Actuarial Valuation Keys for Corporate Locks

Did You Get Your Pension Plan Valued?

Did you get your pension plan valued ? from KPAC

Manage the financial health of your company and employees with the right actuarial solution

In a market where risks are unprecedented and plenty, businesses are in constant need of efficient consulting actuaries which can manage resources with well-planned investment strategies. KPAC is a leading consulting actuary providing various actuarial and consultancy services. It prepares organizations for the future by assessing risks and lending control over capital and resources.

Pension plan valuation

One of the various actuarial valuation services which KPAC provides is pension plan valuation. In a volatile market situation, it is important to plan ahead of time for a deft management of resources. Accumulating capital and resources for pension plan benefits is a difficult job and consulting actuaries like KPAC are helpful to provide organizations a financial edge.

Actuarial valuation of pension plans is important because it helps organizations to estimate how much funding and investment the plan needs. It also helps to analyze the future in terms of investment returns in the future, retirement age, hike in salaries etc. A comprehensive review of retirement plans is important to ensure the financial health of both employers and employees. Actuaries are therefore important for the financial management of defined benefit pension plans. They recommend transfer values and keep an eye on the scheme’s compliance.

Other services

Apart from pension plan valuation, KPAC provides several other services such as gratuity actuarial valuation, leave availment valuation, long service awards valuation, etc. All these schemes help to secure the future of a company as well as its employees.   

What does an actuarial consultant actually do?

Career Opportunity in Risk Management

Haven’t found your calling yet? Are you still confused about what your career should be? Be it Under-Graduates, Graduates and sometimes even Post-Graduates, everybody faces such struggles

If you are figuring out the answer to your life’s most difficult question- What career would suit your acumen best? We have, for all such students, a developing career preference to be added in your list of choices- Actuarial Consultants or Practicing Actuary.

Actuarial science, simply put, is the application of mathematical and statistical methods to assess the risks of insurance, finance and other professional industries. An actuary is the professional who is trained and equipped mathematically and statistically. 

As a practicing actuary you learn to recognize risks as opportunities and use them to the advantage. You are hired by companies and organizations to deliver actuarial consultations for valuation of liabilities.

Read further, to know if becoming an actuarial consultant is your next step.

You will be ELIGIBLE for admission as a student member you satisfy one of the following criteria.
1.    You should have passed 10+2(HSC) or equivalent with 85% marks in mathematics/ statistics.
2.    Graduates or Post-Graduates with not less than 55% in Mathematical subjects (i.e. Mathematics or any of its branches; Statistics or any of its sub classifications such as Mathematical Statistics and Applied Statistics; Econometrics; Computer Sciences; any discipline of Engineering; subject in Science such as Physics or its branches).
3.    Candidates with CA/ CS/ CWA/ MBA (Finance)/ PGDBA.
4.    Fully qualified members of professional bodies such as the Institute of Charted Accountants of India (ICAI), The Institute of Cost and Works Accountants of India (ICWAI) and Certified Institute Of Financial Analysts Of India (IFAI) And Fellow Of Insurance Institute Of India (III)- Passing With The Subjects Mathematical Basis Of Insurance And Statistics.
5.    A student member of actuarial bodies such as Institute of Actuaries, London; Faculty of Actuaries in Scotland and Institute of Actuaries, Australia.
6.    Students from Society of Actuaries, USA and Casualty Actuarial society, USA , provided that they must have passed at least one subject from these bodies.

DURATION of the course is not finite. Meaning, the time to complete the course is not fixed. Only requirement is that the aspirant has to clear the entrance examination and 15 prescribed subjects.

These examinations are designed with high difficulty levels to determine the qualifications of the examinees.


JOB PROSPECTS

An actuary consultant has typically been understood with relation to insurance sector. But as the economy is developing, in India, companies in the likes of KPAC are expanding the horizons of a practicing actuary. Now, non-insurance sectors are also opening up to actuarial valuations- employee benefits, health insurance, asset-management, reinsurance, insurance broking houses and consulting companies.

REMUNERATION

Khushwant Pahwa, Founder and Consulting Actuary of KPAC, was quoted as saying “Being an actuary consultant pays me well and helps me make a change for people.” A practicing actuary is paid graciously for their hard-work in all the sectors. The salary ranges handsomely from 25,000 per month for trainees and up to 40lac per annum for those in senior positions.

