US. New Actuary Rule for Assessing Pension Risk Kicks In
ASOP 51 requires looking at potential risks to plan’s future financial condition.
A new actuarial standard in the US took effect November 1 that requires pension plan actuaries to factor in potential risks that “may be reasonably anticipated to significantly affect the plan’s future financial condition.”
For many plan sponsors and actuaries who have already been performing this due diligence, it will be business as usual; however, for others, it may require a lot of extra work, but should provide a more thorough risk analysis of a pension plan.
Actuarial Standards of Practice (ASOP) 51, as defined by the American Academy of Actuaries’ Actuarial Standards Board (ASB), provides guidance to actuaries when measuring obligations under a defined benefit pension plan, and when calculating contributions. The new rule requires the assessment and disclosure of the risk that actual future measurements may differ significantly from expected future measurements.
“Any good actuary does this already,” Bob McBride, vice president of work space solutions at Transamerica, and a certified actuary, told CIO. “The standard is just making it a formal item that we’re obligated to incorporate in our practice. We [Transamerica] already provide that information, but this will memorialize it in case anyone questions if we were meeting the standard.”
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