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Actuarial - misc

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[Official Guidance] Civil Service Retirement System; Present Value Factors
"This notice is necessary to conform the present value factors to changes in the economic and demographic assumptions adopted by the Board of Actuaries of the Civil Service Retirement System.... The revised present value factors apply to survivor reductions or employee annuities that commence on or after October 1, 2019." (Office of Personnel Management, U.S. Government)
[Official Guidance] Federal Employees' Retirement System: Present Value Factors
"This notice is necessary to conform the present value factors to changes in the economic and demographic assumptions adopted by the Board of Actuaries of the Civil Service Retirement System.... The revised present value factors apply to survivor reductions or employee annuities that commence on or after October 1, 2019." (Office of Personnel Management, U.S. Government)
Practice Note: Valuing Benefits Payable as a Lump Sum: Current and Emerging Practices (PDF)
48 pages. "When a lump sum is offered in a traditional pension plan, the amount of the lump sum often varies based on market interest rates.... [The IRS] requires the use of an 'annuity substitution' approach for the purpose of valuing certain benefits expected to be paid in lump sum form. This practice note discusses the valuation of these benefits for financial accounting purposes." (Pension Committee, American Academy of Actuaries)
New Lawsuits Over Actuarial Assumptions Could Signal Next Wave of ERISA Litigation
"The plaintiffs in all four cases allege that the actuarial assumptions being used are 'unreasonable' and as a result, certain pension recipients have been underpaid.... To resolve these claims, the courts may need to address whether actuarial assumptions must be reasonable at all times. Currently, most lawyers and actuaries believe actuarial assumptions need to be reasonable when the pension benefit is initially accrued." (Faegre Baker Daniels)
ASOP 51 Provides New Standard for Disclosure of Pension Risks (PDF)
"[ASOP 51] provides guidance to actuaries in determining and communicating the risks that the actual cost of a pension plan may differ significantly from the expected cost of a pension plan.... ASOP 51 does not require an actuary to perform numerical calculations in order to assess each specific area of risk. It does, however, require actuaries to use their professional judgement as to whether a particular risk analysis is warranted and, if so, to recommend to the client that the risk potential be quantified if 'a more detailed assessment would be significantly beneficial.' " (Findley)
Big Data and the Role of the Actuary (PDF)
64 pages. "[S]ignificant advances have been made in recent years in the use of Big Data in health and life insurance. Similar advances in the pension area have not been as noticeable. However, it can be expected that over the next decade, all areas of actuarial practice will be significantly impacted by the use of Big Data." (American Academy of Actuaries)
[Opinion] Rising Pension Costs are California's Biggest Problem
"Over the next seven years, rising pension costs will require cities to nearly double the percentage of their General Funds they pay to CalPERS.... Without fundamental changes, cities will have to choose between cutting services or raising taxes.... There are three things we should do now ... First, cities and the state should set aside 2 to 3% of their budgets to pay down their unfunded liabilities. Second, cities and the state should look for cuts and new revenue sources now, not wait until pension costs begin to crowd out funding for basic services. Third, and most importantly, we must revise the California Rule." (Fair Observer)
New Actuarial Standard of Practice Focuses on Pension Risk
"ASOP No. 51 requires actuaries to identify and assess risks that may reasonably be anticipated to significantly affect a pension plan's future financial condition. The goal is to help users of actuarial reports better understand those risks. The new standard applies to annual funding valuations and pricing valuations.... It permits actuaries to use various methods to assess risks. It also requires actuaries to recommend that a more detailed risk assessment be performed if the actuary judges that it would be significantly beneficial for the plan sponsor to understand those risks." (Segal Consulting)