Impressive as well as arduous jobs of actuarial valuation present the professionals with an opportunity to modify the lives of the people.

Leave your Corporate Worries to Actuaries

“Your biggest risk will be the one you don’t take.”

Know what risks to take and when. An actuarial consulting firm coaches you to do just that using mathematical and statistical methods to assess risks. Any organization will need actuaries when their aims align with values in order to achieve equilibrium between earned capital and provision to pay off expected benefits.

The actuary consultancy firms Perform statutory valuations (AS15 actuarial valuation, IAS19, US GAAP and other International Accounting Standards) of your organization's employee benefit schemes so that you stay in compliance with the regulatory standards and manage to plan for the future intelligently.

Need and Importance

Not many companies understand the importance of actuarial valuation in the success of a company. But, as a matter of fact, they participate as a leader in guiding the company through the routes of heights.

•    Assistance in making required contributions: The key purpose of an actuarial valuation is to inform plan sponsors of the amount that needs to be contributed each year to adequately fund benefits. This ensures that actuarially determined contributions are faithfully paid to the plan each year.

•    Assessing the Funding Progress: Actuarial consulting firms use historical information assess funding progress like- Is the funded ratio improving over time? Is the rate of improvement consistent with the employee’s funding policy?

•    Mitigation of Risks: Information from the actuarial valuation by consultancy firms can help your company uncover risk exposure related to the funding of benefits. Actuarial firms helps clients identify these risks and take appropriate and timely action to mitigate them. 

•    Ensuring Reliable Data: For an actuarial valuation to be reliable, the consultants assure that the underlying data is reliable as well. Employers should work closely with the actuaries to ensure that steady information is provided in a timely manner.

•    Validating Methods through Experience Studies: The reliability of an actuarial valuation also depends on the use of reasonable methods and assumptions.  Experience studies are performed to help to ensure the assumptions are in line with the plan’s demographic and economic experience. This aids in or can be used as a guide to make necessary changes.

Actuarial valuations are also done for calculating contribution rate for funded schemes and during mergers & acquisitions. The case for employees liabilities e.g. gratuity, leave encashment etc. are similar to that of adding depreciation.

Gratuity liability accumulates due to services rendered by the employees during the year. This liability also increases on account of the following reasons listed below:

•    Increase in salary
•    Time period of retirement gets reduced by 1 year.

Gratuity is payable on exit after 5 years of service, actuarial valuation takes care of this contingency also with the help of attrition rates. Finally gratuity is payable on death also irrespective of length of past service. Actuary during actuarial valuation applies appropriate mortality rates to provide for financial effect of likelihood of earlier payment on death of an employee.

Actuaries rely on the discreet changes in the industry and their consequences. Therefore, actuaries consulting firms’ functions toy around the unexpectedness and relative results.

Why do you need to consult an actuary?

Markets are dynamic and suffer gains and losses continuously. In the competitive market, an organization has to be careful with what steps it takes so that they changes in the market result in minimized loss and maximized profit. You literally need to look into future to prevent hefty losses that can result from the highs and lows in the market.

This is not an easy task and one may have to look for individuals that specialize at predicting the future market scenario by analyzing the one of today. Actuaries are such people, and every organization must associate with them.

Read on to figure out what an actuary is and why do we need them.

•    What are actuaries?

Actuaries, also known as financial architects and social mathematicians; work to figure out the cost of future market risks. They are able to do so with the help of their unique combination of analytical and business skills that helps them to solve a variety of social and financial problems. Consulting an actuary helps you make sense of your financial future because they apply mathematical models to problems of insurance and finance.
Need for individuals practicing actuary:

1.    They predict the future losses a scenario can make. For instance, a hurricane hits your city and you need actuaries to develop insurances and policies to compensate such losses in the future.
2.    You need a balance between accumulating capital and building provisions to pay off the expected benefit payments accruing to employees in their productive lifetime. Actuaries give you that financial edge that lets you get and retain the best talent.
3.    They help you evaluate employee benefits and retirement plans,
4.    Develop funding and investment strategies, and,
5.    Design employee benefit schemes.

