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I Used To Be That Dumb (But Not Quite So Dumb) 12-001

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I was reminded of an incident some thirty-five years ago where an actuarial student confronted with doing a benefit calculation for a salaried union employee asked how to determine the hourly rate. I advised to look to the plan document and if silent, look to past benefit calculations for a precedent, and if there were none, we would contact the Plan Administrator about adopting an administrative procedure or amending the plan. Meanwhile, I advised, simply divide the annual pay by the total number of hours.

The actuarial student returned a bit later and had taken the annual pay and divided it by 365 and then by 24 hours. "How many union employees do you know," I asked, "who work 24 hours a day year round?" The student replied, "I don't know any union employees." Shortly thereafter the student left the profession to pursue other interests.

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