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EMPLOYEE BENEFITS ACTUARIAL VALUATION UNDER AS 15 (REVISED, 2005), IND AS 19, IAS 19(R) AND OTHER ACCOUNTING STANDARDS MITHRAS CONSULTANTS 1
EMPLOYEE BENEFITS
ACTUARIAL VALUATION
UNDER AS 15 (REVISED, 2005), IND
AS 19, IAS 19(R) AND OTHER
ACCOUNTING STANDARDS
MITHRAS CONSULTANTS
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INTRODUCTION OF MITHRAS CONSULTANTS
About Mithras Consultants:
Mithras Consultants is an independent actuarial and insurance consultancy
firm providing qualitative financial and insurance solution to its clients.
Mithras advantage stems from our ability to bring our experience into our
client advisory services, our team has rich regulatory experience allowing us to
build client solutions centred on regulatory compliance in order to build
forward looking robust internal processes to allow our customers to operate
smoothly and to be a stakeholder in their progress.
Our goal is to provide business solution customized to client‘s need to help our
clients make the best possible decisions on their financial, insurance and risk
management programs. Our team has a combined experience of 5 decades that
spans into areas of Pricing ,Valuation, Investments, Risk Management,
Employee Benefit Valuations etc in Insurance in actuarial field.
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MANAGEMENT TEAM AT MITHRAS CONSULTANTS
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Ms. Sapna Malhotra
Sapna is one of the youngest people in India to achieve Actuarial Fellowship. Her
actuarial experience of around 10 years includes working experience in Product design
and Pricing, statutory reserving and reporting, Solvency-II implementation and reporting,
Modelling, Business Planning, Experience investigation, Asset Liability Management,
Solvency Computation and its reporting, etc. She is also supporting Institute of Actuaries
of India examination system. With exceptional management and technical abilities,
Sapna will take care of all your technical issues at Mithras.
Mr. Ashish Gupta
Ashish has done BSc(H) Statistics and MSc in Staistics from Delhi University. He started
his career with Aviva Life Insurance as an Actuarial Trainee. During his 7 years stay in
Aviva, he worked in almost all the all the actuarial job profiles like pricing, valuation,
data management , reinsurance management. He worked on various projects including
implementation of Reinsurance System in Aviva and the implementation of new policy
administration system in Aviva. He left Aviva as Manager Actuarial and joined MERCER
India Pvt. Ltd as Group Leader. He worked for around 2 years with MERCER and than
left MERCER to pursue his other dreams.
SOME OF OUR CLIENTS
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WHAT IS EMPLOYEE BENEFIT VALUATION
To recognise a liability when an
employee has provided service in
exchange for employee benefits to be
paid in the future
To recognise an expense when the
enterprise consumes the economic
benefit arising from service provided by
an employee in exchange of employee
benefits
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NEED FOR ACTUARIAL VALUATION
Actuarial valuations in India are
mostly done for accounting
purposes - under AS 15 (revised,
2005) and IND AS 19
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GOVERNING ACTS AND REGULATIONS
The Payment of Gratuity Act, 1972
The Employees Provident Funds and Miscellaneous
Provisions Act, 1952 (EPF & MPA)
Accounting Standard (AS) 15 (revised 2005), IND AS 19
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FAQS
Clarification 1- My Company’s employees are 15 in number but it is 4 year
old company, so my company is not required to make provisions under
payment of gratuity act as minimum service required is 5 years;
Answer1- Since Company has more than 9 employees and so provision for
gratuity is to be made from day 1 and minimum 5 year condition is for pay-
out in case of exit (except death and disability where minimum service
condition does not apply) and not for making provision till 5 years. The pay-
out can arise even on day 1.
Clarification 2- Even if provisions of AS15 (R) 2005 do not apply to my
company, is actuarial valuation required?
Answer 2- Even the companies do not fall under categories mentioned in AS
15 ( R) 2005, however companies should consult an Actuary whether they
need actuarial valuation or not. The need for actuarial valuation is
determined by the actuary in consultation with the auditors after assessing
materiality issues. In other words, requirement of actuarial valuation falls
more or less on every registered company.