Actuaries valuate your employee policies and company expectations to yield the best results.

•    What are actuarial gains or losses?

Actuarial valuations will lead you to a couple questions: what is actuarial gain/loss? What are factors influencing it?

Actuarial gain or loss is the increase or decrease to a company’s estimate of the present value of obligation because of either change in assumption or experience adjustment/variance.

1.    What does change in assumptions cause?
Actuarial variations are based on various categories:

• Financial assumptions: Including discount rate and salary growth rate. This depends on the present economic scenario as well as the plans of the organization for the future.

• Demographic assumptions: Includes attrition rate and mortality rate. Usually depends upon organization’s HR policy, past experiences and expectations from the future.

The changes in assumptions cause a change in actuarial prediction, which might be a gain or loss (depending upon the change).

2.    How does experience adjustments/variance affect the actuarial variations?
In this case, the actual and the assumed scenarios are compared.
For instance, if the assumed salary escalation was 8% but the actual was 12% this would’ve been an actuarial loss and vice versa.

Since an organization functions on the actuarial assumptions, our goal is to minimize the actuarial losses. But how is this done?

Except discount rates, all other factors are determined by management, in consultation and concurrence with actuaries and auditors respectively. Hence, one needs consulting actuaries or associate with practicing actuaries to strengthen the process of consultation and concurrence.

Consulting actuaries can help you tackle future market difficulties with greater ease. Most organizations hire actuaries from other companies and some practicing actuaries can be hired as employees to work for your organization specifically.

How to Manage Employees Financial Needs

How to Select Best Actuarial Consulting Firm

Actuarial Valuations Benefits

How to Hire from Various actuarial consulting firms?

Actuarial consulting firms are specialists in predicting the future events in finance sector of a country. They help in reducing the impact of unwanted future events and at the same time help companies and individuals to plan well in advance for the future events.

•    It is highly essential to estimate what kind of actuarial valuation services you are looking forward to. This will help you understand different kinds of services actuarial consulting firms offer and which one is going to work the best for you.

•    If you are dealing in insurance sector, you must look for actuarial firms which offer relevant services. This may include underwriting and risk involved for potential clients. Reducing the impact and predicting the impact of new legislations on insurance sector will help you in procuring better clients.

•    The consultants are also ideal for businesses to ensure the best pension plans for their employees. These plans aim at funding individuals in the company even after retirement.

•    Location of your actuarial consultant is another major concern when it comes to choosing from wide range of actuarial consulting firms. Some of you may be comfortable communicating through email or Skype and location may not be a big concern, however, some may feel the need hire them in proximity.

•    Each organization has its own repute for providing services. You can consult these organizations and ask for ideal actuarial consultant who has worked closely and efficiently well for them.

An ideal actuarial consultant is the one who helps his clients to save money in the best possible manner, helps in avoiding risks from future market scenarios and at the same time suggest ideal solutions for the employees of your organization as well.

How To Gradually Build A Nest Egg?

How To Gradually Build A Nest Egg from KPAC

Actuarial Valuation of Leave Encashment

Gratuity valuation for a security and sanctity of employer-employee relation

 

What is gratuity?

An end-of-contract gratuity is a certain sum of money put aside by the employer to be paid at the end of employment period. A Gratuity is a lump sum payment that is essentially payable by the employer and acts as a financial security and buffer at the time of employee’s retirement.

Present perfect

Employers have to build a corpus so that payments accruing in the future can be paid easily without causing an unnecessary burden on the financial resources. Finances have to managed from the present day itself so that the future can be planned intelligently. A company is required to not only calculate future exigencies but also to put apart a sum and invest it properly so that the entitlements can be paid off easily. This calls for proper management of finances and the unpredictable future.

A Practicing actuary is able to help a company manage the payables arising in the future through planning and management. Actuaries help calculate  the present value of due payments and manage the uncertainties arising in the path of building a comfortable corpus.

Future Planning  

Gratuity, leave encashment, pension funding and other compensations payable across the spectrum of employee’s lifetime of employment and beyond are a necessity that has to be fulfilled by the employer. The law requires the company to set aside funds so that an employee can attend to his personal and family needs arising in the future. Gratuity valuation helps companies cover volatile circumstances with planned investments so that employees can be paid their due recompense.

