The Retirement Report, Spring 2019

Enrolled Actuaries Meeting Draws Almost 800 Pension Professionals to the Nation’s Capital

Nearly 800 actuaries and other pension professionals attended the 44th annual Enrolled Actuaries Meeting April 7–10 in Washington, D.C., where they heard presentations on a wide variety of retirement and pension issues. Academy President Shawna Ackerman gave welcoming remarks, noting the unique role of the Academy in the actuarial profession and the long history of the Academy’s support for this specialized meeting for enrolled actuaries.

Academy President Shawna Ackerman opens the EA Meeting

“Retirement security has long been an essential element of the Academy’s public policy work, as I believe it is for most of you,” Ackerman said. “The Academy’s viewpoint is that public policy debate can bring issues to the forefront that require attention.”

Several Academy work products were discussed in the various sessions, including the recent practice note on investment returns and assumptions, an upcoming practice note on working with auditors, and current and exposed drafts pension actuarial standards of practice (ASOPs).

Josh Shapiro, Academy vice president, pension, led a discussion on of congressional attention to multiemployer plan issues; Steve Jackson, Academy assistant director for research (public policy), gave a preview of an upcoming report on generational perspectives on retirement, a follow-up to the Academy’s 2016 report on retirement readiness in the United States, United Kingdom, and Australia; and Academy Board member Bruce Cadenhead presented on qualified longevity annuity contracts (QLACs) as part of a retirement readiness session.

Following is a summary of key Academy-related sessions of interest at the meeting.

Late-Breaking Developments

The latest developments session drew a crowd The “Late-Breaking Developments” session provided updates on Internal Revenue Service (IRS) guidance released in the past 12 months. Panelists included Bruce Cadenhead, chairperson of the Academy’s Pension Committee and an Academy Board member, and IRS officials.

The panelists discussed employer-sponsored plans, recent lawsuits filed against large plans, and changing interest rates for cash-balance plans. The IRS had recently released some “soft guidance” on the cash-balance plans, which was “probably nothing new for people that have been working with these plans for a while, but we continue to see situations where people don’t fully understand the 411(d)(6) protection on those interest rates.”

Retiree lump-sum windows and the lack of clarity around them was discussed, and the panel wrapped up with a multiemployer plans update, discussing recent challenges to assumptions used to assess withdrawal liability.

Expected Returns

In the “Expected Return Q&A for Pension Actuaries” session, panelists Elena Black, vice chairperson of the Academy’s Pension Committee, and Evan Inglis covered issues related to actuaries being responsible for selecting or recommending investment return assumptions for various purposes. Inglis, who along with Black worked on the PPC’s recent practice note on the subject (see The Retirement Report Winter 2019 issue)—said that “market metrics and information in the market tells us a lot about what returns are going to be in the next 10 or 20 years.” Black cited several existing and emerging actuarial standards of practice (ASOPs) that are applicable, including pending ASOPs on modeling and setting assumptions. “We can actually forecast future returns pretty well, when we use current market information,” Inglis said.

Congressional Joint Committee

Academy Vice President, Pension, Josh Shapiro led an EA meeting panel discussing Congress’s Joint Select Committee on Solvency of Multiemployer Pension Plans (JSC). Panelists at the “Joint Select Committee and the Road Ahead” session noted that while the JSC failed to reach agreement to issue a report at the end of last year, extensive work was done to develop proposed solutions that may provide a template for legislation that determines the future of the multiemployer system.

The panelists—Christian Benjaminson, a PPC member and vice chairperson of the Academy’s Multiemployer Plans Committee; Chris Bone, actuary with the Pension Benefit Guaranty Corporation; and Mariah Becker, director of research and education at the National Coordinating Committee for Multiemployer Plans, and a member of the Academy’s Multiemployer Plans Committee—discussed the JSC’s public hearings and internal processes, as well as some of the ideas that the committee considered. The panelists also discussed their expectations for Congress going forward as it continues to evaluate approaches to address failing multiemployer plans and considers fundamental reforms to the funding and governance of all multiemployer plans.

“I think the panel shed some light on the problem and had some good analysis of how Congress might deal with it,” Shapiro said following the session. (He also testified before the House Education and Labor Subcommittee on Health, Employment, Labor, and Pensions in March on behalf of the Academy; see story, this issue). “It’s a very complicated and challenging issue—if it was easy, it would have been solved by now.”

Generational Retirement Perspectives

Jackson (at podium) speaks at the sessionAt the “Research on Generational Perspectives on Retirement” session, Steve Jackson, the Academy’s assistant director for research (public policy), gave an update on generational perspectives on retirement, referencing the Academy’s 2015 report on retirement readiness in the United States, United Kingdom, and Australia, and including a new subscriber-only article just published in Benefits Quarterly.

Jackson noted findings from the tri-country studies that showed U.S. respondents were better prepared for retirement than their counterparts in the U.K. and Australia, including gathering information about retirement, saving or planning to save for retirement, or having a plan if one’s investment portfolio declines in value.

Professional Standards

In the “ASB Standards for Pension Actuaries” session, panelists gave an overview of the Actuarial Standards Board’s (ASB) pension ASOPs, including a new standard—ASOP No. 51, which was adopted in late 2017 and effective last November—and exposure drafts that have been approved in the past year. The speakers were Mita Drazilov, an ASB member and past chairperson of the ASB Pension Committee; and Tammy Dixon and Stephen McElhaney, members of the ASB Pension Committee.

