understand how inflation influences them.

Inflation affects OPEB liabilities in two main ways:

1. Healthcare costs – higher inflation often means faster growth in medical expenses.
2. Discount rates – rising rates can temporarily offset liabilities, depending on your funding status.

In this article, I’ll walk you through how inflation impacts these two key assumptions and what that means for your OPEB liabilities.

Medical Cost Trends

Medical care cost inflation is the assumption used to project the future growth of healthcare expenses (physician fees, prescriptions, medical services). Since retiree medical costs are often the largest component of OPEB, higher premiums directly lead to higher liabilities.

Real-World Example: Post-COVID Surge

After the COVID-19 pandemic, we saw a spike in healthcare costs as people returned for procedures that they deferred, as well as healthcare providers looking to make up for lost earnings during a period of higher inflation. As a result, many actuaries (including myself) updated our assumptions to better reflect short-term spikes before projecting smaller, steadier increases later.

As of 2021, actuaries now rely on the Getzen Healthcare Cost Trend Model, which links medical costs to long-term economic growth while accounting for short-term shocks like COVID.

This Getzen Model incorporates assumptions about economic growth (GDP per capita), long-term healthcare cost growth, and a gradually declining “excess cost growth” factor that reflects how much faster healthcare costs are expected to rise compared to the overall economy. 

By applying this framework and adjusting short-term assumptions to account for elevated cost pressures in the early 2020s, most actuaries developed annual trend rates that started higher but eventually settled back into more sustainable, economically aligned growth. 

The Unique Drives of Medical Cost Growth

As you can see in the graph above, general inflation and medical care inflation are not perfectly correlated because a variety of additional factors drive healthcare cost growth beyond overall price changes in the economy, including but not limited to:

1. Cost shifting plays a significant role: when government programs reimburse providers at lower rates, a greater share of costs is often shifted to private insurers. Similarly, employers often pass on rising healthcare expenses to employees through higher premiums, deductibles, and out-of-pocket maximums, often in exchange for more affordable plans or Health Savings Accounts. 
2. Certain government mandates, including required coverage of certain benefits and regulatory changes, can increase the cost of providing care and insurance. 
3. Uncompensated care from uninsured or underinsured patients also further raises costs, as providers often offset these losses by charging higher prices to insured populations. 
4. Advances in medical technology and the introduction of new treatments, while improving outcomes, often come with a premium, especially with costly specialty drugs and procedures. 
5. Demographic changes, such as an aging population and rising rates of chronic conditions, also contribute to increased demand for healthcare services. 

Together, these factors place sustained upward pressure on healthcare costs, often outpacing general inflation over the long term.

How Inflation Affects Discount Rates

The two key rates used in the discount rate calculation are the 20-year municipal bond index rate and the long-term rate of return on plan assets. Your plan’s funding status determines how these rates are applied: 

• Fully funded plans – the discount rate equals the expected long-term rate of return (inflation plus the long-term return). 
• Partially funded plans – the discount rate will be a blended rate equivalent to discounting all expected future benefit payments that may be funded by assets held in the OPEB Trust at the expected long-term rate of return, with all other payments discounted using the 20-year index of yields on high-grade municipal bonds. (Most plans fall into this category.)
• Unfunded plans – the discount rate will be the 20-year index of yields on high-grade municipal bonds.

When inflation rises, municipal bond yields usually rise as well. For underfunded plans, this may lead to a reduction in your disclosed Total OPEB Liability (TOL) due to a higher discount rate being applied. But keep in mind: historically, elevated inflation in the U.S. has been short-lived. So while your liabilities may temporarily decline, that effect could reverse as inflation and rates settle back down. 

Inflation rates also influence financial markets. During high-inflation periods, certain sectors may see declining equity prices, which can negatively impact overall portfolio performance. Depending on the composition of the investments in your OPEB Trust, you may realize lower returns during these periods of high inflation. For fully funded plans, those reduced returns could lead to a downward adjustment in the discount rate, which may increase your TOL.

For partially funded plans, higher inflation may boost the municipal bond rate, which can raise the blended discount rate and reduce liabilities. However, if inflation depresses asset returns or shortens the period during which assets can cover benefits, that benefit could be offset or even erased.

The discount rate for a funded OPEB plan is generally less volatile compared to that of an unfunded plan, which relies solely on the municipal bond rate. That’s why establishing and maintaining funding remains the most effective strategy for you to manage long-term OPEB obligations.

Read more: Selecting the Best Funding Strategy for Your OPEB Trust

Key Takeaways

Inflation impacts your OPEB liability, mainly through its effect on two assumptions: 

• Medical cost trend rates – periods of high inflation often result in short-term spikes in healthcare costs.
• Discount rates – rising bond rates may temporarily reduce liabilities in unfunded plans, while funded plans could see liabilities rise if investment returns suffer. 

