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GAO-06-837R 1 (2006-07-26)

handle is hein.gao/gaocrptatra0001 and id is 1 raw text is: SGAO Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 July 26, 2006 The Honorable John Warner Chairman The Honorable Carl Levin Ranking Minority Member Committee on Armed Services United States Senate The Honorable Duncan L. Hunter Chairman The Honorable Ike Skelton Ranking Minority Member Committee on Armed Services House of Representatives Subject: Financial Management: Implications of Significant Recent and Potential Changes for the Actuarial Soundness of the Department of Defense Survivor Benefit Plan Program This report responds to a legislative mandate to report on the effects of certain program changes on the actuarial soundness' of the Survivor Benefit Plan (SBP) program, which is part of the Department of Defense's (DOD) Military Retirement Fund (Fund). The primary purpose of the SBP is to provide benefits to the surviving dependents of deceased members or retirees of the armed forces. In certain cases, individuals other than dependents can be designated recipients of survivor benefits. The Fund accumulates financing resources in order to fund, on an actuarially sound basis, the liabilities of the military retirement and SBP programs. The SBP was created by legislation enacted on September 21, 1972,2 and has been modified various times by subsequent legislation. The fiscal year 2006 National 1The term actuarial soundness is widely used but not clearly defined for public retirement systems. For purposes of this report, we used the following definition: A retirement system is considered actuarially determined if a professionally qualified actuary (1) calculates the present value of the liabilities for future benefits for current participants and their beneficiaries, (2) determines the normal cost and amortization payments for the unfunded actuarial accrued liability over a reasonable period, and (3) has established a method for determining and amortizing experience gains and losses. If, in addition, the plan sponsor has indicated that it has the willingness and sufficient fiscal capacity to pay those ongoing costs, the plan may be considered actuarially sound. 2 Pub. L. No. 92-425, 86 Stat. 706 (Sept. 21, 1972) (codified, as amended, at 10 U.S.C. §§ 1447-1455). GAO-06-837R Actuarial Soundness of the DOD Survivor Benefit Plan

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