Definition
An Enrolled Actuary is a professional actuary who has been accepted by the Internal Revenue Service (IRS) and the Joint Board for the Enrollment of Actuaries. Enrolled actuaries are authorized to perform a variety of tasks, including certifying the funding adequacy of pension plans. Their signature is specifically required on IRS Form 5500 to ensure that the pension plan complies with federal tax laws and regulations.
Examples
- Pension Plan Certification: An enrolled actuary ensures that a company’s pension plan is sufficiently funded and complies with regulatory standards.
- Form 5500 Filing: This form is required by the IRS and the Department of Labor, and an enrolled actuary must sign it to validate various actuarial statements.
Frequently Asked Questions
What qualifications does an enrolled actuary need?
An enrolled actuary must pass specified exams and meet experience requirements set by the Joint Board for the Enrollment of Actuaries. This often includes several years of professional actuarial experience in pension planning.
No, only an actuary who is enrolled by the Joint Board for the Enrollment of Actuaries and accepted by the IRS can sign Form 5500.
What are the primary responsibilities of an enrolled actuary?
An enrolled actuary calculates the funding requirements of pension plans, prepares actuarial valuations, and ensures compliance with relevant statutes and regulations.
A pension plan generally must file Form 5500 annually to report its financial condition, investments, and operations.
Are there continuing education requirements for enrolled actuaries?
Yes, enrolled actuaries must meet ongoing continuing education requirements to maintain their enrolled status.
Actuarial Science
Definition: Field of study that assesses risk in insurance, finance, and other industries through mathematical and statistical methods.
Defined Benefit Plan
Definition: A type of pension plan in which an employer promises a specified pension payment upon retirement, based on employee earnings and years of service.
Pension Plan
Definition: An arrangement to provide individuals with an income when they are no longer earning a regular income from employment, typically after retirement.
Definition: A report filed with the IRS and the Department of Labor, including information about employee benefits plans, to ensure compliance with ERISA.
Online References
- Internal Revenue Service (IRS) - Enrolled Actuary Information
- Employee Benefits Security Administration (EBSA) - Form 5500 Instructions
Suggested Books for Further Studies
- “Actuarial Mathematics for Life Contingent Risks” by David C.M. Dickson, Mary R. Hardy, and Howard R. Waters
- “Pension Mathematics for Actuaries” by Arthur W. Anderson
- “Fundamentals of Private Pensions” by Dan M. McGill and Donald S. Grubbs
Fundamentals of Enrolled Actuary: Actuarial Science and Pension Plan Basics Quiz
### What must a professional obtain to become an enrolled actuary?
- [ ] A bachelor's degree in mathematics
- [x] Enrollment by the Joint Board for the Enrollment of Actuaries
- [ ] Certification from the IRS directly
- [ ] A master's degree in actuarial science
> **Explanation:** To become an enrolled actuary, a professional must be enrolled by the Joint Board for the Enrollment of Actuaries after meeting specified exam and experience requirements.
### Who can sign IRS Form 5500 besides an enrolled actuary?
- [ ] Any CPA
- [ ] Any licensed attorney
- [x] No one; only an enrolled actuary can sign
- [ ] Any certified financial advisor
> **Explanation:** Only an enrolled actuary is authorized to sign IRS Form 5500 to ensure compliance with federal tax regulations for pension plans.
### What primary role does an enrolled actuary serve concerning pension plans?
- [ ] Investment advising
- [ ] Tax filing for individuals
- [x] Certifying the funding adequacy of pension plans
- [ ] Property appraisal
> **Explanation:** An enrolled actuary primarily certifies the funding adequacy of pension plans to ensure they comply with regulatory requirements.
### How frequently must a pension plan file Form 5500?
- [x] Annually
- [ ] Every six months
- [ ] Every two years
- [ ] Only upon establishment
> **Explanation:** A pension plan must generally file Form 5500 annually to report its financial condition, investments, and operations.
### Which body, in addition to the IRS, requires the filing of Form 5500?
- [ ] The Securities and Exchange Commission
- [x] The Department of Labor
- [ ] The Federal Reserve
- [ ] The Federal Trade Commission
> **Explanation:** Form 5500 is required to be filed with both the IRS and the Department of Labor to provide information about employee benefits plans.
### What ongoing requirement must an enrolled actuary meet to maintain certification?
- [ ] Annual IRS audit submission
- [ ] Filing quarterly reports
- [x] Continuing education requirements
- [ ] Professional affiliation with an actuarial society
> **Explanation:** Enrolled actuaries must meet continuing education requirements to maintain their authorization to practice.
### What does the Form 5500 aim to report?
- [ ] Personal income of employees
- [ ] Company profits
- [x] Financial condition, investments, and operations of pension plans
- [ ] Corporate investments
> **Explanation:** IRS Form 5500 reports on the financial condition, investments, and operations of employee benefits plans to ensure compliance.
### What authority does the Joint Board for the Enrollment of Actuaries have?
- [ ] Overseeing retirement benefits for government employees
- [x] Certifying and enrolling actuaries who meet required standards
- [ ] Auditing financial reports
- [ ] Setting accounting standards
> **Explanation:** The Joint Board for the Enrollment of Actuaries certifies and enrolls actuaries who meet its standards, allowing them to sign compliance documentation like Form 5500.
### Can a person without actuarial experience become an enrolled actuary?
- [ ] Yes, with a relevant degree
- [ ] Yes, by passing the required exams
- [x] No, experience is required in addition to passing exams
- [ ] Yes, if employed by the IRS
> **Explanation:** Both professional actuarial experience and passing the required exams are essential to becoming an enrolled actuary.
### What does an actuary generally assess in the context of pension plans?
- [ ] Stock market movements
- [x] Risk and funding adequacy
- [ ] Employee job satisfaction
- [ ] Compliance with foreign labor laws
> **Explanation:** Actuaries assess risk and funding adequacy, particularly focusing on whether pension plans have sufficient funding to meet future obligations.
This detailed overview and quiz should help you better understand the role, responsibilities, and requirements of becoming an enrolled actuary.