[Official Guidance] Text of PLR 201803006: OK to Amend Interest Rate Lookback Month for Cash Balance Plan's Pre-Conversion Benefit (PDF)
"This letter is ... a ruling on the effect of an amendment changing the interest rate lookback month with respect to preconversion benefits under section 411(b)(5) ... and the regulations thereunder, following the conversion of a defined benefit pension plan ... to a cash balance plan that is intended to be a statutory hybrid plan under section 411(a)(13).... [P]resent value determinations [prior to conversion] were based on interest rates for the lookback month that is the first full calendar month preceding the Plan Year in which the annuity starting date occurs.... [Under the plan amendment, for any distribution having an annuity starting date after the year in which the conversion occurred,] the Look-back Month [became] the month of September in the Plan Year preceding the Plan Year in which the annuity starting date occurs." (Internal Revenue Service [IRS])
When Amending a Plan, Tell the Truth or Pay the Consequences
"The district court found that the communications to employees [about a 1996 modification of its pension plan to become a cash balance plan, causing a suspension of benefit accruals for four to five years for several thousand participants] were intentionally false and misleading ... You have to ask why this case did not settle. Well before trial, Foot Locker surely knew the facts were not favorable, and the plaintiffs also must have been concerned about serious legal issues.... There were legitimate limitations period issues. Compromise on technical actuarial factors (interest rates and mortality tables) might have been reasonable. The plaintiffs might have yielded on the windfall issue.... It might be difficult to find employment records back to 1996 ... But perhaps 'principle' took over.... This loss will cost Foot Locker [$180 million]." [Osberg v. Foot Locker, Inc., No. 15-3602 (2d Cir. July 6, 2017; cert. pet. filed Nov. 8, 2017)] (Bob Blum Mediation)
[Official Guidance] Text of JBEA Request for Nominations for Advisory Committee on Actuarial Examinations
"The current Advisory Committee members' terms expire on February 28, 2017. This notice describes the Advisory Committee and invites applications from those interested in serving on the Advisory Committee for the March 1, 2017 through February 28, 2019, term." (Joint Board for the Enrollment of Actuaries)
[Guidance Overview] GASB 74/75: Impact on Small Government Employers (PDF)
"An employer is qualified to use the [Alternative Measurement Method (AMM)] if fewer than 100 employees (active and inactive) are eligible for OPEB through the plan as of the beginning of the measurement period. The AMM includes the same broad steps as an actuarial valuation, including projecting benefit payments, discounting those payments to a present value, and attributing the present value of projected benefit payments to time periods using an actuarial cost method. However, the AMM permits some simplified methods for setting the assumptions to be used in the calculation." (Milliman)
Syllabus and Reading List for 2016-17 Actuarial Exams (PDF)
35 pages, dated July 2016, revised on Aug. 18, 2016. Covers November 2016 Pension EA-2 (Segment F) Examination, May 2017 Basic EA-1 Examination, and May 2017 Pension EA-2 (Segment L) Examination. "Candidates are urged to develop a thorough understanding of the conditions generally or specifically applicable to all examination questions as set forth later in this examination program. Conditions for each examination will be included in the applicable examination booklets." (American Society of Pension Professionals & Actuaries [ASPPA]; Joint Board for the Enrollment of Actuaries [JBEA]; Society of Actuaries)
[Opinion] The $6 Trillion Public Pension Hole That We're All Going to Have to Pay For
"U.S. state and local employee pension plans are in trouble -- and much of it is because of flaws in the actuarial science used to manage their finances. Making it worse, standard actuarial practice masks the true extent of the problem by ignoring the best financial science -- which shows the plans are even more underfunded than taxpayers and plan beneficiaries have been told. The bad news is we are facing a gap of $6 trillion in benefits already earned and not yet paid for, several times more than the official tally." (MarketWatch)
