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Oversight board reviews five-year actuarial audit options for state retirement systems
Summary
LRC staff briefed the Public Pension Oversight Board on the statutory five-year actuarial audit required by House Bill 238, outlining level 1 (full replication) through level 3 audit scopes, prior costs and timing, and the committee's role in requesting LRC contract action.
The Public Pension Oversight Board heard a detailed briefing on the five-year actuarial audit requirement from Brad Gross, a Legislative Research Commission staffer, as members weighed scope, timing and cost options for reviewing the major state retirement systems.
Gross told the board the primary product that drives financial oversight is the systemsannual actuarial valuation, which produces funded-status metrics and long-term contribution projections. "Out of that document, we find out the financial health of our plans," Gross said, stressing the valuation's role in budgeting and long-term planning. He also quipped, "I'm not an actuary. I don't play one on TV," to set expectations about technical detail in the briefing.
Why it matters: House Bill 238 requires the Legislature to obtain an independent actuarial audit at least once every five years to evaluate the reasonableness of assumptions and methods used in the valuations. The reviewing actuary is retained through a contract with the LRC at the committee's request; Gross said a summer (July/August) request would be appropriate to align a review with the June 30, 2026 valuation and a December finalization of valuation data.
Audit scope and precedent: Gross described three audit levels. A level 1 audit is a full replication of the valuation that re-calculates every member's results; it is the most conclusive and most costly. Level 2 is a limited-scope sample and level 3 focuses primarily on assumption reasonableness. The board conducted a level 1 audit in 2021 (Milleman Consulting), which Gross said was generally clean but recommended greater consistency across systems for assumptions and reporting. He noted the prior level 1 contract cost about $190,000.
Board deliberations and questions: Members asked whether a level 1 should be routine every five years and whether a review should explicitly model recent statutory benefit changes. Senator Funky From asked whether a level 1 audit would apply current statutes and benefit-enrichment provisions; Gross said any level can be tasked to report on specific items but a level 1 provides the most definitive replication of liability calculations. Senator Wilson asked who selects the audit level; Gross replied the committee requests a level in a letter to LRC, and LRC holds contracting authority. Representative Petri pressed for clearer cost differentials between levels; Gross said costs vary substantially by scope and vendor and offered to supply prior procurement figures.
What happens next: If the committee wishes to proceed, Gross said a formal request should go to LRC this summer identifying the desired audit level and any special scope items. The reviewing actuary would likely begin work once the June 30 valuation data are finalized and submitted by the systems later in the calendar year.
Procedural note: The board approved the prior meeting minutes by motion from Representative Dval with a second from Senator Elkins.
The committee did not take further action on selecting an audit level during the meeting; members appeared to favor getting more precise cost estimates before directing LRC to solicit a contractor.
