(a)

1. (1) If a local plan has less than fifty (50) participants, the local plan may show actuarial soundness using an alternate cash flow projection valuation as defined in this section.
2. (2) This valuation will project the assets, future income, and future benefit obligations of the local plan.
3. (3) The assumptions used for an alternate cash flow projection valuation will not necessarily be the same assumptions used by the Arkansas Fire and Police Pension Review Board for regularly scheduled valuations because of the small number of fund participants.
4. (4) The alternate cash flow projection valuation must show that the current assets projected with future income will always be sufficient to cover all benefit obligations.
5. (5) An alternate cash flow projection valuation is not required to be done on a regular basis, but will be completed when requested by the local plan and at the expense of the local plan.

(b) For a local plan to be able to use the alternate cash flow projection valuation, it must also meet the following conditions:

1. (1) The local plan uses an Arkansas Fire and Police Pension Review Board-recognized investment management and trust arrangement; and
2. (2) The local pension board, as well as the local city council, must certify to the Arkansas Fire and Police Pension Review Board that they understand the risks involved in using a cash flow model for a small group.

(c) An investment management and trust arrangement will be a recognized investment management and trust arrangement by the Arkansas Fire and Police Pension Review Board if it contains the following independent and separately accountable components:

1. (1) Investment advisory and reporting including, but not limited to:

   1. (A) Pension plan prudent asset allocation advice;
   2. (B) Choosing independent investment managers or funds; and
   3. (C) Reporting the results of the investment managers versus their benchmark at least quarterly;

2. (2) Investment management including, but not limited to:

   1. (A) Investing plan assets on a plan-specific basis which pertains to the stated asset allocation designated by the local pension board with the assistance of the investment advisor; and
   2. (B) Regular reporting of results through the recognized investment management and trust arrangement; and

3. (3) Trust, custodial, and administrative services including, but not limited to:

   1. (A) Trust and/or custodian agreement with an independent trustee and/or custodian; and
   2. (B) Year-end plan financial reporting to the Arkansas Fire and Police Pension Review Board.