Actuarial Insights into Retirement Benefits Seminar
Delve into the intricacies of retirement benefits and pension plans at the "19th Seminar on Current Issues in Retirement Benefits". Gain valuable insights into traditional and special actuarial projects, funding valuations, accounting considerations, and regulatory compliance. Explore the evolving landscape and emerging opportunities in the realm of retirement benefits, guided by industry experts. Join us for a comprehensive overview of pension projects, challenges, and best practices in the field of actuarial science.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
E N D
Presentation Transcript
19thSeminar on Current Issues in Retirement Benefits (CIRB) Working in actuarial knowledge centre supporting US pension plans Sreoshi Sarkar Head Retirement Actuarial & Workforce Transformation Deloitte Consulting 21st September 2022
Agenda Introduction to Types of Projects Overview of Pension Projects - Traditional and Special Changing Landscape and Emerging Opportunities Challenges and Learnings Q&A www.actuariesindia.org
Introduction to Types of Projects Special Pension Projects ALM, Experience Studies, Benefit Calculation/Review Funding and Accounting Valuations Pension Plan Employer Health Consulting Employer Cost Analysis & Design Vendor Evaluation Provider Assessment & Implementation Rewards Optimization Talent Insights & Optimization Audits Reviews Pension Plan Audit PENSION ACTUARIAL PROJECTS BROADER REWARDS PROJECTS www.actuariesindia.org
Overview of Pension Projects - Traditional and Special
Traditional Actuarial Projects Funding Valuations Accounting Valuations Compute minimum required cash contributions Annual valuations under Accounting Standards o o (MRC) and maximum tax-deductible contributions such as US GAAP / IAS19 (MTDC) Calculation of Pension Expense and Disclosures o Special Accounting such as Curtailment, Certify plan s funded status o o Funding levels determine at-risk status Settlement, Special Termination Benefits o Funding and Accounting Valuations There may be restrictions on lump sum Assumptions: Discount Rate set by the employer o payments and/or benefit accruals depending by reference to market yields on high quality on funding levels corporate bonds & Mortality per the latest table Assumptions: Discount Rate and Mortality developed by SoA o assumptions mandated by US Internal Revenue Accounting for Other Post Retirement Employee o Services (IRS) Benefit Plans (Medical, dental, vision, disability, Compliance Filings PBGC (Pension Benefit life insurance) and Supplemental Executive o Guarantee Corporation), Form 5500, Non- Retirement Plans discrimination testing (NDT) www.actuariesindia.org
Traditional Actuarial Projects (contd.) Audit Reviews Actuaries work with auditors to test the financials prepared by the client in order to identify potential material misstatements and inconsistencies Assist with several types of audits - Corporate Audits - USGAAP (ASC 715-30, ASC 715-60, ASC 712-10), IFRS, INDAS19, Plan Audits ASC 960, ASC 965, benefit calculation testing, plan provision reviews Review consistency and reasonableness of the preparing actuary s expense and disclosure reports by performing independent calculations Assess appropriateness of accounting treatment for interim measurements, plan amendments and special events such as curtailment, settlement, etc Test appropriateness of actuarial assumptions (Discount rate, long-term rate of return on assets, salary increase, mortality, turnover, retirement, cash balance interest crediting rate, lump sum conversion etc.) www.actuariesindia.org
Special Pension Projects Benefit Calculation/Review Experience Studies Asset Liability Modeling - Perform pension benefit - Analysis of salary scale, - Projection of assets and calculations and estimates withdrawal, retirement, benefit liability on form election, % married, - Prepare statements and deterministic/stochastic mortality, disability assumptions participant communications scenarios - Review done every 3 or 5 years - Carry out independent - Assist the sponsor with for bigger plans reviews of calculations informed policies for prepared by administrator - Analysis of past data along with funding and accounting expectations of future experience. strategies, benefit design Evaluate impact of proposed changes www.actuariesindia.org
Changing Landscape and Emerging Opportunities
Changing Landscape Determination of Discount Rate for Funding Valuations o Pension Protection Act (2006) mandated the use of corporate bond interest rates for DB Plans o Moving Ahead for Progress in 21st Century Act (2012) provided funding relief for plan sponsors by introducing interest rate stabilization corridor o Highway and Transportation Funding Act (2014)and Bipartisan Budget Act (2015) extended and widened the interest rate corridors COVID-19 related relief Impact o Post the Great Recession of 2008, interest rates were at historical lows and use of the Interest rate stabilization lowered the MRC, increased the AFTAP and removed funding- based benefit restrictions o The delay in contributions provided flexibility during the Covid related liquidity crunch Opportunity o Increased consulting opportunities to ensure our clients compliance o Helping clients be compliant to the new regulations and build contribution strategies to save on PBGC premiums o Consulting clients for plan redesigns to reduce the risk on defined benefits driven by volatile interest rates and assets o Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 provided one-time relief by allowing a deferral in 2020 contributions and using the 2019 AFTAP at-risk status for plan year 2020 o American Rescue Plan (ARP) Act of 2021 further extended the corridors and provided further reliefs to reduce MRC www.actuariesindia.org
Emerging Opportunities Plan Redesign De-Risking Plan Termination DB vs cash balance vs DC design DB Plan Freezing past benefits (soft freeze or hard freeze) and moving to alternate options for future benefits: Cash Balance Plan DB Plan with benefit expressed as an account balance which grows with pay based credit and interest credit DC Plan Varied benefits based on contributions made by employee and/or employer Lump sum windows Cost effective means to reduce pension risk Lump sums to deferred participants can be less expensive than buying annuities Reduce administrative costs, including decrease in PBGC premiums Often results in data clean up that eases ongoing plan management Plan administrator may voluntarily terminate the plan in a standard termination due to plan related or business-related reasons Complete wind-down of the plan and distribute plan assets to satisfy all plan benefits under the plan Enables lump sum offer to entire active and termed vested population, secures existing benefits for retirees with annuities purchased Notify participants and file actuarial information with PBGC. Annuity purchases Purchase annuity contract for participants in payment without plan termination Rewards optimization Aligning benefits strategy with workforce preferences www.actuariesindia.org
Challenges and Learnings Things which are working well - - - Providing exposure to a variety of projects Ensuring practitioners are involved in the entire lifecycle of projects Creating opportunities of direct client exposure which was made easier during the times of the pandemic Showing career paths by creating roles for signing actuaries from India Creating a #1 Talent Experience - - Skills Sets o Developing broader consulting skills o Keeping up to date with regulatory changes and industry trends in the US o Lack of US Credentialed Actuaries in the market o Historically most students have pursued IFoA or IAI exams. o Mutual Exemptions with SoA Talent Market o Attrition during the Great Resignation Challenges www.actuariesindia.org
Questions and Answers
