Actuarial sensitivity analysis introduced; lawmakers ask for methodology
Staff presented a sensitivity analysis that assumed the next decade would mirror the last, producing pessimistic returns; lawmakers said the figures were new to them and asked actuaries to explain assumptions and methodology.
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A staff member explained a sensitivity analysis prepared by GRS that models a 'worst-case' scenario—assuming the next decade repeats the prior decade's volatility—which results in lower projected returns than models that assume 7.5% returns. "It was kind of a sensitivity analysis that was done to demonstrate what happened if the next decade is as poor and as volatile as the last decade," the staff member said.
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