June 30, 2015
By Denise Finney, CPA
Top Employee Benefit Plan Tips for July
Plan sponsors of defined benefit plans are gearing up for their plan audits. Before the actuarial valuation and actuarial census are finalized, plan sponsors should review key data to ensure the information is complete and accurate.
Plan sponsors are responsible for providing an employee listing to their actuaries along with updates each year for new employees, terminated employees and retirees. This listing is called the actuarial census. The participant data provided generally includes date of birth, date of hire, date of participation, date of termination, date of retirement, gender, and other key plan benefit data that is used to determine benefits (e.g., compensation or job description). It is important for plan sponsors to review the information to ensure that all eligible employees are included and that the data regarding each participant is correct, as this information is used by the actuary to determine the benefit obligations, required contributions, and benefit amounts.
Plan sponsors are also responsible for reviewing the actuarial methods and assumptions with the actuary prior to completion of the valuation and challenge whether the factors used in the valuation are reasonable based on changes in the plan, prior year factors, demographics of the participants, etc. Two significant assumptions that should be reviewed are the discount rate and life expectancy of the participants. The new RP-2014 mortality tables and the mortality improvement scale MP-2014 were issued at the end of 2014 by the Society of Actuaries. Plan sponsors should determine whether the plan’s mortality table should be updated to RP-2014 based on the life expectancy of the plan’s participant population.
Recap of Top Employee Benefit Plan Tips for July:
- Review the actuarial census to ensure all eligible employees are included
- Review the actuarial census to ensure participant data is accurate
- Review the actuarial methods and assumptions and determine if they are appropriate
- Determine whether or not the plan’s mortality table should be updated to RP-2014