Vol 6 | No. 3
Date:09/01/2023
Q&A—Gender Expansive Data Considerations in a Pension Context
A recent Pension Committee issue brief, Valuing Gender Expansive Data, examines issues pension actuaries might consider when performing an actuarial valuation using sex/gender expansive data, especially when data on sex/gender is either missing or non-binary. It also discusses several possible approaches to handling such data and setting reasonable actuarial assumptions.
Retirement Report spoke with committee members Koren Holden and Maria Kirilenko about the issue brief.
Holden
Kirilenko
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.
GAO Chief Actuary Frank Todisco to Receive Myers Award
Todisco
Frank Todisco, chief actuary of the Government Accountability Office (GAO), will receive the Robert J. Myers Public Service Award at Envision Tomorrow. Todisco’s distinguished career includes serving as the Academy’s senior pension fellow, an Academy Board member, and a member of the Research Committee and the Actuarial Standards Board.
As GAO’s chief actuary, he has transformed the role with wide-ranging actuarial analyses and perspectives on some of the most important issues and programs of national interest. His significant and consistent efforts include working with other nationally recognized experts in various actuarial sub-specialties to gainfully apply actuarial expertise to multiemployer pensions, U.S. Postal Service and regional authority financing, as well as with fiscal risks and federal insurance programs.
Grace Lattyak to Receive OVA
Lattyak
Pension volunteer Grace Lattyak will receive an Outstanding Volunteerism Award (OVA) in recognition of her instrumental leadership as vice chairperson of the Pension Committee, where she has also been a content contributor to projects including the pension risk transfer issue brief, released in July. She is also chairperson of the Research Committee.
In her Pension Committee role, Lattyak has been instrumental in keeping key committee projects and activities moving forward. She has also been an active participant in critical outreach activities like “Hill visits” with federal legislators, lawmakers, and congressional committee staff.
Joseph Lebel, of the New York City Office of the Actuary, is a pension practice-area recipient of the Academy’s Rising Actuary Award, now in its second year.
The awards will be bestowed at next month’s Envision Tomorrow in Washington, D.C., for which in-person and virtual registration options are available.
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.
- The Pension Committee and Multiemployer Plans Committee sent comments in response to the Pension Benefit Guaranty Corporation’s request for comments regarding the proposed rule on Valuation Assumptions and Methods.
- The Pension Committee submitted comments in response to the Department of Labor’s Employee Benefits Security Administration’s request for information on a number of SECURE 2.0 provisions that impact the reporting and disclosure framework of the Employee Retirement Income Security Act of 1974 (ERISA).
InsuranceNewsNet cited comments on pension risk transfers from Academy Senior Pension Fellow Linda K. Stone and Director of Communications & Public Affairs David Mendes.
AOL cited the Academy for data on the average age at which people start collecting Social Security benefits.
A CNBC article used Academy research to help readers understand the significance of reported corporate pension funding levels.
A Wall Street Journal column on longevity risk and annuities used an illustration from the Actuaries Longevity Illustrator, jointly sponsored by the Academy and the Society of Actuaries. A retirement planning radio program that aired on AM 560 (Chicago) also mentioned the tool.
A Wall Street Journal article exploring the expected longevity of President Biden and former President Trump used the Actuaries Longevity Illustrator to explain the probability of living to older ages in case they are elected in 2024.
A Forbesopinion piece cited the Essential Elements paper, “The 80% Pension Funding Myth,” which was also cited in an opinion column from the News-Gazette (Champaign, Ill.) on Illinois’ state pension systems.
Legislative/Regulatory Activity
Federal
A bipartisan group of lawmakers reintroduced a measure that establishes federal retirement savings accounts for workers who lack access to an employer-sponsored plan on Oct. 19. The Retirement Savings for Americans Act (S 3102) automatically enrolls participants at 3% of their income with the possibility of as much as a 4% matching contribution via federal tax credit for low- and moderate-income earners.
The House and Senate introduced identical versions of the Auto Reenroll Act of 2023 (S 2517/HR 4924) on July 27 that allows sponsors of automatic contribution arrangements to reenroll their employees in such arrangements at least once every three years. The purpose of the bill is to increase employee participation in tax-exempt pension plans and other retirement arrangements.