Employee Benefits Actuarial Valuation

Benefits of KP Actuaries and Consultants

Actuarial Valuation

Founder as well as consulting actuary of KPAC, Khushwant Pahwa is a qualified actuary practising for years and is also the appointed actuary working with Iffco-Tokio General Insurance Company. KPAC are your actuarial consultants who can help in various areas where actuaries are required and actuarial valuation is one amongst them. KPAC helps in performing the valuations of actuarial according to Accounting Standard 15 (AS 15) and US GAAP along with several International Accounting Standards. PAC can help you with the following with respect to actuarial valuation: 

1. Calculate Balance Sheet Liabilities 
2. Calculate expenses in order to get recorded in Profit & Loss account 3. Support in determining assumptions (supported by our research of the companies listed with us) 
4. Checking the data thoroughly (offering a data quality report) 
5. Ensure strict delivery Turn Around Time(TATs) 
6. Provide valuation results as per employees (closing liability) 
7. Assist in midyear valuation if there is major fluctuations in the rate of discounts 
8. Engage in qualitative discussions with your auditors if required

Apart from this, our team can assist you to: 

• Design employee benefit schemes like structuring as well as restructuring of employee benefit schemes keeping in mind the ambit of local markets, legal restrictions and tax deductions. 

• Developing the strategies for investment and funding i.e. understanding as well as measuring the key risk drivers along with their impact on scheme funding and mange the interaction from funding to investment strategies.

KP Actuaries and Consultants

AS 15 Actuarial Valuation

KP Actuaries and Consultants can assist you in performing AS 15 actuarial valuation of various defined benefit plans (actuarial valuation of gratuity). We provide actuarial valuation of gratuity and other benefit plans so that you are able to fulfil the responsibilities of employer-employee relationship within the regulatory framework. Actuarial valuation of gratuity is performed generally in line with Payment of Gratuity act 1972, but we can also assist in AS 15 actuarial valuation in case companies follow a different gratuity policy. We provide actuarial valuation for gratuity under various accounting standards, such as AS 15, IAS 19, US GAAP. 

AS 15 actuarial valuations are usually performed for various defined benefit plans, such as –

• Actuarial valuation of gratuity
• Defined Benefit Pension Plans valuation
• Actuarial valuation of Leave Encashment (Privilege/earned/sick/others)
• Leave Availment valuation (Privilege/earned/sick/others)
• Long Service awards valuation
• Provident Fund valuation (in case of employer managed trusts)
• Deferred Bonus/Benefits valuation
• Post-Retirement Medical Benefit Schemes (PRMBS)

kp actuaries and consultants

Actuarial Valuation and Actuarial Valuation of Leave Encashment

Actuarial valuation of gratuity and actuarial valuation of leave encashment both form a part of AS 15 employee benefit plans. 

Actuarial valuation of gratuity and actuarial valuation of leave encashment includes –

• Calculating expenses that should be recorded on Profit and Loss statements
• Calculating Balance Sheet Liabilities

In doing above, we help you with determining the correct value of the benefits offered.We assist you in determining assumptions for both Actuarial valuation of gratuity and actuarial valuation of leave encashment, based on your experience and factors relevant to you, so that the charge to P&L and liability in Balance Sheet is neither over stated nor understated. At KPAC, we help you quantify and understand the key risk drivers and their impact on scheme funding as well as the interaction between funding and investment strategies. 

Actuarial valuation of gratuity is usually a defined benefit plan whereas actuarial valuation of leave encashment is usually treated as long term employee benefit plan.

AS 15 Employee Benefits

KP Actuaries and Consultants can assist you in performing AS 15 employee benefits actuarial valuation so that your organization stays in compliance with the regulatory requirements and is able to plan the future more intelligently. The major AS 15 employee benefit plans that require actuarial valuation are –

• Gratuity actuarial valuation
• Defined Benefit Pension Plans valuation
• Actuarial valuation of Leave Encasement (Privilege/earned/sick/others)
• Leave Av ailment valuation (Privilege/earned/sick/others)
• Long Service awards valuation
• Provident Fund valuation (in case of employer managed trusts)
• Deferred Bonus/Benefits valuation
• Post-Retirement Medical Benefit Schemes (PRMBS)
  
AS 15 employee benefits (Pension plan valuation) is performed to assess the long term liability or cash flows that the company might expect.

