What is an actuary?
An actuary is a specialized, mathematical expert highly trained to compute values for present and future events. Actuarial present value converts future occurrences, such as retirement payments, to a present value. A present value calculation is used to compare retirement plans with other marital assets in a divorce.
Understanding both how pensions work and the actuarial process of how benefits are paid can be beneficial to the performance of pension valuations and the drafting of Division Orders including Qualified Domestic Relations Orders (QDROs). The implications of an actuary's in-depth plan understanding can possibly add insights that a non-actuary might miss regarding your case's particular scenario. These possible insights could have significant effect on present value calculations and support in QDRO drafting.
Since the divorcing employee may not be currently eligible to retire, plans will not estimate what the retirement benefit will be. Plan managers advise their employees to find a qualified actuary to prepare a present value computation of benefits:
"A qualified private actuary should prepare computations of the total (and marital) actuarial value of retirement benefits. Such computations require application of various economic and mortality assumptions and are beyond the scope of an employing agency or the OPM responsibility."Keith J. Netto, Mgr., Benefits, US Postal Service, August, 2005.
Why are actuaries a valuable resource to attorneys?
The attorney may choose to obtain the services of a competent specialist such as an actuary. An actuary will know how to enhance or protect the benefits for one or both parties through knowledgeable application of plan provisions. The expert guidance and insightful solutions of an actuary is a valuable resource to the attorney in this regard.
Actuaries who specialize in this area, such as the actuaries at Pension Analysis Consultants, Inc., have performed many thousands of valuations and qualified domestic relations orders of all types. This powerful experience base with all kinds of companies and plans can be a strong resource to the divorce attorney.
The actuary does not practice law but depends on the attorney for guidance on statutory and appropriate case law in any given matter. Courts have found the actuary to be competent for expert testimony because of their experience, expertise and ability to interpret and effectively communicate actuarial concepts.
How is an actuary different from an accountant?
An accountant is not an actuary. Accountants traditionally view facts and data in a historical context for their analysis. Actuaries replace after-the-fact knowns with present or future values.
Is an actuarial firm an actuary?
Professionals from other fields may have acquired minimum actuarial skills. Together with some knowledge of the legal bases for valuations, they may represent themselves as qualified actuarial experts. An appraisal firm may call itself "an actuarial firm." But upon examination of the credentials of the staff, if they have no actuaries, and have no actuarial credentials, then they are not an actuarial firm, nor are they actuaries.
