What is the primary purpose of actuarial services in pension plans?

The primary purpose of actuarial services in pension plans is to determine the funded status of a plan. Actuaries use mathematical and statistical methods to evaluate the financial health of pension funds. This involves analyzing various factors, such as the longevity of plan participants, expected rates of return on investments, and projected benefit payments. By determining the funded status, actuaries help ensure that the pension plan has sufficient assets to meet its future liabilities, which is crucial for maintaining the plan's integrity and providing security for plan participants.

Understanding the funded status is essential for making informed decisions regarding contributions, benefit structures, and future investments. This assessment helps plan sponsors manage risks and fulfill their obligations to participants while complying with regulatory requirements.

Other activities like managing employee benefits directly, investing funds, or recruiting new plan participants, although important for the overall functioning of pension plans, do not align closely with the core responsibilities of actuarial services. Actuaries play a specialized role focused on the financial projections and sustainability of pension plans rather than these broader operational aspects.