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Questions and Answers about Actuarial Audit RFP


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Questions and Answers about Actuarial Audit RFP

  1. 1. Questions and Answers about Actuarial Audit RFP Q1. IPERS has received an inquiry regarding the “Minimum Qualifications” set forth in Section I.B.2 that “the firm must have been in existence as a business entity performing such services for a minimum of three years.” The inquiry is whether IPERS would consider waiving this requirement. Answer – IPERS is not amending the minimum qualifications required in Section I.B.2 of the RFP. Q2. Does IPERS intend for the actuary to independently value liabilities for a limited, representative sample group or does IPERS desire a complete replication of the valuation results? Answer – IPERS expects that the Auditor will perform as extensive calculations as necessary to properly test and validate both the valuation results and the underlying processes used in performing the valuation. Please describe in your proposal the methodology you intend to use for either sampling or complete replication or both and appropriate pricing for any methodology described. Q3. Please provide additional information about the simulation model provided by your actuary. What does the model simulate? Can you provide sample input/output or a copy of the simulation model? What software does the model use (Excel, etc.)? Any additional detail about the scope of the review of the simulation model would be appreciated. Answer – The simulation model is based on the most recent year’s valuation results and current plan provisions. The model projects actuarial and statutory contribution rates, asset and liability measures, and the unfunded actuarial accrued liability. The model allows IPERS to make projections based on alternative investment return, amortization period, and future payroll growth scenarios. The simulation model utilizes Excel. Q4. Is the FY2001-2005 experience study currently available? If not, when will it be available? May we receive a copy? Answer – No. It is scheduled to be reviewed and approved by the IPERS Investment Board on 27 Jun 06.
  2. 2. Q5. Has an actuarial audit been performed previously? If so, may we receive a copy of the most recent audit? Answer – IPERS has not previously had an actuarial audit completed. Q6. If an actuarial audit has previously been performed, is the scope of this audit the same? If not, please describe changes. Answer – IPERS has not previously had an actuarial audit completed. Q7. The RFP asks us to provide information about all key executives and professionals in our actuarial consulting group. Mercer is a very large organization, with hundreds of individuals meeting this description. We intend to provide the requested information only for the individuals named in the proposal (i.e. those that would be doing the work for IPERS). Will this approach disqualify our proposal? Answer – Please limit to the top 25 key professionals (directors and principals within the actuarial consulting group). Q8. The RFP asks us to provide information about executive and professional staff turnover, hires, and promotions. We will be unable to provide this information, as it would be in violation of data privacy. Will this disqualify our proposal? Answer – Please provide all information requested other than the name of individual leaving the firm and the name of the replacement individual. Q9. The RFP asks us to provide information about all pension plan clients that have terminated their actuarial service contracts within the last five years. Again, given the size of our organization, this information is simply not available. Will the exclusion of the information disqualify our proposal? Answer – IPERS is willing to limit the response to public multi-employer pension plans.
  3. 3. Q10. What participant data should the auditor expect to receive for purposes of reviewing the June 30, 2005 actuarial valuation? For example, will data be received from both IPERS and Milliman? If so, should part of the review focus on the consistency between the two sets of data? Answer – Any data needed by the Auditor to perform the audit will be made available by IPERS and/or Milliman. IPERS expects that a consistency check between the data provided by IPERS and the data used by Milliman will be performed. Q11. For purposes of the 5-year experience study review, is the expectation that only the report will be reviewed, or is the auditing actuary expected to analyze the underlying six years worth of data used in the experience study? Answer – IPERS expects the Auditor to review and express an opinion on the results of the experience study, including the veracity of the actuarial assumptions. We would expect that this would require an analysis of the underlining data. Q12. Does the Defined Benefit Plan actuarial valuation report involve only pension benefits, or are other benefits (e.g., retiree health benefits) included in the valuation? Answer – Only the defined benefit offered by IPERS is covered by the report. IPERS does not offer other benefits or administer other plans. Q13. How much support is anticipated from the current actuary? For example, providing individual test case results from their valuation software. Answer –Cooperation by our current Actuary is contractually required. Q14. Do the clients referred to under D.2 of the Questionnaire include clients that we’ve only performed audit services for, or should it include all public pension plan clients? If it is all public pension plan clients, should it be limited to a specific size? Currently, we serve approximately 400+ public pension plan clients. Answer – For D.2, provide only full service actuarial consulting clients that are multi-employer public pension plans.
  4. 4. Q15. Has this type of actuarial audit been performed before? If so, can we get a copy of the report? What were the fees charged? Answer – IPERS has not previously had an actuarial audit completed. Q16. Is there a special reason for the current actuarial audit? Are there any special current issues or concerns that the audit should address? Answer – In 2005 IPERS issued an RFP for actuarial services and the incumbent firm, Milliman, was the successful bidder. IPERS believes it is a best practice to have an actuarial audit performed if an incumbent actuary is rehired. IPERS has no knowledge of any special current issues or concern that are driving this audit. Q17. Section E-5 of the Questionnaire requests a description of levels of coverage for errors and omissions insurance. However, the proposed contract includes specific amounts of coverage. Are amounts of coverage less than those included in the proposed contract acceptable? Answer – Please provide the information requested in Section E.5. The dollar amounts in paragraph 23 of the sample contract should be considered as what IPERS suggests as the appropriate level of coverage. However, IPERS will consider other coverage levels and negotiate with the bidder the final contract language. Q18. Please clarify the intent of section 10.1 of the proposed contract. Is the auditor being asked to indemnify IPERS for any of the findings of the actuarial audit? For example, if an error in the June 30, 2005 actuarial valuation is discovered during the actuarial audit, is IPERS requesting the auditing actuary to indemnify IPERS for this? Answer – Section 10.1 of the proposed contract relates only to the relationship of the successful bidder and IPERS. The indemnification requirement shall only relate to the successful bidder’s actions so far as it relates to issues arising from or relating to the bidder’s performance of its contract obligations. Therefore, if an error is discovered involving the performance of IPERS’ present actuarial firm, the bidder that is performing the services specified in this RFP will not be held responsible for that error.
  5. 5. Q19. Please clarify the requirement under section 12.2 of the proposed contract. Does this mean that any work papers created during the actuarial audit are the property of IPERS? Answer – Section 12.2 addresses the data IPERS or Milliman provides to the successful bidder. This data is and will remain the property of IPERS. Work papers of the successful bidder are not covered by this subparagraph unless the work papers also include data owned by IPERS. Bidders are reminded that Paragraph 8 of the sample contract requires the successful bidder to maintain all records associated with the performance of the contract for a period of five years following the date of final payment from IPERS.