The social security institution calculates benefit entitlements according to the provisions of the laws and regulations governing the scheme. All actuarial calculations necessary to calculate benefit entitlements are carried out in accordance with generally accepted actuarial principles, and an appropriate peer review process is established.
The role of the actuary may include the calculation of benefits as well as the determination of certain factors required for the determination of benefit amounts. This guideline should be read in conjunction with Guideline 14 and with Guideline 19 of the ISSA Guidelines on Information and Communication Technology.
Guideline code
ACT_01500
Mechanism
Mechanism
- The social security institution should put in place the necessary procedures to ensure that the data used for the determination and calculation of benefits are complete, accurate and verified. Key data used for benefit statements should be summarized to allow the beneficiary to check that they are correct. This may include date of birth, family status and salary and contribution records.
- Calculation of benefit entitlements should be, as much as possible, automated to avoid manual data entries and the incorrect application of formulae or benefit factors. However, there should be appropriate reasonableness and random manual checks of such calculations to ensure accuracy. All manual data entries and calculations should be checked by other administrative and/or actuarial staff. The actuary should assist in the development of calculation modules and benefit factors. The ISSA Guidelines on Information and Communication Technology provide more details regarding the quality of data to be used and how the processing of this data should be managed.
- In order to mitigate any reputational risk, the social security institution should formulate the policy concerning the way errors in benefit calculations are addressed. If an error in a benefit is detected after or during the course of payment, the error should be corrected to bring the benefit in line with the legislation or benefit rules. In the case of an underpayment of a benefit, the error should be corrected retroactively. In the case of an overpayment, the social security institution should consider how the amounts overpaid are to be treated. The actuary should ensure that amounts due or owed, if any, are properly calculated and appropriate interest assumptions are used for late settlement.
- The actuary should review on a regular basis the actuarial assumptions used to determine benefit entitlements and to calculate actuarial factors.
Structure
Principles
- The social security institution should take necessary steps to ensure that members of the scheme receive the benefits they are entitled to according to the provisions of the laws and regulations governing the scheme, and that these benefits are based on members’ individual historical records of contributions, earnings and credited service.
- The calculation of social security benefits often requires actuarial input. Such input includes, but is not limited to, calculation of lump sum equivalents of income streams, calculation of annuity values, calculation of rates of returns credited on accounts, calculation of actuarial equivalence factors, calculations related to change in family situations and calculation of survivor benefits. Actuaries should be involved in the development and maintenance of calculation modules needed for the determination of benefit entitlements as well as the determination of actuarial factors used to calculate benefits.
- Actuarial assumptions used for calculation of benefit entitlements and actuarial factors should be reasonable, appropriate and relevant.
Title HTML
Guideline 13. Determination of benefit entitlements
Type
Guideline_1
Weight
18