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An Act 205 actuarial valuation must be filed biennially with the Department of the Auditor General. PMRS and its consulting actuarial firm complete the filing electronically for the employer’s approval. Actuarial valuation cost components are used to determine the annual financial requirements of the plan plus the data is used to calculate state pension aid for cities, boroughs, towns and townships.
Information regarding Changes in Actuarial Assumptions for Calculating Plan Costs can be found here.
The Minimum Municipal Obligation (MMO) is the smallest amount an employer must contribute to any pension plan established for its employees. The amount is calculated using actuarial valuation to ensure that employer pension plans are sufficiently funded.
PMRS will send an MMO worksheet annually to the employers and they must complete the worksheet by September 30 by the plan’s chief administrative officer and then provide it to the employer’s governing body. The MMO is the calculation of their pension plan cost for the following year.
A copy is returned to PMRS to be processed and used to prepare the plan’s bill for the upcoming year. By completing the MMO worksheet, the employer calculates its pension bill for the upcoming calendar year. Most cost components needed to calculate the MMO are provided by PMRS; however, the employer must provide payroll information and follow the instructions provided on the worksheet. There are different types of worksheets, one for defined benefit plans; one for overfunded defined benefit plans; and one for cash balance plans.
Any revisions to the MMO worksheet must be completed by December 31 of the current year. Any submissions after this date would result in an audit finding from the Auditor General’s office in the event of an audit review.
The MMO must be based on the most recent Act 205 Report that was filed with the Auditor General.
For more information on the MMO, we recommend the DCED Municipal Pension Handbook: https://dced.pa.gov/download/municipal-pension-handbook/
According to Act 205, Pennsylvania employers who wish to participate in the State Aid program, are required to certify information with the Department of the Auditor General each year.
It is important to know that PMRS does not calculate, provide, or audit state aid to employer pension plans in Pennsylvania. That work is conducted by the Municipal Pension Reporting Program (MPRP) within the Department of the Auditor General’s Office of Budget and Financial Management. If you have questions about the state aid process, you are encouraged to contact MPRP at 717-787-3637 or MPRP@PaAuditor.gov.
For more information, and to complete the AG-385 form, click here.