Given the wide variation in the underlying characteristics of the Retirement Systems, one statistic, like a funded ratio, may not make Retirement Systems comparable and alone may lead to invalid conclusions. Although the Actuarial Value of Assets generally contains a 5-year smoothed value of equities or assets which is intended to dampen the impact of market volatility, a significant or prolonged down market would substantially reduce future funded ratios. If the current actuarial assumptions are realized, no additional contributions will be necessary to provide for benefits to all current members and retirees. Examples include funding for retirement incentives and group life insurance. It does not necessarily mean that past benefit accruals are underfunded.
Lower ratios mean higher future contributions.