WRERA You Thinking the Same Way I Am?

[Andy the Actuary]

WRERA applies as if part of PPA. So, the following question arises. Actuary "A" performs the 2008 actuarial valuation and AFTAP certifications of a January 1, 2008 valuation for a calendar year plan as 90% and got all this done by March 31. Actuary "A" couldn't not take it any more and retired suddenly but is still around to bridge transition and clean up loose ends. Actuary "B" was retained going forward.

The issue is why should the client have to pay to redo 2008 valuation [though most of the heavy lifting (e.g., determination of Funding Target) has been done? The result of redooing the valuation is that the employer will have made excess contributions since the redoo will reduce the 2008 minimum. So, why not let the sleeping dogs lie, have the employer elect not to redo the valuation [the election feels good but there is no legal basis], let Actuary "A" just sign the 2008 SB, and then Actuary "B" recognizes the 92% funding target when he/she determines the 2008 amortization charge and remaining base in 2009?

How should Actuary "B" proceed? Please vote.

[Effen]

I think WRERA causes us to redo a lot of 2008 valuations. Whoever signs the 2008 SB would be responsible. If actuary A refuses to redo and signs the SB, then I think actuary B has a problem. I suppose worse case would be that actuary B would need to redo 2008 and footnote the 2009 SB showing why the COB/PB are different than previously reported. Just like with credit balances, Holland always said if you certify the credit balance on the Schedule B, you are accepting all prior work as valid. If you know it was not correct, you have an obligation to fix it.

Who pays for this is a different question. Granted, if actuary A is retireing he doesn't have much incentive to do the right thing, but certifying something you know is incorrect seems like bad answer for a lot of reasons.

It is a shame that there will be added costs due to WRERA, but that is the cost of relief. Tell the client to thank his Congressmen at the next election.

[Andy the Actuary]

Tell the client to thank his Congressmen at the next election.

I will take this advice. But, first please provide your name and address as my client will be looking for a new EA.

Seriously, I agree with what you advocate. There was an actuary in town who simply made up numbers, was ultimately disenrolled, but kept signing Schedule B's nonetheless. I refused to take over any cases that he had worked on because it meant going back to day one and redoing all the work. The only way this is palatable to the client would be if it is demanded by the IRS. In the past, on a takeover it was incumbent upon the new actuary to replicate the preceding actuaries valuation within a 5% tolerance or it was deemed a change in cost method. With PPA, how can there be a change in cost method when PPA prescribes the cost method?

[flosfur]

...... The result of redooing the valuation is that the employer will have made excess contributions since the redoo will reduce the 2008 minimum. .....

How should Actuary "B" proceed? Please vote.

Since the revised calculations create a pre-funding balance and "not a deficiency" and as long as the amount contributed and deducted is less than the maximum permissible, I don't see why Actuary B should have any reservations about signing the Sch SB with zero pre-funded credit balance? This is a no harm, no foul situation!

But the client may want to have irt redone so there is a credit balance which can be used to reduce future years' minimum.

By the way, what part of the WRERA created this problem?

[david rigby]

Maybe. What if the client has not yet contributed its 2008 PY contribution, and wants the absolute minimum? The result will not produce any prefunding balance? Does that not require some revision?