Retirement Report, Fall 2023

Q&A—Gender Expansive Data Considerations in a Pension Context

What are some of the key issues regarding data that actuaries are facing in addressing sex vs. gender, as outlined in the issue brief?

Primarily, we want to drive home the point that most pension actuaries are not closely familiar with administrative practices of pension plans. In the past couple of years, we’ve encountered that drop-down options for gender in forms often include more than just options for “male” and “female” and, in some cases, get extremely granular. Responses to a small informal survey of several public pension plans that we conducted for this brief indicated that the questions asking for sex or gender use a wide variety of terminology.

At the same time, the distinction between the terms “sex” and “gender” has become much more mainstream. There are also recent studies showing that the proportion of the population who are transgender or nonbinary is increasing, especially among adults under 30. So, the participants filling out these forms are also approaching these questions with different levels of nuance.

Of course, as pension actuaries, we are frequently not aware of what our clients’ admin forms look like, so we have little insight into how the data provided might have changed as a result of any changes to form language.

The issue brief notes that while the percentage of transgender or nonbinary people is low enough to be de minimis, it is higher in younger age groups and may rise over time. How will an increase in this percentage see itself played out in mortality tables, for example?

Any answer to this would be wild speculation, but we would really be interested in hearing from someone who develops mortality tables! What we can say, as also mentioned in the issue brief, is that data noise resulting from the conflation of the terms “sex” and “gender” likely flows through to the development of mortality tables, too.

You referred to this above—in the webinar, it was noted that the Pension Committee undertook an informal survey about gender-data collection methodology. Can you speak a little about that—what were some of the insights you gleaned from that survey?

From the informal survey, we were able to gain a general understanding of the varied approaches taken by public systems when attempting to gather pertinent sex/gender data for actuarial purposes. Fortunately, the few responses represented a broad base of small and large public pension systems across geographically diverse regions of the U.S. Therefore, the issue brief drafting team agreed to include the following three bullet points:

• Sex/gender response options available to plan members reflect a wide variety of terminology (including a write-in option and/or “unspecified” category); some plans offer only a binary choice, but don’t require members to provide that data.
• Some public plans are moving to mimic the sex/gender options on other state-based administrative forms, such as the Department of Motor Vehicles or Department of Health, even if not statutorily required to do so.
• Administrators within the responding group were not aware of any recently enacted legislation limiting or forbidding the collection of sex/gender data for “privacy reasons” that would change their practices, although once collected, sex/gender data is viewed as “protected data” for all public plans.

How is actuarial practice around reflecting non-binary or incomplete sex/gender status evolving? What are some of the methods being used?

Incomplete data has long been an issue actuaries have had to confront. Without conducting a broad survey, it is hard to say what proportion of pension actuaries in particular have encountered non-binary data in their practice. It would be interesting to me to see the results of a survey like that, or even stories from individual actuaries. The methods we lay out in the brief are theoretical for now, although of course they or similar methods have been used in the past to value incomplete data.

This issue is clearly being thought about by other actuaries, though. For example, the IRS has just issued mortality regulations for 2024 that explicitly address and suggest two methods for valuing liabilities for nonbinary participants and mentioned that the suggestion has come from a commenter. We’ll likely see more discussion around this in the future.

What are some professionalism implications of actuaries working with non-binary or incomplete gender data sets?

There are a couple of professionalism implications. First is compliance with actuarial standards of practice (ASOPs). Actuaries who have not encountered this before owe it to themselves—and their clients—to really think about ASOPs and evaluate their level of expertise. I think there’s a risk of perhaps doing the same thing you’d normally do for missing data without fully considering the specifics of your pension plan. Additionally, whatever methodology is used and whatever additional assumptions are made need to be accurately described in the communications, using clear and up-to-date language.

The other, no less important, aspect is respect for and willingness to learn what may be new concepts and vocabulary. This makes us better actuaries, improves our communication with our clients, and builds trust across our diverse teams.

For a long time, sex/gender has been a primary—and binary—differentiator for mortality tables. Do you see that changing in the future?

To the extent that male and female mortality continues to differ as much as it does, this will continue to be widely used. Not only is it predictive, it’s also convenient and baked into all our systems. At the same time, it’s interesting to think of the possibilities of a world where people’s life expectancies don’t depend quite so much on sex or gender.

