Actuaries are financial professionals who use mathematics, financial theory, and statistics to analyze the costs associated with risks and uncertainty for businesses and manage them. It is estimated that the demand for these professionals will grow 18% from 2019 to 2029, according to data released by the US Bureau of Labor Statistics. They are most commonly employed in insurance companies, government agencies, financial institutions, and business finance departments. However, they also play an important role in designing and managing retirement plans.
What Are Pension Actuaries?
Pension and retirement benefits actuaries help with designing, testing, and evaluating company pension plans and determine whether the expected funds available in the future will be enough to ensure payment of future benefits. They also help businesses with the development of other types of retirement plans, such as 401(k)s and healthcare plans for employees. However, every business may have unique requirements. So, you should hire a firm that can design the right plan, based on your specific objectives and business goals, according to E.H. Thomson & Company.
How Can An Actuarial Consulting Firm Help?
An actuarial consulting firm can offer a wide range of benefits to your business such as:
· Estimating Employer Obligations
As mentioned earlier, a pension actuary estimates the value of employer obligations based on the benefits provided and employee demographics of your business. The calculation of these liabilities includes several factors such as expected future compensation increases, asset returns, rates of retirement, disability, death, and other reasons for termination. An effective actuarial consulting firm uses historical data and future expectations to make assumptions for these factors.
· Calculating Plan Contributions
An actuarial consulting firm will calculate contributions required to fund the pension plans, especially Defined Benefit Plans. All employers are allowed some flexibility when deciding how much to contribute to the plan. This firm will help with specifying the benefit structure in the plan document while taking into account employee demographics in such a way that annual contributions meet the objectives of the employer.
· Maintaining Compliance
Pension actuaries ensure that your business is following laws and regulations regarding pension plans, including the timely certification of minimum contributions and the funded status. They also take care of time-sensitive government filings and participant notices.
Some pension actuaries are “Enrolled Actuaries”. They are 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, according to the IRS. They have complete knowledge and experience requirements related to pension laws and regulations.
In almost all cases, you will need the assistance of a pension actuary to help you properly implement, maintain, and terminate your pension plans. So, find one that best suits your specific objectives and business goals.