Although there is no way to completely shield your plan from the effects of inflation, staying informed about economic trends will allow you to anticipate potential changes. Regularly updating actuarial assumptions and implementing sound funding strategies can help mitigate inflation’s impact and help prepare you for any financial challenges that come your way. 

At Odyssey Advisors, we’re here to support you in navigating these complex challenges. Please don’t hesitate to contact us if you have questions or want guidance tailored to your needs.

The post Understanding the Impact of Inflation on OPEB Liabilities appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Early retirement can significantly increase your OPEB liability by extending the years of employer-covered healthcare.
• Spousal coverage, especially for younger spouses, can more than double your financial obligation.
• Transferred service and flexible spousal enrollment rules can leave your organization footing the bill for benefits earned elsewhere or added late.

Meet John. John joined your organization at age 25 and stayed through his entire career. He’s reliable, dedicated, and the kind of employee any employer would be lucky to have. Now, at age 65, John is ready to retire.

If John retires at 65 and takes retiree healthcare coverage, the total present value liability* to your organization is about $102,000.

To help illustrate how OPEB liability can change based on key decisions, we’ve included a table below that shows expected present value liabilities for both males and females at various retirement ages. These figures will serve as the foundation for the scenarios we’ll explore.

But what if John retires earlier? What if he decides to cover a spouse? Or what if that spouse is significantly younger than him? Each of these decisions could substantially increase your organization’s Other Post-Employment Benefits (OPEB) liability.

Let’s follow John through a few different retirement scenarios to better understand how OPEB costs can quickly add up.

OPEB Liability by Retirement Age

Disclosures/Assumptions

1. Discount Rate: 4.00%
2. Medical Care Cost Inflation Rate: Getzen Model of Long-Run Medical Cost Trends for Active and Medicare Supplement Plans
3. Average pre-65 premium: $955.80
4. Post-65 premium: $443.40
5. Mortality: RP-2014 Mortality Table for Blue Collar Employees projected generationally with scale MP-2021, set forward 1 year for females
6. Cost Sharing: Employer pays 20% of premiums
7. Liability: Represents the present value of all future payments as of the date utilizing the discount rate, mortality rate, healthcare inflation, and insurance costs above.

*OPEB liability estimates are based on standardized assumptions, including a 4.00% discount rate, projected healthcare inflation, and average premium costs. Figures are for illustrative purposes only and may not reflect your plan’s actual design or funding approach. For a personalized valuation, please consult a qualified actuary.

How do Benefits Change with Early Retirement?

Let’s say John retires at 60 instead of 65. At first, it may not seem like a big change. It’s only a five year difference.

But now, your liability jumps to $177,000, an increase of $75,000.

Why? You’re now covering five extra years of retiree healthcare. John will stay on the Active healthcare plan until age 65, which tends to be more expensive than Medicare-based coverage. Bottom line: the earlier John retires, the more expensive his benefit becomes.

What If The Employee Has Transferable Retirement Service?

Now, imagine John spent 35 years at another public organization in the same retirement system. At age 60, he joins your organization and retires at age 65. Even though he only worked with you for five years, your organization inherits the full $102,000 OPEB liability.

That’s because some systems allow for transferable service credit, and the liability is borne entirely by the last employer unless there is a policy in place to share liability based on service or some other metric.

In this case, you had only five years to fund a benefit that normally accrues over 40 years.

​​ Be aware of your retirement system’s eligibility rules; transferred service can cause unexpected financial strain.

What Happens When a Retiree Covers Their Spouse?

Let’s return to the first scenario: John retires at 65. If he elects to cover his 60-year-old spouse, your liability doesn’t just increase; it nearly triples.

• John’s solo liability: $102,000
• With spouse: $287,000

That’s an increase of $185,000.

Why such a big jump? You’re covering two people now, not just one. The spouse is under 65, so she’ll be on the Active plan until eligible for Medicare, just like John was in the early retirement example.

How Does a Much Younger Spouse Affect The Liability?

Here’s where it gets even trickier.

Let’s say your plan allows retirees to add a spouse at any time. John retires at 65, then marries a 45-year-old woman and adds her to his retiree coverage.

Your new OPEB liability? $456,000. That’s an increase of $345,000 from when John was retiring alone (if they have children, those costs are even higher).

While rare, these scenarios do happen, and they underscore the importance of plan design. Consider limiting spousal eligibility to those covered at the time of retirement to avoid surprises.

Understanding the Biggest Drivers of OPEB Liability

John’s story illustrates a few key truths:

• Retirement age matters – early retirements result in higher costs.
• Spousal coverage matters – covering a spouse, especially a younger one, can more than double liabilities.
• Eligibility rules matter – transferred service and flexible spousal enrollment can burden your organization with significant, unexpected costs.

