Retirement Plan Administrator
Blue Ridge ESOP Associates
(Charlottesville VA / Telecommute)
Retirement Plan Consultant
Cetera Retirement Plan Specialists
Retirement Plan Administrator
Steidle Pension Solutions, LLC
(Lebanon (Hunterdon County) NJ)
“BenefitsLink continues to be the most valuable resource we have at the firm.”
-- An attorney subscriber
The report supports a variety of needs including determining the annual cost of your retirement plan and the claim on existing assets that the employees (and in some cases, former employees) have related to retirement benefits promised to them. There are various rules and limitations on how the numbers are to be produced and what external factors must be taken into account. Most are not ones that you, the client, are familiar with.
You are probably not going to thoroughly check your report.
So, how do you comfort yourself that the numbers you stand behind are correct?
We suggest several approaches:
(i) Insist that the report be signed by the professional supervising the work, not the subordinate who may have actually done the work. While accounting firms sign as firms, we believe they are the only firms that do so. If an actuary does not sign your report, it is not an actuarial report.
(ii) Look for appropriate credentials in the professionals supervising your work. While a Ph.D. is impressive, it means nothing on a report purporting to be an actuarial report unless the professional is also an actuary. Actuaries can have a lot of designations, but the most universally recognized one is FSA or Fellow of the Society of Actuaries.
(iii) Insist that your advisors tell you of errors while using the report for their own needs. While typographical errors can usually be ignored, those stating different actuarial assumptions than were actually used should be cause for alarm. If a discount rate of 4% was used, the row title shouldn't say 5.5%!
(iv) Look for cross-foot errors and be suspicious of a report that does not have enough redundancy to permit their discovery. Also, one should not have to know the sponsor's fiscal dates to know what the various measurement dates are in the report. Be suspicious of "this year/next year" type terminology.
(v) Insist on a detailed analysis of liability gain and loss. Not only does this help give you confidence in the report, it tells you and your advisors how well the non-financial actuarial assumptions are doing - especially the salary increase assumption.
Be confident in your report!
Unlike the U.S., Japanese sponsors still have the opportunity to provide benefits that vary significantly according to the reason for termination. Although death, disability, involuntary severance and "age" retirement typically draw the same benefit based on pay at the event and service to that point, some plans do provide benefits that differ.
Furthermore, the typical disability situation presents us with a disabled employee staying off work anywhere from a month to several years at full pay and benefits before the retirement plan makes a payment. Part of the cost of the pay and benefits are covered by Government incentives and the company benefits enormously if the employee recovers.
But, the typical self-insured situation will see very little attention being paid to the employee to help him get back on his feet; the company has too many other things to worry about. While it would benefit the company, if large enough, to hire a firm to assist with employee recovery, we have not seen a market for such services in Japan. Few companies would be large enough to be able to justify hiring and training their own people to do this work.
Interestingly, though, there are firms that pay particular attention to disabled employees and seriously try to get them on their feet again. These firms are the disability insurers. Since they can improve their bottom line by getting people off disability and back to work, they pursue this work assiduously! Through a combination of setting proper insurable limits for benefits and regular physician checkups and sometimes therapy, appropriate attention is paid to disabled employees and they are encouraged to return to work.
You have been reading the online edition of LIA $FACTS$, the monthly fax newsletter of Lohmann International Associates. For further information, please visit our home page on the Web or send e-mail to Les Lohmann.