As used in this subpart:

1. (1)

   1. (A) “Actuarially sound” is defined in 24 CAR § 20-401 et seq.
2. (2) If a local plan is considered actuarially sound by virtue of a cash flow projection valuation or alternate cash flow projection valuation as defined in that subpart, then they will be considered to remain actuarially sound until the next regular actuarial valuation, cash flow study, or alternate cash flow study is released;

3. (2)

   1. (A) “Compliance under Arkansas Code § 24-11-202” means the same as “eligible location (in compliance)” as defined in 24 CAR § 20-1201 et seq.
   2. (B) The list compiled in accordance with 24 CAR § 20-1201 et seq., will therefore also serve to determine which local plans are not in compliance for purposes of this subpart;

4. (3) One-year United States Treasury notes.

   1. (A) “Rate of return for one (1) year United States Treasury notes over the most recent three-year period” means the arithmetic mean of the thirty-six (36) months closing yield on “U.S. Treasury securities at 1-year constant maturity”, as this term is commonly used by the Federal Reserve System and investment professionals.
   2. (B) The thirty-six-month average will be calculated using the December 31 closing yield of the year of measurement and the thirty-five (35) preceding months.
   3. (C) The Arkansas Fire and Police Pension Review Board will determine the thirty-six (36) months closing yield from Bloomberg or another similarly authoritative standard investment community source; and

5. (4) Rate of return.

   1. (A) “Rate of return earned by the local pension and relief fund” means the market rate of return, which shall be calculated using the following formula and definitions: Market Rate of Return = (2 X II) / (A + B – II) A = Beginning of the year Market Value of Assets B = End of the year Market Value of Assets Income = Non-Investment Income of the plan (e.g., millage, premium tax, etc.) Benefits = Benefits and administrative expenses of the plan II = Market Investment Income = B – A – Income + Benefits
   2. (B) The rate of return will be determined by the Arkansas Fire and Police Pension Review Board and reported in the valuation reports; and

6. (5)

   1. (A) “Three-year average rate of return” and “over the most recent three-year period” mean the arithmetic mean of the rate of return as defined in subdivision (4) of this section.
   2. (B) For example, if a local plan had rates of return of four and one-half percent (4.5%), six and two-tenths percent (6.2%), and five and two-tenths percent (5.2%) in 2004, 2005, and 2006, respectively, then the three-year average rate of return would be five and three-tenths percent (5.3%) (four and five-tenths plus six and two-tenths plus five and two-tenths divided by three (4.5 + 6.2 + 5.2)/3)).