Team & Fiduciary Responsibility | Actuary
Role
If you are the actuary, your role is to:
- Calculate contribution levels for defined benefit pension plans and certain employee welfare benefit plans (e.g., a self-insured medical plan funded through a trust).
- Provide any required certifications or reports to the IRS or the PBGC with respect to the plan's funding status and funding methods.
- Assist the plan administrator with the determination of an individual participant's accrued benefit under a defined benefit pension plan.
Your services will be needed if a company plans to institute a defined benefit pension plan, certain types of cross-tested defined contribution retirement plans, or certain self-insured employee welfare benefit plans. You are trained in mathematics and statistics. You review the funding status of the plan and determine the contributions that should be paid to a plan in order to fund the promised benefits as they become payable. You generally are responsible for filing an actuarial certification (Schedule B) as part of a defined benefit pension plan's annual return/report (Form 5500).
Actuary Liability In General
Much like the situation of an attorney or an accountant, an actuary is in business to provide specific plan related services (in this case, actuarial) to plan sponsors and plan administrators. In most cases, the actuary is not a plan fiduciary.
In rare cases, an actuary that exercises discretion and control over the plan, or some part of it, may become a plan fiduciary. The courts often examine the issues of differing fact patterns to determine who is and who is not a plan fiduciary and although they seem to be becoming more and more liberal in their interpretations of facts the underlying rule remains the same. Discretion and control over the plan, its operation and its terms are the keys.
Limiting Actuary Liability
The best way for an actuary to control and limit its ERISA liability is to educate the plan sponsor, the trustee and the plan administrator about their roles regarding the operation and administration of the plan and to make sure it does not make discretionary decisions with respect to the plan. In order to keep the respective roles and duties straight, we strongly recommend that the actuary use a written service agreement that clearly spells out its role, its services, and most importantly, those responsibilities that do not belong to it but rather to the other parties.