That’s why it’s essential to have an actuary perform an OPEB valuation at least once every two years. Actuaries use data-driven assumptions, like retirement age and spousal election probabilities, to calculate service cost, the annual cost of benefits earned.

By funding that amount each year, your organization stays ahead of the curve, avoids budget surprises, and ensures long-term sustainability.

While employee decisions may not always align with assumptions, pre-funding your OPEB plan is your best strategy for minimizing financial strain.

At Odyssey Advisors, we work with municipalities and public sector organizations across the country to plan, manage, and fund their OPEB obligations. Have questions? You can reach one of our actuaries or actuary consultants here.

The post Why Your OPEB Costs May Be Higher Than You Think appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Medicare is a national health insurance program that’s available to people age 65 and older unless they meet certain requirements for early eligibility.
• Municipalities can reduce their healthcare (OPEB) costs by incorporating Medicare into their retiree benefits plans.
• For 2026, the Part B monthly premium is $202.90 (an increase from $185.00 in 2025), but there are some exceptions to note for those with low/high income.

Updated for 2026 Medicare Premiums

Medicare is a national health insurance program typically available to people age 65 and older (or younger, if they qualify through early-eligibility rules). For municipalities, understanding how Medicare works—and how it integrates with your retiree health strategy—is essential. When retirees remain on active plans past age 65, it often increases OPEB costs because those plans are more expensive, the care is costlier and none of it is federally subsidized.

Shifting eligible retirees to Medicare can reduce long-term healthcare liabilities and improve the retiree experience. Most retirees benefit from the flexibility and nationwide coverage of Medicare Supplement (Medigap) plans, which make it easier to access doctors and treatment facilities compared to Medicare Advantage plans.

Defining Medicare Parts A, B, C, and D

Medicare has four parts: Parts A, B, C, and D. Parts A and B are known as Original Medicare, Medicare Part C is known as Medicare Advantage and Part D covers prescription drugs.

Medicare Part A

Medicare Part A covers hospital insurance. It covers the most common hospital expenses such as room stays, hospice, home health care, and even skilled nursing facility stays. Part is free for most people as long as they’ve worked in the U.S. or are married to someone who is at least 65 years old and meets the requirements.

Medicare Part B

Medicare Part B is for any outpatient services that are determined to be medically necessary. It includes coverage for services like office visits, lab testing, surgeries, preventative care, ambulance rides, chemotherapy and radiation, and more. Think of Part A as inpatient care and Part B as outpatient care.

Parts A and B make up what’s known as Original Medicare. Most retirees who qualify for Social Security or Railroad Retirement Board Benefits receive premium-free Part A Medicare coverage (aka “hospital insurance”), but have to pay for premiums for Part B (aka “medical insurance”).

Costs of Medicare Part B

The rates are determined according to the Social Security Act each year. For 2026, the Part B monthly premium is $202.90 (an increase from $185.00 in 2025). While this seems like a straightforward rate, there are some exceptions to note for those with low/high income.

Low-income individuals may qualify for free or reduced Part B premiums if they meet a certain requirement. The requirements take both income and asset levels into account. In 2025, the Federal Poverty Level is $15,650 for individuals and $21,150 for couples. The asset limit is $9,660 for individuals and $14,470 for couples. If a participant meets these requirements, there are programs available to help pay for some or all of their monthly premiums.

Those that have a higher income, could be subject to a surcharge known as IRMAA (Income Related Monthly Adjustment Amount). If their Adjusted Gross Income (AGI) from 2 years ago is over a certain amount ($108,000 for individuals as of 2026), then they may be charged a higher premium. This means that they could pay up to $689.90 per month for Medicare Part B (if they earn more than $500,000 as an individual or $750,000 annually for jointly filed returns).

It’s calculated annually so if their income fluctuates from year-to-year, then their IRMAA status could change.

2025 Medicare Part B IRMAA Premiums

See all the 2026 premiums, deductibles, and coinsurance amounts for Medicare here.

Learn more about the costs of Medicare here.

Medicare Part C

Medicare Part C is different from the other parts of Medicare so it can be confusing. Essentially, Part C is just another name for private Medicare insurance. It’s usually referred to as Medicare Advantage.

Retirees have the choice to choose this plan instead of Medicare. It includes Part A, Part B, and sometimes Part D, all from the same insurance carrier. The retiree would “enroll” in a Medicare Advantage plan during the annual enrollment period (normally 7 weeks in the 4th quarter). Once enrolled, they have “opted out” of traditional Medicare for that year and will be covered by private insurance.

Medicare Part D

Medicare Part D was created by the federal government to help reduce the costs of prescription drugs. This plan is optional and only available through private insurance carriers that follow rules set by Medicare.

