How To Complete the Firm Name in the Signature Block on a Schedule SB
A spirited discussion recently took place on the ACOPA listserve revolving around how the “Firm name,” “Telephone number” and “Address of the firm” lines at the bottom of page 1 of the Schedule SB (collectively the “contact information”) can or should be completed.
If the actuary is an employee of the firm which prepares the actuarial valuation and the entirety of the Form 5500 filing (a.k.a. “the administrative firm”) there is not much controversy — everybody uses the identifying information of the administrative firm in this case.
There are two possible circumstances in which the signing actuary is neither a W-2 employee nor a self-employed owner of the administrative firm. The first is when the client (Plan Sponsor, Administrative Committee, Board of Trustees, etc.) directly engages the actuary. Again, there is not much controversy here — most agree that in this case, the actuary’s firm, and not the administrative firm, should be identified on the Schedule SB.
But there is disagreement when the actuary is not engaged directly by the client and the actuary is neither an employee nor a self-employed owner of the administrative firm. I usually refer to this arrangement as an administrative firm engaging an independent contractor actuary.
Some actuaries are strong in their belief that in the case of an independent contractor actuary the only appropriate contact information is for the entity which employs the actuary as a W-2 employee or as a self-employed owner, i.e., the legal entity through which the actuary is acting as an independent contractor to the administrative firm.
Others are strong in their belief that in the case of an independent contractor actuary the contact information can be that of the administrative firm engaged by the client.
Those who believe that the contact information must identify the entity which employs the actuary either as a W-2 employee or as a self-employed owner point to Annotation 1-4 of Precept 1 of the Actuarial Code of Conduct which lays out certain proscribed acts and reads: An actuary shall not engage in any professional conduct involving dishonesty, fraud, deceit or misrepresentation or commit any act that reflects adversely on the actuarial profession.
I’ve gone over that Annotation a number of times in the context of an independent contractor actuary that signs a Schedule SB displaying the contact information of the administrative firm and personally, I don’t see anything that could possibly be described as a proscribed activity.
So I put out some feelers to the Joint Board and to the ABCD. I have nothing in writing, so I’m not pretending that we have anything in the way of formal guidance, but the sense of what I heard is that in the case of an independent contractor actuary both have a preference for the contact information being the actuary’s firm and not of the administrative firm. Both were quick to point out that there is, in fact, no formal guidance on this issue and that no actuary will get in trouble solely based on signing a Schedule SB that displays an administrative firm’s name, address and telephone number.
In my view, the purpose of the contact information is threefold. First, it provides a mechanism to identify the individual actuary who is responsible for the Schedule SB. This is extremely important as it is relevant to, among other things, elections under IRC Section 430. Second, it provides contact information that is intended to be accurate as of the date that the Schedule SB is signed. And I think we all agree that the contact information can become stale very soon after a Schedule SB is signed. It happens quite naturally when an actuary who is an employee changes jobs, for example.
It is the third purpose that raises issues: Is the firm identified intended to be the legal entity through which the actuarial services are performed? Or can it be the legal entity with which the client has a contractual agreement? Without specific guidance to the contrary, it is certainly not unreasonable to believe the latter.
As long as the actuary believes, as of the date the Schedule SB is signed, that the contact information is valid — i.e., mail addressed to the address on the Schedule SB directed to the actuary’s attention will find its way to the actuary, and phone calls directed to the phone number on the Schedule SB will either be forwarded to where the actuary can be reached or to a voice mail equivalent — then the actuary can’t possibly be in violation of Annotation 1-4 of Precept 1 of the Actuarial Code of Conduct, in my opinion.
You can read the discussion to date by searching the listserve for “DB Signature Firm.” Of course, if you have some insight on this issue you'd like to share, feel free to add your voice to the discussion.