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FAQS
Clarification 3- My Company has funded the liabilities with an insurance
company and used to get AS 15 valuation certificates from respective
insurance company as they agreed to provide the same. Company used to
ensure that such certificates are signed by a qualified actuary and are
prepared as per the provisions of AS 15 (R) 2005.
IRDAI brought out circular in Dec 2013, where it mentions that Companies
should get the valuation certificate from external actuaries. Going forward
insurance companies would not issue actuarial certificate and if they issue it
would be non-compliance of regulations. Both employer and insurance
company be held responsible.
Clarification 4- Which are the employees’ benefits for which Actuarial
valuation is NOT required?
Defined Contribution pension schemes where no investment return
guarantee is provided
Leaves and other benefits which cannot be carried forward beyond one
year
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ELIGIBILITY Companies covered under AS 15 (revised, 2005)
In its entirety which fall in one or more of following during accounting period;
Enterprises whose equity or debt securities are listed whether in India or
outside India.
Enterprises which are in process of listing their equity or debt securities
as evidenced by the board of directors’ resolution.
Banks including cooperative banks/Financial Institutions
Enterprises carrying on insurance business,
All commercial, industrial and business reporting enterprises, whose
turnover for the immediately preceding accounting period on the basis of
audited financial statement exceed Rs 50 Crore. Here Turn over does not
include ‘other income’.
All commercial, industrial and business reporting enterprises having
borrowings, including public deposits in excess of Rs 10 cr at any time
during accounting period.
Holding or subsidiary enterprises of any of the above at any time during
accounting period,
Any company which do not fall above but on an average has 50 employees
during year, with some exceptions.
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ACTUARIAL VALUATION
We provide services for the following actuarial valuations of
employee's benefits as per statutory requirement of Accounting
Standard 15 (revised) issued by the Institute of Chartered
Accountants of India. We provide actuarial valuation for the following:
Gratuity Liability
Leave Encashment Liability
Sick Leave Benefits
Post Retirement Medical Benefits
Long Service Benefits (e.g. awards given on completion of certain number of years
of service or at retirement)
Health Related Benefits
Disability Benefits
Pension and Other Defined benefits plan
Exempt Provident Fund (those PFs managed in-house and not by EPFO)
Any other employee benefit which fall beyond 1 year, e.g. ESOPs.
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OTHER ACTUARIAL SERVICES
Estimate valuations for future accounting periods
Assumption setting
Experience Analysis- Analysis of employee turnover rates, option take-up rates, Investment performance measurement and analysis
Funding and Statutory Valuations - Setting contribution rates so as to meet specified objectives, Assessment of adequacy of funds
Preparation of run-off plans for closed/discontinued schemes
Statutory funding valuations under US and UK legislations
Asset Liability Management for estimation of: Optimal investment strategy/asset allocation , Costing and reporting of minimum benefit guarantees/underpins
Under Defined Contribution schemes, setting up terms for early/late retirement , commutation and other employee options
Scheme design and alteration
Cost estimation for alternative Defined Benefit designs
Setting contribution rates for Defined Contribution schemes
Conversion from Defined Benefit to Defined Contribution
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BACKBONE OF ACTUARIAL VALUATION
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Employee
Data Assumptions
Benefit Valuation Analysis
Disclosures as per AS15 Revised)
ASSUMPTIONS REQUIRED
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Discount Rate
Salary Inflation and benefits level
including claim processing cost
Rate of return on plan assets
Rate of employees turnover, disability
and early retirement, age
difference
Mortality during service and post
retirement, spouse and dependent
mortality
Assumptions
OUR EXPERTS WILL HELP YOU
Estimate Employee Benefits expense and liability to be
recognized in the financial statements
Project Employee Benefit Obligations for future years
Analyze the employee liability Year on Year
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CONTACT US
Contact Person: Contact Person:
Sapna Malhotra – 09212375418 Ashish Gupta – 09818520021
(Sole Proprietor – Mithras Consultants) (Senior Actuarial Consultant)
[email protected] [email protected]
Website: www.mithrasconsultants.com
Email us at : [email protected]
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