Drazilov gave an overview of the ASOPs covered in the session: Nos. 4, 27, 34, 35, and 51. He discussed general ASOP principles, stating that “the ASOPs set standards for appropriate actuarial practices [and are] not meant to be ‘best practice.’ [They are] meant to establish standards for appropriate actuarial practice and that’s defined in ASOP No. 1 [Introductory Actuarial Standard of Practice], which governs all of the other ASOPs.”

Dixon discussed the existing ASOP No. 27, Selection of Economic Assumptions for Measuring Pension Obligations, including the principles behind setting assumptions. Dixon stated, “There was some discussion about whether [to use] select and ultimate rates as opposed to individual rates, and that reflects an issue of timing.” A second exposure draft of a proposed revision of ASOP No. 27 is expected to be released this year.

McElhaney discussed ASOP No. 51, Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions, adopted in September 2017, which applies to funding valuations and pricing valuations. He defined pricing and funding valuations, explaining that “funding valuations are the measurement of pension obligations or projections of cash flows which are performed and intended to be used by the principal to determine plan contributions or to evaluate the adequacy of specified contribution levels to support benefit provisions.” The session ended with Drazilov stating that certain sections of ASOP No. 27 addressed “the pattern of plan payments over time.”

Working With Auditors

Geddes (at podium) at the working with auditors session Tim Geddes, an Academy Board member and a member of the Pension Practice Council and Pension Committee, and Susan Breen-Held were panelists at the “Working With Auditors” session held on the meeting’s final day. With an update to the 2011 Academy’s public policy practice note, Working with Pension Auditors, in the works, the two discussed pending updates and the rationale for new changes.

Questions actuaries might ponder include: Why do you ask so many questions about things the company already shared with you? Why do you challenge my assumptions? What about immaterial items? Why do we have to rework prior-year numbers instead of simply showing the impact on this year? What is the rule about reflecting new information?

Geddes said the subject of actuaries being a self-regulating profession often comes up through his Academy volunteer activity. “We as actuaries have the privilege of regulating the profession ourselves. The accounting firms lost that privilege ... and Congress decided they had a better way with the PCAOB,” Geddes said, referring to the Public Company Accounting Oversight Board, created under the 2002 Sarbanes-Oxley financial regulation law, which tells auditing firms they “need to do a better job of documenting,” he added.

Academy Testifies Before House Subcommittee on Multiemployer Pension Issues

Shapiro testifies in the House on March 7Josh Shapiro, Academy vice president, pension, testified in early March before the House Education and Labor Committee’s Subcommittee on Health, Employment, Labor, and Pensions, providing oral and written testimony with a nonpartisan, objective, actuarial focus on the increasing financial risks facing multiemployer plans and the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer program.

Click here for Shapiro’s written testimony, and view a replay of the hearing (his testimony starts at the 12:45 mark). In our continuing support of this effort, the Academy responded in writing later in the month to lawmakers’ questions from the hearing.

Linda K. Stone Named Senior Pension Fellow

StoneThe Academy announced that Linda K. Stone is its new senior pension fellow, effective May 20. Stone, a leading pension actuary and nonprofit volunteer with more than 25 years’ experience dedicated to improving defined-benefit and defined-contribution retirement solutions, will help shape and communicate the Academy’s work on pension, Social Security, and other retirement security issues to the public, policymakers, and the news media.

“With a variety of experience in both private practice and nonprofit roles, Linda brings a deep knowledge that will add valuable, objective actuarial perspective to the contemporary dialogue on retirement policy issues,” said Academy Executive Director Mary Downs. “As a multifaceted, seasoned practitioner with a strong service orientation, Linda is ideally suited to represent the Academy as a voice on critical pension policy issues that can affect millions of current and future retirees.”

Pension Practice Council Members Visit Capitol Hill

Members of the Academy’s Pension Practice Council (PPC) visited congressional offices and federal agencies in Washington, D.C., April 29–30 to discuss current and upcoming legislative and other policies, including multiemployer pension plan reform, multiple-employer plan initiatives, Social Security, and many others.

Public Policy Outreach

Multiemployer Plans Committee Vice Chairperson Christian Benjaminson gave a presentation to the Actuaries Club of Philadelphia in Philadelphia on April 2. He provided historical background and context to the financial challenges facing distressed multiemployer pension plans and discussed recent activities in Congress, including Academy testimony at two congressional hearings, aimed at addressing plans’ ongoing financial health and the financial health of the Pension Benefit Guaranty Corporation’s (PBGC) multiemployer plans program.

Committee Comments on Proposed Regulation

The Multiemployer Plans Committee submitted comments to the PBGC regarding simplified methods and other aspects of computing withdrawal liability under the Multiemployer Pension Reform Act of 2014 (MPRA).

Pension Committee Comments on Modeling ASOP

The Academy’s Pension Committee commented to the Actuarial Standards Board (ASB) on a fourth exposure draft of a proposed modeling actuarial standard of practice (ASOP). The Pension Committee’s comments, submitted May 15, covered a number of sections of the proposed ASOP. All comments are available on the ASB website.