Download a printable copy here: Medicare 101 Infographic

Medicare Eligibility

Medicare eligibility starts at age 65 for most retirees (earlier based on early qualifiers). As mentioned above, in order to be eligible for premium-free Part A, they need to be age 65 or older, and they (or their spouse) need to have worked and paid Medicare taxes for at least 10 years in the U.S.

If the retiree doesn’t meet the requirements, then they may be able to buy Part A.

Early Medicare Coverage

Medicare starts at age 65 for most retirees, but did you know that some people qualify earlier than that? Here are three things that would qualify someone for early Medicare:

• Those with ALS (Amyotrophic Lateral Sclerosis or Lou Gehrig’s disease)
• A diagnosis of End Stage Renal disease
• Those with Social Security disability benefits for a 24-month period

If someone has been receiving SSDI and passed the two-year waiting period, Medicare benefits will start automatically on the 25th month.

For all others, Medicare enrollment generally starts 3 months before you turn 65. Keep in mind, there could be penalties associated with signing up late.

What If You Have Retirees Who Aren’t Eligible?

So you might have retirees who are over the age of 65 and not enrolled in a Medicare Supplement plan because they weren’t eligible based on the criteria above.

All hope isn’t lost.

You can purchase Medicare credits for those employees so that they can take part in the plan. This is known as OPEB Medicare Buy-In. Basically, you work with the Center for Medicare & Medicaid Services (“CMS”) and they will provide you the necessary premiums for Medicare Part A as well as any Part B penalties for late enrollment (if you have retirees over the age of 65).

Migrating to Medicare

As mentioned above, a cost-saving measure is to have your retirees switch from your active health plan to a Medicare plan once they are eligible. If you’re not already doing this, you can still make the switch. 

The first step is to find out how much your potential savings on OPEB would be if you decided to move your retirees over. From there it’s just a matter of taking a look at your pool of retirees and separating them by who’s past their eligibility date and those that are within the eligibility window or what’s called the Initial Enrollment Period (IEP). There is a 7-month period in which a retiree can enroll in Medicare. This includes the three months before, the month of, and the three months following their 65th birthday. 

For those that are outside of the IEP, they may enroll during the General Enrollment Period (GEP) which takes place January 1 through March 31 each year, but they may incur a Part B enrollment penalty. 

Now, this is where you’ll have to determine what you’re willing to cover. As mentioned with Medicare Buy-In there is an extra cost to get the “credits” for the retiree, there’s a premium, and Part B penalties and/or Part B premium. It’s pretty common for municipalities to pay the Part B penalties to make sure that each retiree gets moved over to Medicare. 

Despite the fees and costs to make the switch, we’ve seen that most municipalities save a significant amount in the long run.

If you have questions, we’d be happy to help. You can reach me or another Odyssey consultant by dropping us a message here.

Whenever you’re ready, here are three ways we can help:

1. Minimize your liabilities with a comprehensive OPEB valuation here. 
2. Get a free review of your last valuation here.
3. Get to know all of your options (including if making the switch to Medicare would work for you) with a benefits plan analysis here.

The post Medicare 101 for Municipalities appeared first on Odyssey Advisors, Inc.

BOTTOM LINE UP FRONT

• Start small with your OPEB funding to build momentum and create a foundation for future growth
• Use flexible strategies like earmarking free cash or dedicating specific revenue streams to support ongoing contributions
• Plan in 3-5 year increments to maintain long-term stability while allowing room for short-term budget adjustments

Budget season is here, and once again municipalities are navigating rising healthcare costs, inflation pressures, and shifting demographics. For many, OPEB Trust funding feels like one more item in an already crowded list of budgetary demands. Whether you’re just getting started or trying to sustain contributions amid tighter margins, here are four practical strategies to help prioritize OPEB without breaking the bank.

1. Just Getting Started? Think Small

If your municipality hasn’t contributed to an OPEB Trust yet, you’re not alone. Our advice for those in this group is to start somewhere. Even getting a small amount budgeted gets a ‘foot in the door,’ which makes it easier to increase that funding in the future. The first step is usually the hardest, and funding an OPEB Trust is no different. We’ve seen many Towns fund $5,000 in the first few years, but manage to increase that gradually over time.

2. Consider a Free Cash Policy

One effective strategy we’ve seen is earmarking a set percentage of certified free cash. We’ve seen several municipalities adopt a policy that allocates 10% of certified free cash to funding their OPEB Trust. This approach allows contributions to adjust naturally, shrinking in tight budget years and increasing when resources allow.

3. Look for Dedicated Revenue Streams

A dedicated source can be a great way to start funding your OPEB Trust or to increase the funding that’s already in place without squeezing other areas of your budget. For example, we’ve had some Towns start funding their OPEB with a settlement, which would make annual payments for 10-20 years.

