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Actuaries & Defined Benefit Plans: Guardians of Financial Certainty

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Written by Mark Fishman

Traditional pension plans have long been recognized as a core of retirement financial stability. However, due to their intricacy, these programs require a helping hand, a guardian of financial security. That guardian is an actuary—a skilled professional who plays a key role in designing, managing, and valuing Defined Benefit plans. Defined benefit plans fall into two types: Traditional and Cash Balance.

The Crucial Roles of Actuaries in Defined Benefit Plans

Plan Design

Actuaries work closely with plan sponsors to create benefit structures. These structures balance the needs of both employers and employees. This involves crafting formulas determining benefit growth rates, retirement ages, and other key variables.

Funding Strategy

Actuaries perform complex calculations to ensure the plan is adequately funded to meet future benefit obligations. They consider factors like investment returns, employee demographics, and regulatory requirements to strike the right balance.

Risk Management

All Defined Benefit plans carry financial risks, particularly related to investment performance and changing economic conditions. Actuaries help plan sponsors develop risk management strategies to mitigate these uncertainties.

Regulatory Compliance

Actuaries ensure that Defined Benefit plans comply to all legal requirements. This includes funding, reporting, and participant disclosures. Failure to comply with regulations can lead to severe penalties.


Actuaries conduct crucial valuations to assess the plan’s financial health. They determine whether the plan has sufficient assets to cover its liabilities and recommend any necessary adjustments.

The Future of Defined Benefit Plans

As the retirement landscape changes, actuaries play an essential role in adapting Traditional Pensions and Cash Balance Pension Plans. They provide guidance on plan freezes, terminations, and conversions to hybrid designs, serving the best interests of both plan sponsors and participants. •

About the author

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Mark Fishman

Practicing in Los Angeles since 1982 specializing in the creative design, implementation and administration of Defined Benefit, Cash Balance, 401(k) & Profit Sharing Plans. Mark is a licensed Enrolled Actuary and Shareholder-Partner of Actuaries Unlimited, Inc. He is also a Fellow in the Conference of Consulting Actuaries (CCA), a member in the American Society of Pension Professionals & Actuaries (ASPPA) and a Member of the American Academy of Actuaries (AAA). Mark has also taught classes for ASPPA and lectured for CPA and CFP continuing education seminars.

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