Recent Activities
Academy Launches Lifetime Income Web Page
The Academy launched a new web page to provide members and the general public with information on the importance of lifetime income. The Academy has identified lifetime income as a top public policy issue and strongly supports efforts that lead to more widespread use of lifetime income options.
As part of the initiative, the Lifetime Income Risk Joint Task Force released the discussion paper Risky Business: Living Longer Without Income for Life on June 19. The paper explores the major causes of inadequate lifetime income and describes steps that could alleviate the issue. Suggested possible solutions include: emphasizing financial literacy; refocusing plan design; and making policy changes, such as increasing the Social Security maximum age for delayed retirement credit and increasing the age for required minimum distributions. The Academy followed the release of the paper with a Capitol Hill briefing on June 27.
The Pension Committee contributed to the lifetime income initiative on Aug. 7 by commenting on the Department of Labor’s (DOL) proposal to provide lifetime income illustrations in defined contribution benefit statements. The committee commended the DOL for developing the proposed regulations and commented on several topics, including inflation adjusted annuity conversions, projected retirement ages, and assumed rate of investment return.
Senior Life Fellow Nancy Bennett spoke on the topic to the NAIC ERISA Retirement Income Working Group at the NAIC Summer National Meeting on Aug. 24. Her presentation was based on the joint task force’s discussion paper.
Academy Active in Social Security Analysis
Academy Senior Pension Fellow Don Fuerst wrote a letter on July 31 to Chairman Sam Johnson (R-Texas) and Ranking Member Rep. Xavier Becerra (D-Calif.) of the House Ways and Means Subcommittee on Social Security in response to questions following Fuerst’s May 23 testimony. The letter provided further analysis on changing the benefit formula of Social Security and modifying the program’s early and full retirement ages.
Fuerst also spoke to Chuck Jaffee, host of the Internet radio program MoneyLife on May 31. Fuerst warned that the policy options for promoting sustainable solvency of Social Security will become more limited and difficult over time. According to Fuerst, the sooner Congress acts to make Social Security sustainably solvent, the better.
The Social Security Committee published an August issue brief on the 2013 Social Security Trustees Report that outlined the trust fund’s current financial status, long-range estimates of the program’s solvency, and the need for reforms to ensure sustainable solvency. The Social Security trust fund’s projected exhaustion date remains unchanged from the 2012 report. The trust fund is projected to run out of assets during 2033, and, if reform is not implemented by that date, benefits will have to be reduced by about one-fourth.
The Social Security Committee also is updating two issue briefs and a monograph on Social Security (last updated in 2007). The issue brief on individual accounts will examine whether any individual account program that’s enacted should be mandatory or voluntary, if it could replace the current program, and how individual accounts should be managed and invested. The issue brief on quantitative measures for Social Security will evaluate how such measures can be used to obtain a clearer picture of the relative advantages and disadvantages of various proposals for reforming Social Security. The committee’s monograph on Social Security reform options will analyze proposals to address the program’s long-term funding challenges.
PBGC Deficit Issue Brief Released
The Pension Committee published an issue brief on Aug. 23 that evaluates the Pension Benefit Guaranty Corp.’s (PBGC) methods and assumptions, and concludes the agency produced a reasonable representation of the single-employer program’s current obligation and deficit. Perspectives on the PBGC Single-Employer Deficit explains that, while policymakers should explore new sources of income to address the deficit, immediate premium increases on plan sponsors are unnecessary and potentially counterproductive. Last year, the Pension Practice Council explored the PBGC premium structure and proposed changes in Examining the PBGC Premium Structure.
PBGC’s Proposed Rule on Reportable Events Applauded
The Pension Committee wrote a letter on June 3 to the PBGC regarding its proposed rule on reportable events under ERISA Section 4043. The committee believes PBGC’s revamped proposal eliminates many concerns within the pension benefit community about the 2009 proposed regulations. The committee applauded PBGC on its common-sense, risk-based approach to reporting and indicated its support for the goal of reducing reporting for events that pose little risk to the pension insurance system.
Committees Comment on ASOP No. 4
Both the Pension Committee and Pension Finance Task Force submitted comments to the Actuarial Standards Board (ASB) on revisions to ASOP No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions. The Pension Committee said the current draft addresses many of its previous suggestions and recommended additional changes involving output smoothing, disclosures, definitions, other terminology, and formatting issues. The Pension Finance Task Force raised concerns that the exposure draft uses the term “market-consistent present value” instead of “market liability.” The task force recommended that “market liability” be used instead for greater consistency and clarity and suggested the ASB review ASOP No. 6 for this terminology as well.
Academy President Sends Letter to the New York Times
On July 22, Academy President Cecil Bykerk sent a letter to the editor of The New York Times pointing out that a story on Detroit’s pension shortfall mischaracterized actuaries as “running” pension plans and urging the paper to report on “the causes and the fiscally sound and sustainable solutions” for troubled public pension plans. The newspaper issued a correction on July 25 stating that an actuary does not “run” a public pension plan. For more information on the Academy’s work on public plans, go to its e-guide on the topic.
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