We’ve also seen others dedicate a specified portion of the meals tax or a new revenue source to fund their OPEB. Combining one or more dedicated funding sources can help automate contributions and remove the need for yearly deliberation.

4. Think in 3-5 Year Windows

Don’t limit planning to one fiscal year at a time. A 3-5 year roadmap gives you a lot of flexibility. If you can plan to fund several years, you’ll have the breathing room to pause funding for a few years, if needed, while still reaping the benefits of the Trust. We have helped Towns plan to pause their funding for 3 years and seen almost no impact to their OPEB plan because they had spent the previous seven years with some level of funding. Thinking in 3-5 year windows has also enabled some Towns to anticipate future funding sources and earmark them for their OPEB Trust.

A Little Today, A Lot Tomorrow

We know municipal budgeting can feel like a tightrope act, but hopefully, these tips help you get started with an OPEB funding plan or improve the plan you already have. We believe that funding your OPEB Trust today creates flexibility for the future. As the old retirement saying goes, ‘the best time to start funding was five years ago, the second-best time is right now.’ Best of luck navigating this year’s budget. We’re always here to help shed some light on your complex needs.

Need help building your OPEB funding strategy? We offer free reviews of your most recent valuation and can help you craft a plan that works with your budget, not against it. Contact us here.

The post How FY 2026 Budget Priorities Could Shape Your OPEB Funding Strategy appeared first on Odyssey Advisors, Inc.

I’ve been in your shoes. When I first joined Odyssey, I felt like a fish out of water and Google was my constant friend. If you had peeked at my search history four years ago, it would’ve looked something like this:

“What is OPEB?”
“Is it Other Postemployment Benefits or Other Post-Employment Benefits?”
“What’s the difference between TOL and NOL?“

Without an actuarial background, I needed time to catch up. But with the invaluable support from our amazing team, I soon found my footing. This guide is designed to help you find yours. I hope it helps!

Top Actuarial Terms & Definitions:

• Actuarial Accrued Liability (“AAL”): AAL is the present value of benefits earned by employees to date, calculated based on actuarial assumptions.

• Actuarial Assumptions: Actuarial Assumptions are estimates used by actuaries to calculate future benefit obligations, including rates of retirement, turnover, and salary growth.

• Amortization: The process of spreading out payments or expenses over time. In the context of OPEB (our area of expertise), it often refers to the period over which changes in unfunded liabilities are recognized through the expense.

• Actuarially Determined Contribution (“ADC”): “ADC”, not to be confused with “ACDC” is the contribution amount determined or calculated by an actuary for a pension or OPEB plan for a year which includes the normal cost and an amortization payment for any unfunded liability. This figure is designed to help a plan reach “full” funding over some time.

• Assumption Testing: This is the process by which both actuaries and auditors evaluate the reasonableness and appropriateness of actuarial assumptions used in valuations. For our auditor friends, we recently published this article: Auditing the Actuary: Assumption Testing

• Cash Balance Plan (“CB Plan”): CB Plans are a type of defined benefit retirement plan (“DB plan”) that combines features of both traditional DB plans and defined contribution plans (“DC plans”) and is often used by small business owners with high, predictable income. It allows for significant tax-deductible contributions each year and the accumulation of retirement assets which are both tax-deferred and protected from creditors. To learn more about CB plans and their benefits, check out this article:  What is a Cash Balance Plan?

• Census Testing: Census Testing is the process used by auditors to verify the accuracy and completeness of the participant data used in an actuarial valuation by checking the demographic and employment information, such as age, service duration, and benefit data to ensure that it is correct and corresponds to the actual records of the participants.

• Defined Benefit Plan (“DB Plan”): A Defined Benefit Plan is a retirement plan that promises a specified monthly benefit at retirement, which is typically based on salary and years of service (collectively bargained or union plans often will use a fixed dollar amount multiplied by years of service). The key thing to remember is that the plan sponsor or the employer bears any investment or mortality risk. These plans are also known as a pension plan.

• Defined Contribution Plan (“DC Plan”): A DC plan is a retirement plan where the employer, employee, or both, contribute to an individual account for the employee, with benefits based on the account balance at retirement. Unlike a DB plan, with a Defined Contribution Plan, the employee or participant is normally responsible for some or all investment decisions.

• Discount Rate: The discount rate is the interest rate used to determine the present value of future benefit obligations. Essentially, the discount rate is a tool that helps our actuaries determine how much money needs to be set aside today to cover the future pension or OPEB benefit payments owed to employees. To learn more, check out this article: Top 5 Factors That Determine Your OPEB Discount Rate

• Funding Ratio: The ratio of a plan’s assets to its liabilities, indicating the financial health of the plan.

• Governmental Accounting Standards Board (“GASB”):  GASB is the organization that sets accounting and financial reporting standards for U.S. state and local governments, including standards for pension and OPEB plans.