Task Force Recommends Changes in Actuarial Standards for Pension Plans
"The primary recommendations of the [task force] include: [1] Calculation and disclosure of a solvency value; [2] Improved management of assumptions; [3] Clarification of existing guidance regarding assumptions; [4] Additional guidance regarding methods; [5] Calculation and disclosure of contribution requirements and funded status associated with a reasonable actuarially determined contribution; [6] That the actuary provide an opinion statement about the reasonableness and consistency of assumptions and methods; [7] Special disclosures applicable to specific situations, including where the contribution requirement is less than the normal cost plus interest on the unfunded accrued liability." (Cheiron)
Exposure Draft: Selecting Investment Return Assumptions Based on Anticipated Future Experience (PDF)
20 pages. "Complex issues arise in the determination of investment return assumptions, especially for an investment return assumption that will be used as a discount rate (i.e., as a means for determining the present values of promised benefit payments payable over long periods).... Arithmetic averages generally exceed geometric averages, but some issues and concerns may arise in developing investment re turn assumptions based on these higher rates." (Pension Committee of the American Academy of Actuaries)
[Official Guidance] Text of PBGC Final Regs: Annual Financial and Actuarial Information Reporting
31 pages. "The final rule modifies the reporting waiver under the current regulation tied to aggregate plan underfunding of $15 million or less to be based on non-stabilized interest rates. In addition, the final rule adds new reporting waivers for smaller plans and for plans that must file solely on the basis of either a statutory lien resulting from missed contributions over $1 million or outstanding minimum funding waivers exceeding the same amount (provided the missed contributions or applications for minimum funding waivers were previously reported to PBGC). The final rule also provides alternative methods of compliance for reporting certain actuarial information and makes a few technical changes to the regulation." (Pension Benefit Guaranty Corporation [PBGC])
Text of Enrolled Actuary Program Booklet, Revised March 15, 2016 (PDF)
35 pages; covers [1] May 2016 Basic (EA-1) Examination; [2] May 2016 Pension EA-2 (Segment L) Examination; and [3] November 2016 Pension EA-2 (Segment F) Examination. (Joint Board for the Enrollment of Actuaries [JBEA], American Society of Pension Professionals and Actuaries [ASPPA], and Society of Actuaries)
If You're Alive in 30 Years, Chances Are Good You May Also Be Alive in 1000 Years
"Sure, computers are getting better, but how's that relevant for making people younger? ... In recent decades, biology and medicine has to an increasing extent started to become an information technology. With computers we can now, among other things: [1] Read human genes; [2] Edit genes with CRISPR/Cas9, a revolutionary technology that has been adopted by laboratories worldwide. Still better technologies for gene editing are under development.... So medicine is about to become an information technology, and that's the main reason why we can expect medical technology to advance exponentially in the future." (Haakon Skaarud Karlsen, on
[Opinion] ACOPA Comments to American Academy of Actuaries on Exposure Draft of Public Policy Practice Note on Variable Annuity Plans (PDF)
13 pages. "The scope of the Exposure Draft should be expanded to discuss the application of Code Section 411 (a)(9) and Section 415 to VAPs.... The Exposure Draft should include empirical data and analysis supporting the use of a 'pure' VAP as the baseline for discussion of liability measurement and lump sum determination for a VAP.... The Exposure Draft should encourage actuaries to disclose benefit determination and regulatory uncertainties known to the actuary, the financial implications of such uncertainties, and if the actuary is relying on outside counsel or the plan administrator for plan document and/ or regulatory interpretations." (ASPPA College of Pension Actuaries [ACOPA])
Sixth Circuit Denies Equitable Relief for Employer Liability Upon Union-Mandated Withdrawals from Multiemployer Plan (PDF)
