An actuarial valuation is used to determine the annual funding for a defined benefit plan.  A defined benefit pension plan that is subject to minimum funding requirements generally must have an enrolled actuary prepare an actuarial valuation each year.  The actuary will calculate the minimum required and maximum deductible contribution for the year.  The actuary also must calculate the Adjusted Funding Target Attainment Percentage, commonly referred to as the plan’s AFTAP, which compares the plan’s assets and liabilities to determine how well-funded the plan is.

Plans not subject to minimum funding requirements, such as plans sponsored by a Church or a government entity, are not required to have an annual actuarial valuation.  These plans are required by the Internal Revenue Service (IRS) to have an actuarial valuation performed every three years.  However, valuations done less frequently than each year could lead to surprising results, especially in these volatile economic times.

If you have questions about the timing of the valuation process for your pension plan, please contact a Nyhart pension professional.

This article was last updated on December 6, 2011