Recent Activities
Retirement for the AGES
The Academy has launched its Retirement for the AGES initiative to highlight ways to strengthen the U.S. retirement-income system to provide greater financial security for older Americans. On Jan. 17, the Academy published a monograph that provides a framework for building enduring retirement-income systems. The framework is based on four principles—alignment, governance, efficiency, and sustainability—which will be used to score plans and proposals in the future. That same day, Donald Fuerst, the Academy’s senior pension fellow, Eli Greenblum, the Academy’s vice president for pension issues, and Cindy Levering, a member of the task force, presented the framework to congressional staff and media on Capitol Hill.
Measuring Pension Obligations
The Academy’s Pension Practice Council published an issue brief on Nov. 21 that examines two approaches in selecting discount rates for measuring obligations of defined benefit pension plans and discusses two common measurements: solvency value and budget value.
Pension Accounting
Fuerst sent a letter on Jan. 8 to members of Congress who requested that generally accepted accounting principles (GAAP) be consistent with the pension funding rules in the Moving Ahead for Progress in the 21st Century Act (MAP-21). While using discount rates derived from 25-year average interest rates may help stabilize required contributions, Fuerst stated in the letter, the rates do not provide a meaningful measurement of a pension plan’s liabilities for financial reporting and would not be consistent with the conceptual framework of the Financial Accounting Standards Board (FASB).
The Pension Finance Task Force sent a letter on Sept. 25 to FASB providing suggestions, based on financial economics, to improve accounting for single employer pension plans.
Regulatory Matters
In a Dec. 16 letter to the Internal Revenue Service (IRS), the Pension Committee recommended that any regulatory changes made to reflect new mortality tables for pension funding requirements continue to allow for alternatives (such as static tables) to simplify administration and valuations, especially for smaller plans. The Pension Committee also sent a letter to the IRS on Sept. 23 applauding the electronic filing mandate of Schedules SB and MB of Form 5500 but pointing out that the change raises concerns over how to ensure reliability of the data. The committee suggested sample reviews to ensure better accuracy.
The Pension Committee on Oct. 3 requested that the Department of Labor revisit its interpretation of “current plan year” because it leads to some material events not being disclosed on the Annual Funding Notice (AFN). The lack of disclosure could mislead or confuse participants who read the AFN, according to the committee.
The Pension Committee issued a letter on Oct. 2 in support of the Pension Benefit Guaranty Corp.’s (PBGC) proposed rules to reduce regulatory burdens related to premium filings. Following that letter, the PBGC issued final rules that eliminate the estimated flat-dollar-premium filing deadline for certain pension plans.
Professionalism Matters
The Joint Committee on Retiree Health, Pension Committee, and Pension Finance Task Force wrote to the Actuarial Standards Board (ASB) on Oct. 29 about the coordination of Actuarial Standards of Practice (ASOPs) involving retirement benefits. The group noted that coordination of standards covering retirement benefits will help actuaries who are familiar with a particular area of practice quickly and conveniently find relevant material governing a related practice area.
The Pension Committee expressed concern in a Sept. 27 letter to the ASB that the language in a recent exposure draft on modeling could lead to the potential standard being applied too broadly and urged that the draft standard be rewritten to focus more precisely on the modeling issues that the ASB wishes to address.
The ASB published two updates to standards related to pension practice: ASOP No. 4, Measuring Pension Obligations and Determining Pension Plan Costs or Contributions, which becomes effective for any actuarial work product with a measurement date on or after Dec. 31, 2014, and ASOP No. 27, Selection of Economic Assumptions for Measuring Pension Obligations, effective for any actuarial work product with a measurement date on or after Sept. 30, 2014.
In December, the Academy’s Council on Professionalism released a discussion paper, “The Application of Precept 13 of the Code of Professional Conduct,” to help actuaries better understand their obligation to take action when they see actuarial work that appears to materially violate the Code of Professional Conduct. The paper includes a handy infographic on how the precept works.
Intersector Group Notes Posted
The Intersector Group meets twice a year with government agency representatives to discuss regulatory and other issues affecting pension practice. The group is composed of two delegates from each of the following actuarial organizations: the Academy, the Society of Actuaries, the Conference of Consulting Actuaries, and the ASPPA College of Pension Actuaries. Going forward, notes from the meetings will be posted on the Academy’s website. Read them here.
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