"The withdrawal assessment exceeds half of Rubber Associates' annual sales in 2009, 2010, and 2011 ... The parties agree that a complete withdrawal has happened in this case, and that ERISA and the MPPAA require a contributing employer to pay withdrawal liability upon its exit from a multiemployer pension plan. The parties disagree, however, on whether we should create federal common law under ERISA to carve out special liability rules for contributing employers which are forced out of pension funds due to union-mandated withdrawal.... Allowing employers to reduce or eliminate their withdrawal liability even when faced with a union-mandated withdrawal is not essential to the promotion of fundamental ERISA policies." [United Food and Commercial Workers Union-Employer Pension Fund v. Rubber Assoc., Inc., No. 15-3434 (6th Cir. Feb. 4, 2016)] (U.S. Court of Appeals for the Sixth Circuit)
Downloadable Files of Historical and Projected Populations of the Social Security Area
"The following tables provide historical and projected populations of the Social Security area by single year of age, gender, marital status, and year for the period December 1940 through December 2090.... (Projected values contained in these files are based on the intermediate assumptions of the 2015 Trustees Report) In each file, the first column gives the year and the second column gives the age. The remaining columns have headings that display the gender and marital status." (U.S. Social Security Administration [SSA])
Companies Eye Pension De-Risking
"The decision to de-risk is a complicated one, and it is often driven by a company's CFO.... But given that these deals can leave retirees and employees feeling alienated and confused, it's critical for HR to insert itself in the process. Indeed, deciding to de-risk provides a good opportunity for HR to partner with finance and work through the details of these transactions together." (Society for Human Resource Management [SHRM])
Enrolled Actuaries Report, Winter 2015 (PDF)
Articles include: [1] Multiemployer pension plans draw concern over long-term health; [2] Updated annual Social Security tables; [3] PPC submits comments to Treasury; and [4] Pension Committee releases Practice Note Exposure Draft. (American Academy of Actuaries)
[Official Guidance] Text of JBEA FAQs on Continuing Education, Enrollment and Standards of Performance (PDF)
6 pages; dated Jan. 2016. Topics include: [1] Questions related to qualifying programs for continuing education credit; [2] Questions related to certificates of completion of a qualifying program; [3] Questions related to continuing professional education credits; [4] Questions related to initial enrollment; and [5] Questions related to standards of performance. (Joint Board for the Enrollment of Actuaries [JBEA])
[Official Guidance] Text of PBGC Announcement: Maximum Insurance Benefit Level for 2016
"[T]he annual maximum guaranteed benefit for a 65-year-old retiree in a single-employer plan remains at $60,136 for 2016. The guarantee for multiemployer plans also remains unchanged.... [T]he multiemployer guarantee structure has two tiers, providing 100 percent coverage up to a certain level, and 75 percent coverage above that level. For a retiree with 30 years of service, the current annual limit is 100 percent of the first $3,960 and 75 percent of the next $11,760 for a total guarantee of $12,870. This limit has been in place since 2001." (Pension Benefit Guaranty Corporation [PBGC])
Retiree Lifetime Income Initiative: Living Longer Without Income for Life
Report issued in five components: [1] Choices & Considerations -- general retirement planning considerations. [2] Product Comparisons -- high-level perspective on a few key risks and aspects related to lifetime income. [3] Legislative and Regulatory Issues -- approaches that emphasize financial literacy and education for prospective retirees, refocus plan design on lifetime income needs, and refocus federal retirement policies to support lifetime income needs. [4] Actuarial Considerations for Financial Advisers; and [5] Information for Current and Future Retirees -- how a retiree can use the concept of 'risk sharing' to help manage longevity risk through lifetime payout options and individual annuities, as well as other approaches to lessen risk." (Pension Practice Council of the American Academy of Actuaries)
Does Mortality Differ Between Public and Private Sector Workers?