KP Actuaries and Consultancy

KPAC (Actuaries and Consultants) is an actuarial consulting firm working and providing solutions in various actuarial practice areas including:

• Employee benefits (including carrying out valuations under AS15 and IAS19),

 • Insurance (Life insurance as well as general insurance), 

 • Outsourcing and actuarial talent management (currently brewing)

All the actuarial consultants in the team work in close tact with the consulting actuary and endeavor to develop solutions that work seamlessly for your business. Endeavor

of KPAC (actuarial consultants) is to provide consultancy services with focus on value addition for each client. 

Khushwant Pahwa is a qualified actuary and is also the founder of the KP Actuaries and Consultants (Consulting actuary). KPAC is an actuarial consulting firm working in diversified areas of actuarial practices. KPAC has a team of experienced actuarial consultants. Khushwant Pahwa also has been an actuarial consultant for various companies in the past and is also an actuarial consultant (Appointed Actuary) for IFFCO TOKIO General Insurance Company.

KPAC – Actuarial Valuation Services

KPAC is an actuarial consulting firm providing service in areas requiring actuarial specialization, such as –

• Designing and actuarial valuation of employee benefits scheme (AS 15 / IAS 19 and other international Accounting Standards)
• ESOP structuring and valuation
• Developing funding and investment strategy

KPAC is a knowledge intensive consulting firm which operates and delivers actuarial valuation services with an endeavor to ensure value addition. KPAC follows standard employee benefits actuarial valuation metrics which can help an organization manage future expectations with preparation. KPAC provides actuarial valuation of gratuity and other valuations so that you are able to fulfill the responsibilities of employer-employee relationship within the regulatory framework. 

We work within the parameters of the law to create perfect conditions that helps you manage employee expectations with ease. With its domain expertise, KPAC can help you quantify and understand the key risk drivers and their impact on scheme funding as well as manage the interaction between funding and investment strategies. KPAC can also assist you in structuring and restructuring of employee benefit schemes within the ambit of local markets, tax and legal restrictions and align them to your human resource and financial needs.

Gratuity Valuation

Actuarial & Gratuity Valuation services

Gratuity Actuarial valuations in India

Actuarial Valuation Leave Encashment

Actuarial valuation of leave encashment from KPAC

Actuarial Consultants at KPAC

Kpac actuarial consultants from KPAC

Gratuity Valuation

Khushwant Pahwa is a qualified practicing actuary, who is also the founder and consulting actuary for KPAC. Besides being a practicing actuary, he is also the appointed actuary with Iffco-Tokio General Insurance Company. KPAC can assist in diverse actuarial specialization areas, and gratuity valuation is amongst one of those. KPAC can assist in in performing gratuity valuation as per Accounting Standard 15 (AS 15), International Accounting Standard 19 (IAS 19), US GAAP and various other International Accounting Standards. With respect to the gratuity valuation, KPAC can assist you in the following –

• Calculating expenses to be recorded in the Profit and Loss account,
• Calculating Balance Sheet Liabilities,
• Ensuring thorough checking of data (and providing a data quality report)
• Supporting in determination of assumptions (backed by our in house research of listed companies)
• Ensuring strict delivery Turn Around Times (TATs) – we look to provide the report within 3 working days of
• provision of correct data
• Engaging in qualitative discussions with your auditors, in case the need arises
• Assistance in midyear valuations in case of significant downwards fluctuations in discount rates.
• Providing employee wise valuation results (closing liability) in excel format (in case required)

Besides gratuity valuation, the team can also assist in the following –

• Designing of employee benefit schemes, i.e. structuring and restructuring of employee benefit schemes within the ambit of local markets, tax and legal restrictions and align them to your human resource and financial needs.
  
• Developing funding and investment strategies, i.e., understanding and quantifying the key risk drivers and their impact on scheme funding as well as manage the interaction between funding and investment strategies.

Actuarial Valuation of Gratuity and Actuarial valuation

Actuarial valuation of gratuity and actuarial valuation of leave encashment from KPAC

Actuarial Valuation - Gratuity Valuation