• Learn more: A Sept. 27 webinar, “Valuing Gender Expansive Data in Pension Plans,” examined the issue brief. Slides and a recording are now available on-demand, as a complimentary member benefit. Holden and Kirilenko also discussed the issue brief in a Sept. 11 Actuary Voices episode.

‘Envision Tomorrow’ Pension Highlights

The Academy’s Envision Tomorrow: 2023 Annual Meeting is just two weeks away, being held Nov. 13–14 in the nation’s capital.

A pension/life breakout session will look at “Group Annuity Contracts for Pension Risk Transfer.” Presenters will be Michael Heard, chief operating officer, National Organization of Life & Health Insurance Guaranty Associations; William O’Sullivan, senior vice president & general counsel, NOLHGA; Denise Sisk, managing director, State Street Global Advisors; and Patricia Matson, partner, Risk & Regulatory Consulting LLC. Brent Dooley, a member of the Academy’s Annuity Reserves and Capital Working Group, will moderate.

Pension breakout sessions will be “Social Security and Financially Disadvantaged Groups,” which will examine how the program’s adequacy and individual equity provisions work, how certain proposals might impact those financially disadvantaged, and what the chances of these proposals are of being enacted. “Multiemployer Plan System: Current State and Trends” will look at the latest in that area, including the impact of the Pension Protection Act; the current status of Special Financial Assistance; and assumption setting, and risk mitigation. Joint Board for the Enrollment of Actuaries (JBEA) credit will be available.

Also of interest—two Nov. 14 general sessions that will offer perspectives from leading expert voices on the important and multifaceted issues raised by artificial intelligence (AI). See the full agenda and the practice-area breakout sessions for details. Don’t miss out on valuable insights on key pension and professionalism issues—make sure to register today.

Issue Brief Tackles Social Security Reform Options

A new issue brief, Reforming Social Security Sooner Rather Than Later, looks at the options for shoring up Social Security’s solvency by making reforms sooner rather than later.

The Social Security Committee issue brief follows the Academy’s release earlier this year of the Social Security Challenge, which offers users a look at options to shore up the program’s long-term solvency.

Earlier reform action would allow for tax increases and benefit reductions to be phased in gradually, providing individuals more time to plan and adjust to the changes, the issue brief states.

Social Security’s combined trust fund reserves are projected to become depleted around 2034, at which time its income would be able to pay only 80% of the benefits scheduled for the program’s 80 million beneficiaries.

If Congress does not act by 2034, Social Security will be faced with an automatic 20% cut in benefits to people already receiving benefits, the need to immediately increase Social Security taxes by 25%, or some combination of benefit cuts and tax increases, the issue brief states. “Acting now to address Social Security’s financial challenges would allow Congress to consider reform options that are more moderate, gradual, and give the American people time to adjust to any needed changes in benefits or taxes,” said Senior Pension Fellow Linda K. Stone. Read the Academy news release.

Issue Brief Highlights Pension Plan Design Enhancements

The Pension Committee issue brief, Enhancing Retirement Security Through Changes in Plan Design and Related Requirements, examines modifications to defined benefit (DB) plans that would make them more attractive for modern employers, and looks at ways to incorporate some of the more desirable attributes of DB plans into the more common defined contribution (DC) options that many employers are currently offering.

Issue Brief Looks at Social Security Assumptions

The Social Security Committee released an issue brief, Assumptions Used to Evaluate Social Security’s Financial Condition, which describes the assumptions that must be made in any actuarial projection of the Social Security program’s finances and explains how variations in assumed values affect projections.

The annual Social Security Trustees Report describes in detail the assumptions used by the trustees and the rationale behind these assumptions, providing excellent material for illustrating the practical effects of the many assumptions covered in this issue brief.

It is important that any report about the program’s future include a description of the assumptions used in the calculations, the issue brief states—likewise, it is important that anyone reading these reports understand how differences in assumptions affect the results.

Webinar Examines Buy-Out Annuity Purchase Options

The Academy hosted an Oct. 11 webinar, “Buy-Out Group Annuity Purchase Primer: Pension Plan Sponsor’s Role and Considerations,” that looked in-depth at an issue brief of the same name released in July. It focused on “buy-out” annuity contract transactions—one of the ways pension plan sponsors transfer pension payment responsibilities and associated risks to other entities.

Speakers Beth Wong and Defined Contribution Subcommittee Chairperson Maria Carnovale highlighted the issue brief’s key points and gave insights on considerations to keep in mind when looking at such issues. Michael Clark moderated. Webinar slides and a recording are available as a complimentary member benefit.