"In projecting pension costs, state and local plans assume their workers will live longer than private sector workers.... The analysis confirms that public sector workers -- particularly women -- have lower mortality rates than their private sector counterparts. The question is whether lower mortality reflects the nature of the job or the nature of the workers. The answer is the workers -- specifically their education levels. Controlling for education, the gap between public and private workers disappears." (Center for Retirement Research at Boston College)
CRS Insight: A Comparison of House and Senate Provisions for Military Retirement Reform (PDF)
3 pages. "The House and Senate committee versions would change the existing system from a defined-benefit system that is vested at 20 years of qualifying service (YOS) to a blended system that authorizes government-matching contributions of up to 5% of basic pay to individual Thrift Savings Plan (TSP) accounts.... Currently, most non-disability retirees are eligible to receive a retired annuity equal to 50% of pay base after 20 years of service, based on a multiplier of 2.5% times the number of qualified years of service (with the exception of servicemembers in the Redux system, where it is calculated differently). Both versions of the FY2016 NDAA would reduce the multiplier for the defined benefit from 2.5% to 2.0% (a retirement annuity equal to 40% of pay base at 20 YOS)." [CRS Insight IN10286, Jun. 4, 2015] (Congressional Research Service [CRS])
Text of Enrolled Actuaries Pension Examination Segment L, Spring 2015 (PDF)
97 pages. Complete text of exam dated May 5, 2015, with answers, published online by IRS. (American Society of Pension Professionals & Actuaries [ASPPA]; Joint Board for the Enrollment of Actuaries [JBEA]; Society of Actuaries)
Text of Enrolled Actuaries Basic Examination EA-1, Spring 2015 (PDF)
66 pages. Complete text of exam dated May 5, 2015, with answers, published online by IRS. (American Society of Pension Professionals & Actuaries [ASPPA]; Joint Board for the Enrollment of Actuaries [JBEA]; Society of Actuaries)
A Brief Comparison of Basic Financial Projections Affecting Social Security Trust Funds Since 2000 (PDF)
Actuarial Note No. 157, 6 pages. "[The] recession [which began at the end of 2007] has greatly diminished revenue and has somewhat increased the cost of the [Disability Insurance program] on a temporary basis. These recession effects led to a change in the projected DI Trust Fund reserve depletion year from 2025 in the 2008 Trustees Report to 2016 currently.... [Two graphs] illustrate the degree to which GDP has fallen short of the projections released in 2001 and 2008 by the Trustees ..., CBO ..., and the President's Budgets ... Clearly, none of these entities (nor the vast majority of private forecasters) foresaw the coming recession either early in 2001 or even early in 2008." (Office of the Chief Actuary, U.S. Social Security Administration [SSA])
Report on Life and Annuity Living Benefit Riders: Considerations for Insurers and Reinsurers (PDF)
74 pages. "The Society of Actuaries (SOA) Product Development Section and Reinsurance Section, along with the Committee on Life Insurance Research, have sponsored this research paper to investigate life and annuity living benefit riders and their implications from both a direct writer and a reinsurer perspective.... The scope of the research includes the following products: [1] Accelerated Death Benefits (ADB) for Chronic Illness; [2] ADB for Terminal Illness; [3] ADB for Critical Illness [4] Life/Long Term Care Insurance (LTCI) Accelerated Benefits; [5] Life/LTCI Linked-Benefit Plans; [6] Annuity/LTCI Linked-Benefit Plans; and [7] Annuity Enhanced Payout Benefits triggered by a qualifying health condition." (Society of Actuaries)
No ERISA Cause of Action for Violating Standards of Actuarial Performance
"Enrolled actuaries under ERISA are held to a set of performance standards in 20 C.F.R. 901.20. A federal district court has now ruled that these standards do not create a private right of action under ERISA against an actuary who is alleged to have violated the standards." [Forgione v. Gaglio, No. 13 Civ. 9061(KPF) (S.D.N.Y. Feb. 13, 2015)] (Reinhart Boerner Van Deuren s.c.)
