How often should organizations update their actuarial valuations?

Updating actuarial valuations should primarily be done as needed based on benefit changes. This approach allows organizations to maintain an accurate reflection of their liabilities and the funding status of their pension plans or other long-term benefits. Actuarial valuations are complex evaluations that incorporate various assumptions, including demographic changes, investment returns, and benefit modifications.

When benefits are changed—such as increasing benefits, changing eligibility criteria, or any adjustment to the benefit structure—it's crucial to perform an updated valuation. This ensures that the organization adequately reflects the financial impact of such changes and maintains compliance with regulatory requirements.

While annual or periodic valuations can be useful for consistent tracking, they may not capture immediate changes in the financial status resulting from benefit alterations. In some circumstances, informal assessments might be sufficient until formal valuations are strategically beneficial; however, the key is to ensure that significant benefit changes trigger a thorough review to avoid underfunding or misrepresenting financial obligations.

Therefore, the ideal practice incorporates both proactive updates in response to changes and regular assessments on an annual or other periodic basis to ensure ongoing relevance and accuracy of the organization's financial picture.