• GASB 67: GASB 67 is a specific set of rules created by GASB that focuses on how state and local government pension plans should report their financial information to ensure they are accurate, consistent, and provide a true reflection of their financial position.

• GASB 68: GASB 68 is a similar set of rules issued by GASB that focuses on how government employers should report their pension obligations in their financial statements.

Still curious about the GASB 67 & 68? Check out this article: GASB 67 & GASB 68: What’s the Difference?

• GASB 74: GASB 74 is a standard set by GASB that focuses on the financial reporting of Other Post-Employment Benefits (OPEB). The focus of GASB 74 is on the OPEB plans’ financial reporting.

• GASB 75: GASB 75 is a standard set by GASB that focuses on the financial reporting by the government employers who sponsor OPEB plans related to their participation in those plans.

Want to learn more? Read this article: What is the Difference Between GASB 74 and GASB 75?

• Healthcare Cost Trend Rate: The rate at which healthcare costs are expected to increase over time. This is an important assumption in OPEB valuations.

• Income-Related Monthly Adjustment Amount (“IRMAA”): IRMAA is an additional charge that some higher-income Medicare beneficiaries must pay for their Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage) premiums.

• Net OPEB Expense: This is the expense (on an accrual basis) that is recognized annually on the financial statement.

• Net OPEB Liability (“NOL”): NOL is the difference between the total OPEB liability (TOL) and the plan’s fiduciary net position (assets), representing the unfunded portion of OPEB obligations. 
  • Calculation: NOL = TOL – FNP

• Net Pension Liability (“NPL”): This is the difference between Total Pension Liability (TPL) and the plan’s fiduciary net position (assets). In simpler terms, it’s the amount by which the pension plan’s obligations for both current and future retirees exceed the current assets available. 
  • Calculation: NPL = TPL – FNP

• Normal Cost: The portion of the present value of projected benefits allocated to the current year, reflecting the cost of benefits earned by employees in the current year. 

• OPEB (“Other Post-Employment Benefits”): Refers to the benefits, other than Pensions, that employees receive after they retire from service. These benefits typically include health insurance, dental, vision, prescription, life insurance, long-term care, and other similar benefits. 

• OPEB Trust: An OPEB Trust is a financial arrangement established by a government or public sector employer to pre-fund Other Post-Employment Benefits for their employees. Essentially it’s an account to set aside funds today to meet the future OPEB obligations of retired employees to ensure that these benefits can be paid when due. The funds can be invested, potentially earning returns that help reduce the total cost of providing OPEB over time.

• Pay-as-You-Go (“Pay-Go”) Funding: A method of funding OPEB benefits where benefits are paid from current revenues rather than pre-funding through a trust. 

• Plan Fiduciary Net Position: The market value of assets held in trust to pay OPEB or pension benefits. 

• Present Value: When we talk about determining the present value of future benefit obligations, we’re talking about figuring out how much those future payments are worth in today’s terms. 
  
• Safe Harbor 401(k) Plan: A type of 401(k) plan designed to automatically pass the IRS nondiscrimination tests, which ensure that the plan benefits both rank-and-file employees and highly compensated employees. To qualify, employers must make mandatory contributions that are fully vested immediately. This plan simplifies administration and ensures that all employees benefit fairly from the plan.

• Service Cost: Another term for normal cost, which is the value of the benefits that eligible employees accrue each year.  
  
• SIMPLE 401(k) Plan: A SIMPLE (“Savings Incentive Match Plan for Employees”) 401(k) plan is a retirement plan designed for businesses with 100 or fewer employees. It combines the features of a traditional 401(k) with those of a SIMPLE IRA. Employers are required to make either matching contributions or non-elective contributions to employee accounts. Contributions are tax-deferred, and the plan is subject to simpler and less costly administration than traditional 401(k) plans.
  
• Third-Part Administrator (“TPA”): A TPA for retirement plans is an independent entity that provides administrative services to employers sponsoring retirement plans, such as 401(k)s and pension plans. TPAs handle various tasks such as plan design, recordkeeping, compliance testing, reporting and filings, regulatory updates, and more to ensure the plan operates smoothly and remains compliant with requirements.

Want to learn more? Read this article: Here’s Why You Need a Third Party Administrator (and How to Hire the Right One)

• Total OPEB Liability (“TOL”): TOL is the value of OPEB benefits that have been earned by active and retired employees. 

• Total Pension Liability (“TPL”): Similar to TOL, TPL is the present value of all future pension payments owed to employees based on their service to date.
  
• Traditional 401(k) Plan: An employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary on a pre-tax basis. Contributions are invested in various investment options chosen by the employee, and the funds grow tax-deferred until they are withdrawn in retirement.