Pension Changes Affecting Executive Comp Disclosures; Proxy Hysteria Arrives
"Bloomberg reported in a video and an article that GE CEO Jeffrey Immelt was rewarded with an 88% increase in compensation despite sluggish performance. The company attributed the compensation increase to his reshaping of the company and to an increase in the value of his pension.... The pension plans in which Immelt participates did not change. He wasn't granted a massive benefit increase resulting in his total compensation doubling. What happened was that his 2014 compensation replaced his 2009 compensation (remember 2009 was a horrible year for the US and global economies) in a 5-year average, pension discount rates dropped (this increases the present value of pension benefits), and the Society of Actuaries released a new mortality table (I suspect GE adopted it) reflecting longer life expectancies in general." (Benefits and Compensation with John Lowell)
Pension Plans, Once Inviolable Promises to Employees, Are Getting Cut
"The stock market has soared more than 75 percent in the past five years, yet many pension funds, where many middle-class workers should benefit from the market's rise, continue to struggle, jeopardizing benefits for the workers who were counting on them in retirement. At the end of last year, Congress passed legislation allowing certain distressed pension plans to slash retirement benefits, including those already being received by retirees -- an unprecedented move altering a principle enshrined in federal law for four decades that said benefits already earned could not be cut." (The Washington Post; subscription may be required)
Amara Again: Second Circuit Upholds Judicial 'Reformation' of Pension Plan (PDF)
"The latest opinion is notable for its holding that contract, as well as trust, principles could inform the availability of reformation, and for its conclusion that the elements of contract reformation had been established based on generalized circumstantial evidence of a unilateral mistake by the entire plaintiff class." [Amara v. CIGNA, Nos. 13-447-cv and 13-526 (2d Cir. Dec. 23, 2014)] (Steptoe & Johnson LLP)
M&A Basics: Pension, Savings, and Welfare Plan Issues (PDF)
37 presentation slides. Topics: M&A 101 Review; Diligence; Acquisition Agreement Considerations; Defined Benefit Plan/Multiemployer Plan Considerations; Pre- and Post-Closing Actions and Considerations. (Morgan Lewis)
[Opinion] Does Your Financial Advisor Develop Your Annual Spending Budget Based on How Much You Have and How Long You Might Live?
"In a recent survey of Financial Advisors ... 25% responded that they based their approach on levels of pre-retirement spending, 22% indicated that they used a rule of thumb like the 4% Rule, 19% indicated that they used some variation of the Bucket Strategy, 16% indicated that they compared assets with future liabilities and 18% indicated some other approach. [The survey] concluded that not enough Financial Advisors were using 'math and science' to develop spending budgets for their clients and should be periodically comparing the client's assets with the client's liability ... similar to how actuaries measure the funded status of pension plans[.]" (Ken Steiner, FSA Retired)
Questions for IRS, PBGC, and DOL Sought for Gray, Blue, and Green Books
"The Gray Book Committee is accepting questions in preparation for their meetings with the [IRS, PBGC and DOL] for the 2015 editions. They are seeking relevant questions [to be submitted by Dec. 1] covering such areas as funding, nondiscrimination, benefit restrictions, qualification issues, PBGC-related issues, and other areas that are of interest to enrolled actuaries." (Conference of Consulting Actuaries, Public Plans Community)
[Opinion] Solving PBGC Insolvency: More Funding of Plans by Sponsors or More DB Premiums, Take Your Pick
"Sponsors for whom the math makes sense are simply de-risking -- and funding -- plan liabilities, in order, among other things, to avoid paying PBGC premiums. Sponsors whose borrowing costs exceed their PBGC premium costs are continuing to pay the PBGC for backstopping their liabilities. The problem with this approach -- whether you think of the PBGC as providing credit or insurance -- is that, over time, the agency will be stuck with lower-quality risks.... Other than a (politically unrealistic) proposal that it be given discretion to determine the variable-rate premium structure, [the author sees] little evidence that the PBGC is addressing that issue. Generally, this agency seems to think that higher premiums are always better." (PLANSPONSOR)
[Official Guidance] Text of PBGC Disaster Relief Announcement 14-07 in Response to Earthquake in California
"This Disaster Relief Announcement does not cover every situation in which PBGC disaster relief may be warranted. For example, it does not capture every person that might experience difficulty in meeting a PBGC deadline for reasons relating to the Earthquake that began on August 24, 2014, in California. It also does not grant specific disaster relief for all filings." (Pension Benefit Guaranty Corporation [PBGC])
GFOA Best Practice: Enhancing Reliability of Actuarial Valuations for Pension Plans
"Because actuarial information directly affects the funded level and sustainability of pension plans, the GFOA urges pension plan fiduciaries to take the following steps to obtain additional information that will enhance the reliability of their actuarial valuations: ... Engage the actuary to perform additional services, to validate the actuarial assumptions used for the valuation or to help the plan with risk management strategies and future trends forecasting. Such services include: ... [1] Actuarial Gain/Loss Analysis ... [2] Actuarial Experience Study ... [3] Actuarial Projections ... [4] Asset/Liability Study ... [5] Sensitivity Analysis ... [6] Analysis of Proposed Benefit Changes. In considering benefit changes, decision makers need to understand the potential cost implications of the changes before they are enacted." (Government Finance Officers Association)
Lawsuit Contends Actuarial Firm Misled Detroit Pension Plan
"With the nation's states and cities slowly sinking in a $3 trillion pension hole, the professionals who advise their pension plans have long wondered whether the fingers of blame might eventually point to them. One of those fingers has surfaced in bankrupt Detroit, and it is singling out Gabriel, Roeder, Smith, a top actuarial consultant for public pensions, which has hundreds of clients across the country that rely on it to keep track of data, calculate required annual contributions and advise on crucial assumptions like future investment returns.... Gabriel Roeder said the three lawsuits 'are factually, legally and procedurally infirm and reflect a gross misunderstanding of the nature of actuarial services.' " (The New York Times; subscription may be required)
Premiums and HATFA and Hybrids, Oh My!
