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Actuarially Determined Contribution (ADC)

When actuaries calculate total contributions necessary—factoring in assumptions about investment returns, how long people will live, and when people will retire—this gives us the “actuarially determined contribution” (ADC). Sometimes this is also called the “actuarially required contribution.”¹

In our balancing equation discussed earlier—B + E = C + I— the “C” is really the ADC, actuarially determined contribution. It is the amount necessary to pay benefits plus expenses, after accounting for an assumed investment return.

Once calculated, the ADC is then divided into some share for the employee, and some share for the employer. These are the “employee contribution” and “employer contribution.” Depending on how your state is structured, the employer share of the ADC might be paid for by the state directly, by the school district, or a combination of the two.


Source: Equable

What is the actuarially determined contribution for your pension plan?

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ADEC

Note: This is the ADC from your retirement system’s most recent annual financial report. Some states report on a one or two year lag.
¹ Up until around 2015, the more commonly used phrase to represent this idea was the annual required contribution, or ARC. In fact, so many discussions around pension payments used this phrase “ARC payment” that it is still sometimes used today. However, a few years ago the Government Accounting Standards Board updated their regulations and introduced the phrase actuarially determined contribution.
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