• Unfunded Actuarial Accrued Liability (“UAAL”): The portion of the actuarial accrued liabilities not covered by plan assets, indicating the amount by which the plan is underfunded.

• Vesing: The process by which employees earn the right to receive benefits from a pension, OPEB, or retirement plan, usually after the completion of required years of service.

So, the next time someone calls you to ask about TOL or how NOL is calculated on your next OPEB valuation report, you’ll be able to answer with confidence! 

Want to learn more? Visit our insights page and check out our new video series, “Ask an Actuary,” for in-depth articles and videos covering these topics and much more. 

If you still have questions, feel free to reach out to us here. Whether your question is simple or complex, we’re here to help!

The post Actuary Vocabulary 101: Essential Terms and Definitions appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Lifespan, the average length of life, and healthspan, the average length of healthy living, are two crucial concepts gaining attention recently.
• While lifespans have generally increased over generations, recent trends show a slight decline, while healthspans have decreased even more, leading to increased time spent battling health issues later in life. 
• These trends have significant implications for Pension and OPEB plans, with longer lifespans increasing costs for both, and a widening gap between healthspan and lifespan driving up healthcare expenses and liabilities for OPEB plans in particular.

Lifespan receives considerable attention, often being viewed as a measure of human development, especially as it continues to increase. However, there’s a growing focus on another concept called Healthspan, which hasn’t received as much recognition until recently. Healthspan refers to the length of time an individual remains healthy and functional, as opposed to simply living longer. Understanding the difference between these two concepts is crucial, particularly in considering the future implications for OPEB (Other Post-Employment Benefits) and Pension Plans.

Understanding Lifespan and Healthspan

Lifespan is the average length of time people live today, often used synonymously with “life expectancy”. As a matter of course people are very interested in how long they can expect to live based on the average lifetime of other people. Until recently there has been a general trend of lifespans growing longer and longer every generation. Even with some recent decreases in life expectancy, a person born today can expect to live a longer life than their grandparents.

Healthspan is the average length of time that people can expect to remain in optimal health. Over the last ten years, this concept has gotten more focus, especially with attention-grabbing ideas like Dr. Ezekiel Emanuel’s article “Why I Hope to Die at 75”. The most recent data shows that even as lifespans have decreased slightly over the last several years, healthspans have been decreasing by more than lifespan resulting in the average American spending more time late in life battling serious health issues.

Impact on Pension and OPEB Plans

How do these changes affect Pension and OPEB plans? Longer lifespans are going to mean higher costs for both Pensions and OPEB plans. The Actuary has mortality assumptions built into the valuation, and if more and more people outlive their projected life expectancy that means the plans must make benefit payments for more years than expected. Recent declines in lifespan help contain costs on Pension and OPEB plans as people don’t live as long as expected and therefore receive fewer years of benefit payments than expected.

Healthspan has a different effect on Pension versus OPEB plans. For Pension plan liabilities, healthspan doesn’t matter at all. A participant doesn’t need to be healthy to receive a benefit payment, they just need to be alive. For OPEB plans the story is different. A widening gap between people’s healthspan and lifespan means more years of what will tend to be more expensive medical care. This will tend to have the effect of driving up health insurance premiums, therefore increasing the OPEB plan’s expected benefit payments and liabilities.

Forecasting Future Trends

Some think the recent trend of shortening lifespans will reverse back to the trend of increasing lifespans. However, it seems possible that the gap between healthspan and lifespan will continue to grow as more medical treatments become available to extend lives. A reversion to the trend of increasing lifespans and decreasing healthspans could drive up the cost in the future for both Pension and OPEB plans.

Navigating The Intersection of Lifespan and Healthspan in Retirement Planning

When it comes to retirement planning, the concepts of lifespan and healthspan play pivotal roles in shaping the future of Pension and OPEB plans. While longer lifespans forecast increased financial obligations, the widening gap between healthspan and lifespan presents unique challenges, particularly when it comes to healthcare. With thoughtful and strategic foresight, you can navigate these complexities to ensure the sustainability and resilience of retirement benefits. 

If you have questions about the topic we covered, or if you’re seeking advice on any other challenges you may be facing, we’re here to help. Our team of experienced actuaries and actuarial consultants are always ready to offer guidance. Feel free to reach out to us here. 

The post Lifespan vs. Healthspan – Impact on OPEB and Pensions appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• GASB standards require auditors to “Audit the Actuary,” scrutinizing pension and OPEB valuations, but ambiguity surrounds this requirement
• Auditors must assess the reasonableness of actuarial assumptions individually and collectively, posing a challenge without developing a full actuarial model.
• Below are various methods for auditors to prioritize and test the reasonableness of assumptions in actuarial valuations that are essential for compliance and accuracy. 

