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Creating an Actuarial Valuation Report

An actuarial valuation report is a comprehensive document that provides an assessment of the financial health and sustainability of a pension plan or other defined benefit plan. It involves calculating the present value of future liabilities, determining the funding status of the plan, and projecting its long-term viability.

Key Components of an Actuarial Valuation Report​

1. Introduction​

The introduction section provides background information on the plan being valued, including its structure, demographics, and any relevant assumptions used in the valuation process.

2. Data and Assumptions​

This section presents the data used to perform the valuation, such as membership counts, salary ranges, and demographic characteristics. It also outlines the actuarial assumptions made, including interest rates, mortality rates, and other factors that impact the calculation of present values.

3. Actuarial Methodology​

The actuary must describe the methods and techniques used to perform the valuation, including any adjustments for amortized cost, market-related value, or other relevant considerations.

4. Present Value Calculations​

This section presents the calculations for determining the present value of future liabilities, including benefit payments, administrative expenses, and other costs associated with operating the plan.

5. Funding Status​

The actuary must calculate the funding status of the plan by comparing the present value of its assets to the present value of its liabilities. This may involve adjustments for underfunding or overfunding, as well as consideration of any relevant regulatory requirements.

6. Sensitivity Analysis and Projections​

A sensitivity analysis involves recalculating the valuation using alternative assumptions to gauge the impact on funding status. Projections are then made based on these calculations to estimate future funding needs and potential outcomes.

7. Recommendations​

The final section presents recommendations for plan management, including suggestions for adjusting contributions, amending benefit provisions, or implementing other measures to ensure long-term sustainability.

8. Appendices​

Any supplementary information, such as detailed actuarial tables, valuation assumptions, or supporting data, is presented in the appendices for reference purposes.