Actuaries Launch Longevity Illustrator
The Academy and the Society of Actuaries (SOA) released in May the Actuaries Longevity Illustrator, an easy-to-use online tool to provide perspectives on risk. The illustrator, available to everyone, provides the user with the likelihood of living various lengths of time so that individuals and couples can better understand the risk of outliving their retirement income.
Life expectancy is usually presented as a single number coming from a single set of assumptions, but half of individuals will outlive that estimate. By providing a range of outcomes illustrating the uncertainty of longevity risk, the illustrator demonstrates that there is a significant financial risk involved in living longer and that people need to prepare for that risk.
Academy Co-Hosts Successful EA Meeting
The Academy jointly hosted the annual Enrolled Actuaries (EA) meeting in Washington with the Conference of Consulting Actuaries in April that was attended by more than 800 enrolled actuaries and pension professionals.
In his opening address, President Tom Wildsmith said the Academy is “committed to ensuring that the legislators and regulators who are shaping the future of retirement policy in our nation have the benefit of the best, most objective advice that our profession has to offer.”
Senior Pension Fellow Explains Longevity Risk on Capitol Hill Panel
“Would you bet your life on a coin toss?” Academy Senior Pension Fellow Ted Goldman asked in his presentation on longevity risk made in April on Capitol Hill.
Goldman used this question to emphasize the common mistake of using life expectancy age as a default horizon for retirement planning, delivering this message as part of a National Retirement Planning Week panel discussion. Half of any particular cohort will live longer, and some will live much longer, than their life expectancy age, which makes it tricky to figure out how much to save for retirement, he said.
Pension Committee Releases Practice Note Exposure Draft
The Pension Committee released in April the exposure practice note, Selecting Investment Return Assumptions Based on Anticipated Future Experience. The draft notes that “complex issues arise in the determination of investment return assumptions, especially for an investment return assumption that will be used as a discount rate.”
The issue brief explains how such assumptions can vary based on the selection of an arithmetic or a geometric method in calculating average return. The Pension Committee urges actuaries to spend time studying the concepts, arguments, and applications presented. Comments may be submitted through June 27.
REGULATORY MATTERS
Pension Committee Submits Comments on Late Premium Payment Relief
The Pension Committee submitted a comment letter in June to the Pension Benefit Guarantee Corporation (PBGC) expressing appreciation for proposed regulations providing a reduction or partial waiver of the penalty due upon the late payment of premiums to the single employer and multiemployer insurance programs. Reducing late-payment penalties will ease the financial burden on plan sponsors at a time when they have experienced significant increases in the amount of the annual premiums paid, the committee wrote.
Comments Submitted on 2017 Applicable Mortality Tables
The Pension Committee submitted a comment letter to the IRS and Treasury in June requesting that the 2017 Applicable Mortality Tables be issued as soon as possible. Because of the significance of changes to the statutory mortality tables and the resulting public-policy implications, the committee said it believed it was vital to allow sufficient time for review by the actuarial and plan sponsor community, and for evaluation of submitted comments and testimony by IRS and Treasury prior to issuing final regulations.
Intersector Group Releases March Meeting Notes with Treasury, IRS, PBGC
The Intersector Group released the notes of its March 2016 meeting with the Treasury Department and Internal Revenue Service, and the notes of its March 2016 meeting with the PBGC in June.
Pension Committee Submits Comments to IRS on Closed DB Plans
The Pension Committee submitted comments in Aprilto the IRS regarding the proposed regulations for nondiscrimination relief for closed defined benefit (DB) plans. The proposed regulations would allow plans that were in compliance with the applicable nondiscrimination rules at the time they were closed to continue to provide benefit accruals to the participants in those plans for as long as possible, the letter states.
The proposed regulations will provide relief for some employers and help stem the trend toward fully freezing pension plans, the letter says, but notes that many plan sponsors will not be able to use the closed-plan rules for a variety of reasons. The committee suggests that the regulations need to go further in order be effective.
Committee Comments on Disclosure Requirements for DB Plans
The Pension Accounting Committee submitted comments in April to the Financial Accounting Standards Board on its exposure draft on changes to the disclosure requirements for defined benefit plans.
The exposure draft identifies seven disclosure requirements that could be removed from and five that would be added to Subtopic 715-20 of the exposure draft, Changes to the Disclosure Requirements for Defined Benefit Plan. Generally, the committee writes that “the amendments would result in improved decision-useful information” with one exception regarding the elimination of the accumulated benefit obligation disclosure.
Pension Practice Council Weighs In on Personal Discount Rates
The Pension Practice Council submitted comments in April to the Department of Defense expressing concerns regarding the use of a personal discount rate as the basis for converting certain monthly pension benefits to a one-time, lump sum payment that a pensioner could elect to receive.
The methodology, included in the National Defense Authorization Act for Fiscal Year 2016, could result in the use of higher discount rates than those used in private pensions, resulting in lower lump sum payments to the pensioner, according to the comments. Personal discount rates are not explicitly condoned by Actuarial Standards of Practice, according to the letter, and there are no generally accepted actuarial principles or practices for selecting or utilizing personal discount rates.
IN THE NEWS
The Academy/Society of Actuaries joint Actuaries Longevity Illustrator was covered by several media outlets, including Time magazine, the Wall Street Journal, and the Chicago Tribune.
TheMilitary Times quoted Bill Hallmark, chairperson of the Academy Pension Practice Council, in a feature story that questioned how personal discount rates will be used to calculate lump sum payments from military pensions. The story was published in U.S. military-focused outlets and BenefitsPro.
An editorial by the Press-Enterprise (Riverside, Calif.) cited the Academy issue brief, The 80% Pension Funding Standard Myth. The editorial board points to the Academy’s analysis in urging a discussion of how to further rein in pension costs.
A Forbescolumn on the Academy’s Pension Assistance List (PAL) program tells the story of how Cindy Levering, a member of the Lifetime Income Risk Joint Task Force and PAL volunteer, has helped individuals save tens of thousands of dollars by uncovering miscalculations made by plan sponsors and explaining how critical plan details can shape their benefits.
UPCOMING
Academy’s 2016 Annual Meeting and Public Policy Forum
Join us for the Academy’s 2016 Annual Meeting and Public Policy Forum in Washington on Nov. 3-4. Held less than a week before Election Day, this two-day event will give you an opportunity to interact with policymakers and other stakeholders important to the profession, and an in-depth look at the top public policy issues facing the actuarial profession. For more information, click here.
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