GASB standards concerning Pension and OPEB valuations have placed a burden on auditors to “Audit the Actuary,” but the exact meaning of this requirement is left with some ambiguity. It seems obvious that as auditors, you shouldn’t need to become an actuary, diving into the ins and outs of actuarial valuations. However, you must demonstrate that you are indeed scrutinizing these valuations. While we’ve previously covered census testing for auditors, this article will delve into methods auditors can employ to assess the assumptions underlying 

The benchmark for an actuary’s assumptions is that each assumption should be individually reasonable, and collectively, the assumptions should be reasonable in the aggregate. From an auditor’s standpoint, it’s far easier to evaluate assumptions individually, because it is very difficult to measure the reasonableness of assumptions in aggregate without developing a full actuarial model. So, which assumptions should you prioritize, and what methodologies can you use to test the reasonableness of these assumptions in actuarial valuations?

1. Prioritizing Key Assumptions

There are many assumptions that go into an Actuarial valuation, but some have significantly more impact than others. Thus, your audit energy is better spent reviewing the assumptions that count the most.

Discount Rate

GASB specifies for both OPEB and Pension plans how to calculate the discount rate. The main role of the Auditor is to ensure the Actuary is applying the GASB standards to the development of the discount rate in a way that is consistent with the appropriate standards. This may include a review of the crossover date analysis as well as projected contributions and withdrawals from the Trust if one exists. Review the reasonableness of the assumed rate of return on assets.

Trend Rate (Medical Trend for OPEB, Compensation Increase for Pension)

Trend rates are generally not prescribed by law or by GASB standards so there is more room for the Actuary’s interpretation. An audit of assumptions that are not prescribed by law means asking the question, “Is this assumption reasonable?” The standard of reasonableness is left up to the interpretation of the Auditor and the Actuary.

Fortunately, GASB standards say the Actuary should provide a sensitivity analysis on these two major assumptions showing the impact on Liability and Service Cost if they were 1% higher or lower. That will help with gauging the impact of these assumptions on the valuation and the level of scrutiny that they deserve.

2. Mandated Assumptions

Some assumptions are established by state law or by standards set by GASB/FASB, which outline the assumptions to be utilized. For example, GASB 67/68 and GASB 74/75 specify that the entry age normal cost method should be used when determining the service cost and the state of Tennessee mandates that you must fund 100% of the pension ADC each year. Others like California and Massachusetts require that you pay the assessed pension system appropriation each year. To ensure compliance with mandated assumptions, it’s advisable to cross-reference the Actuary’s work with these directives. 

3. Look for Consistency

The mechanics of a pension and OPEB valuation share many similar components and, often, the same assumptions are used for both valuations. In most cases, the actuarial assumptions used for both valuations should be the same or at least very similar. That makes testing the assumption a bit easier from your perspective because you can look at the two reports and compare assumptions to assess reasonability. If the assumptions appear consistent, it indicates a positive sign of reasonableness.

Key considerations for you to include: 

1. Consistency Across Clients: Does the Actuary employ the same assumptions for all or multiple clients? If variations exist, is there a clear rationale justifying the differences?
2. Consistency Among Actuaries: Are the Actuary’s assumptions consistent with other Actuaries and with the state system’s Actuarial assumption?

By addressing these points, you can effectively evaluate the reasonability of the assumptions used in the valuation process. 

4.  Seek Professional Sources

While some assumptions may originate from the Actuary’s own internal judgment, many will be based on or supported by external experts and data sources. For example, Mortality Tables are generally not formulated solely on an Actuary’s discretion or data. When external data sources are utilized, it’s essential to inquire whether the source is credible and if the assumption aligns with the intended purpose as defined by the external expert. 

Auditing the Actuary can certainly feel like a daunting task, but with these strategies  in your toolbag, hopefully, you’ll feel more confident signing off that you “audited the Actuary.” Remember, if you have any questions regarding the impact of specific census issues, it’s advisable to engage the Actuary to assess the significance, materiality, and necessity of issuing a new report. 

By incorporating these considerations, you can effectively evaluate the assumptions underpinning the valuation process and ensure the integrity of the Actuary’s work.  

Connect With Us for Further Guidance

We hope this article has provided you with valuable insights into assumption testing for pension and OPEB valuations. At Odyssey Advisors, our commitment extends beyond providing actuarial services; we are dedicated to fostering a deeper understanding and clarity in this complex field. 

If you have questions about the topic we covered, or if you’re seeking other advice on challenges you’re facing, we’re here to help. Our team of experienced actuaries and actuarial consultants is always ready to offer guidance to help you navigate through the nuances of actuarial valuations and audits. 

Feel free to reach out to us here. Every detail matters in the pursuit of accuracy and compliance. 

Odyssey Advisors – Empowering Auditors with Expertise and Insight

The post Auditing the Actuary: Assumption Testing appeared first on Odyssey Advisors, Inc.