The House Education and Workforce Committee approved four retirement investment-related bills on Sept. 14. HR 5339, the RETIRE Act, clarifies that financial institutions must base decisions on an investment solely on economic factors. HR 5337, the Retirement Proxy Protection Act, states that the decision to exercise a shareholder right is subject to the prudence and loyalty duties under the ERISA. HR 5338, the No Discrimination In My Benefits Act, states that race, color, religion, sex, or national origin may not be taken into consideration when selecting a fiduciary, counsel, employee, or service provider of an ERISA plan. HR 5340, the Providing Complete Information To Retirement Investors Act, implements a notice requirement on defined contribution plans explaining the difference between choosing from investments selected by ERISA fiduciaries and choosing from investments through a brokerage window.
The House Ways & Means Committee passed HR 5687, the HSA Modernization Act of 2023, which raises the maximum annual contribution amount of health savings accounts (HSAs) to the amount of the annual deductible and out-of-pocket limit. The bill, approved Sept. 28, also allows spouses to make catch-up contributions to the same HSA.
Bipartisan, bicameral bills to reform the Supplemental Security Income (SSI) program for the first time in nearly 40 years were introduced Sept. 12. S 2767 / HR 5408, the SSI Savings Penalty Elimination Act, would update SSI’s asset limits to ensure disabled and elderly Americans are able to prepare themselves for a financial emergency without running afoul of income limits instituted under SSI benefits.
The PBGC released the agency’s Fiscal Year 2022 Projections Reporton Aug. 2. The report shows a continuing positive outlook for both its single-employer and multiemployer pension insurance programs, which together protect the pensions of over 33.5 million workers and retirees. The new projections show that the Multiemployer Insurance Program is likely to remain solvent for more than 40 years while the Single Employer Insurance Program is also projected to strengthen.
Rep. Lauren Underwood and Sen. Tammy Baldwin reintroduced the Women’s Retirement Protection Act of 2023 on July 27. The bills (HR 5060 / S 2627) include provisions that target some of the challenges that disproportionately affect women as they plan for their financial futures.
A bipartisan, bicameral proposal, the Promotion and Expansion of Private Employee Ownership Act, was introduced July 26. S 2515/ HR 5011 would encourage retirement savings by fostering the growth of “S” corporations owned by Employee Stock Ownership Plans. Companion legislation to HR 4237 was introduced on July 12. S 2282 seeks to block ERISA retirement plan fiduciaries and investment advisers from considering environment, social, and governance factors in investment decisions.
State
Nevada Gov. Joe Lombardo signed SB 305 on June 13, establishing the Nevada Employee Savings Trust as an auto-IRA program and mandating all private-sector employers in the state with an electronic payroll system to offer a retirement program. Covered employees would be enrolled in the program automatically.
Colorado and Maine entered into an agreement on Aug. 11 to form the nation’s first retirement savings interstate partnership, an arrangement that paves the way for other states to implement their own programs faster and more cost effectively. As part of the deal, Maine will partner with Colorado on its already established state-sponsored automatic retirement savings program for private-sector workers to provide the smaller state of Maine with a ready-made plan while reducing costs for both programs.
Illinois Gov. J.B. Pritzker signed HB 2352 on Aug. 11, allowing retired Chicago public school employees receiving a pension to return to work as a paraprofessional for the school district in a temporary capacity as long as they work no more than 120 days a year or make less than $30,000.
New Jersey Gov. Phil Murphy approved S 3798 on July 20, permitting retired teachers and education professional staff members who provide special services to return to employment for up to two years without reenrollment in the state pension plan if employment commences during the 2023–2024 school year.
Missouri Gov. Mike Parson signed SB 20 on July 6, addressing several retirement-related provisions. At the top of the list is the establishment of Missouri’s Show-Me MyRetirement Savings Plan, a voluntary multiemployer retirement plan that allows businesses to come together and participate in a state-facilitated plan. The bill also addresses several state public safety officials retirement systems.
Wisconsin Gov. Tony Evers signed AB 245 on June 20, allowing the city of Milwaukee to impose a city sales tax and the county of Milwaukee to impose an additional county sales tax to help each jurisdiction cover the unfunded, actuarially accrued liability of their respective pension systems. The city’s sales tax will be 2%, while the additional county tax will be 0.375%.