Question

Managing Pension cost is a challenge for every Administration. If you are the Chief of NYC Office of Actuary and ask to perform “Sensitivity Analyses for OPEB Eligibility Changes” to determine potential cost saving opportunities, you might recommend?

Increasing the vesting period by 1 year means that employees who quit or withdraw during that 1 additional year will not be OPEB eligible when they retire;

Decreasing the vesting period by 1 year

No change because vesting peirod has no impact on pension liability calculation

Lower the interest assumption

Answer 1

OPEB -OTHER POSTEMPLOYMENT BENEFITS are benefits other than pensions which US state and local government provide to their retired employees .

1. As OPEB is a compensation given by the employer to his employee based on his work history/performance for a predetermined time after retirement and increasing the vesting period by 1 year means employees who quit or withdraw during that year will not be eligible for OPEB when they retire would be really beneficial for the employer becasue anyways such amounts paid by the employer are not usually tax deductible hence it would save their money
2. Decreasing vesting period would have no impact or cost saving to the employer nor change in vesting period would actually have any impact on OPEB liability calculation