"Thomas Finnegan, Principal at the Savitz Organization, ... addressed [at the ASPPA 2014 Annual Conference] some of the fallout of [the Highway and Transportation Funding Act (HATFA)].... Is reporting under ERISA Section 4010 or on PBGC Form 10/200 eliminated due to HATFA? Will penalties for late reporting be refunded? May 2013 HATFA changes be explained with the 2014 annual funding notice (AFN), rather than revising or redistributing? When will changes to model AFN language regarding HATFA and its impact on contribution requirements be available?" (American Society of Pension Professionals & Actuaries [ASPPA])
Rising U.S. Life Spans Spell Likely Pain for Pension Funds
"New mortality estimates released Monday by the nonprofit Society of Actuaries show the average 65-year-old U.S. woman is expected to live 88.8 years, up from 86.4 in 2000. Men age 65 are expected to live 86.6 years, up from 84.6 in 2000. Longer lives for retirees may add to a squeeze at many pension funds already struggling to plug funding gaps and force companies to contribute more to cover future obligations." (The Wall Street Journal; subscription may be required)
SOA Pension Plan Mortality Tables and Mortality Improvement Scale: RP-2014 Finalized
"The Society of Actuaries' Retirement Plans Experience Committee (RPEC) has released the final report of the RP-2014 Mortality Tables. The primary focus of this study was a comprehensive review of recent mortality experience of uninsured private retirement plans in the United States. The RP-2014 mortality tables presented in this report and the Mortality Improvement Scale MP-2014 presented in the companion report form a new basis for the measurement of retirement program obligations in the United States. RPEC released an exposure draft of this report in February 2014 and solicited comments on it through the end of May 2014." (Society of Actuaries)
[Official Guidance] Text of PBGC Monthly Interest Rate Update for November 2014
"This final rule amends the [PBGC] regulation on Benefits Payable in Terminated Single-Employer Plans to prescribe interest assumptions under the regulation for valuation dates in November 2014. The interest assumptions are used for paying benefits under terminating single-employer plans[.] ... The November 2014 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for October 2014, these interest assumptions represent an increase of 0.25 percent in the immediate annuity rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])
[Guidance Overview] IRS Employee Plans News, March 19, 2014 (PDF)
Topics include: [1] Cycle C determination letter applicants who intend to adopt a pre-approved cash balance plan may withdraw their applications by May 31, 2014, if they sign Form 8905, Certification of Intent to Adopt a Pre-approved Plan, by March 31, 2014; [2] FAQs on withdrawing Cycle C applications; and [3] Unreasonable assumptions in actuarial certifications of post-retirement medical benefit reserves may have consequences. (Internal Revenue Service [IRS])
[Guidance Overview] Enrolled Actuary Program Examination Booklet for May 2014 Exams (PDF)
Updated February 2014; 32 pages. Excerpt: "The actuarial knowledge requirement for enrollment is augmented by a requirement that a candidate have certain responsible pension actuarial experience. Through a combined knowledge and experience requirement, the Joint Board seeks to determine which applicants for the designation of Enrolled Actuary have the skills necessary to protect the interests of pension plan participant... Not all topics listed in the syllabus of this examination program are necessarily covered on any particular year's examination, nor are the examination questions necessarily confined solely to the listed topics or suggested readings." (Joint Board for the Enrollment of Actuaries [JBEA], American Society of Pension Professionals and Actuaries [ASPPA] and Society of Actuaries)
[Official Guidance] Text of Proposed PBGC Regs Relaxing Reporting of Mergers by Multiemployer Plans, Reducing Valuation Frequency for Certain Smaller Multiemployer Plans
"PBGC is proposing to amend its multiemployer regulations to make the provision of information to PBGC and plan participants more efficient and effective and to reduce burden on plans and sponsors. The amendments would reduce the number of actuarial valuations required for certain small terminated but not insolvent plans, shorten the advance notice filing requirements for mergers in situations that do not involve a compliance determination, and remove certain insolvency notice and update requirements. The amendments are a result of PBGC's regulatory review[.]" (Pension Benefit Guaranty Corporation)
Who Pays for Public Employee Health Costs?
