How to tell if you’re paying reasonable fees for actuarial services

the SBA TeamThought Leadership

As a defined benefit (DB) plan sponsor, it can be difficult to determine whether the fees you are paying for actuarial services are reasonable.

These services involve complicated calculations and are subject to the scrutiny and requirements of the IRS, Pension Benefit Guaranty Corporation (PBGC), plan auditors, company auditors and other parties. It’s also hard to anticipate how much effort will be required by the actuary to produce various deliverables—particularly when they involve nonroutine special projects.

Plan fiduciaries have a responsibility to ensure that fees paid from trust assets are reasonable. This article describes some ways to evaluate whether actuarial fees are in line with the services provided.

Routine vs. Non-Routine Services

First, it’s important to distinguish between the two categories of actuarial services.

Routine services are those required to be performed, for example, under the Internal Revenue Code (IRC) or financial accounting standards. Many routine services occur annually—such as actuarial funding and accounting valuations, annual funding notices, Form 5500 Schedule SB filings, PBGC premium filings, proxy disclosures and plan auditor requests—while others occur on a non-annual basis. These non-annual services include nondiscrimination testing, actuarial experience studies and individual benefit calculations.

This is an excerpt. Read the full article in PLANSPONSOR.