Why Do I Need an Actuary for My Defined Benefit Plan?
Pension actuaries suggest methods to eliminate or reduce damage to parties if a future event occurs. They are primarily concerned with the payment of benefits, including death benefits, from a pension plan.
According to the IRS, actuaries assess the financial consequences of risks and use mathematics, statistics and financial theory to analyze and determine the financial impact of uncertain future events.
Pension actuaries suggest methods to eliminate or reduce damage to parties if a future event occurs. They are primarily concerned with the payment of benefits, including death benefits, from a pension plan. Pension actuaries also calculate the required amount of an employer’s annual contribution to a defined benefit plan to ensure that current and future plan benefits are available to the participants.
Many pension actuaries are Enrolled Actuaries – individuals who have satisfied the standards and qualifications of the Joint Board for the Enrollment of Actuaries and have been approved by the Board to perform actuarial services required under ERISA. These individuals have fulfilled knowledge and experience requirements related to pension laws and regulations, including:
• the Internal Revenue Code;
• Treasury Regulations;
• IRS Revenue Rulings and IRS Notices;
• PBCG Premium Payment Instructions, Regulations and Technical Updates; and
• Department of Labor Regulations and Bulletins.
Unlike a 401(k) plan, which does not provide any defined benefits as the benefits are at the discretion of the employee, a defined benefit plan guarantees a specific benefit at retirement to each eligible employee.