"[W]e find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries. Strong teachers' unions were associated with relatively strong linkages between benefit growth and growth in total compensation. We further find that when economic conditions are poor, straining public budgets, benefit growth is more readily shifted back to public employees. Our analysis is consistent with the view that the costs of public workers' benefits are difficult to monitor, contributing to benefit oriented, and often under-funded, compensation schemes." (National Bureau of Economic Research [NBER])
[Official Guidance] Text of IRS Notice 2013-66: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates, October 2013 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under [Internal Revenue Code section] 430(h)(2) ... [and] provides guidance as to ... the 30-year Treasury weighted average rate under section 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under section 417(e)(3)(D) ... These rates reflect certain changes implemented by [MAP-21]." (Internal Revenue Service)
[Guidance Overview] Supreme Court Rules Part of DOMA Unconstitutional; Employer Action Steps Suggested
"[T]here are at least five steps that any affected employer should now be considering: [1] Stop imputing income for federal income and FICA tax purposes on health plan coverage provided for a same-sex spouse, but continue imputing income for state income tax purposes if the employee resides in a non-recognizing state; [2] Communicate the Supreme Court's decision to employees, and request that any employees in same-sex marriages that may not be known to the employer identify themselves; [3] Offer a mid-2013 enrollment right under welfare plans for same-sex spouses not previously eligible; [4] Identify all employee plan provisions that may be affected by a changed definition of the term 'spouse'; [and] [5] Identify all past and present employees who are in a same-sex marriage." (The Wagner Law Group)
Text of Enrolled Actuaries Basic Examination, EA-1 (PDF)
Text of questions and answers from the May 2013 exam. (American Society of Pension Professionals & Actuaries; Joint Board for the Enrollment of Actuaries; Society of Actuaries)
Text of Enrolled Actuaries Pension Examination EA-2, Segment L (PDF)
Text of questions and answers from the May 2013 exam. (American Society of Pension Professionals & Actuaries; Joint Board for the Enrollment of Actuaries; Society of Actuaries)
[Guidance Overview] PBGC Proposes Significant Changes to 'Reportable Event' Regulation (PDF)
"The proposed rule retains a modified version of the small plan waiver for active participant reductions and makes it applicable to more events.... The small plan waiver would be extended to controlled group changes, benefit liability transfers, and extraordinary dividends." (Groom Law Group)
PBGC to Pay Retirement Benefits for Hawker Beechcraft
"[PBGC] will assume benefit payments for more than 9,500 workers and retirees from two of Hawker Beechcraft, Inc.'s pension plans. The settlement also includes $2.5 million to those salaried retirees whose benefits exceed those paid by PBGC under rules set by Congress.... [T]he bankruptcy court approved a settlement between Hawker Beechcraft and PBGC in which two plans covering salaried employees would be assumed by the agency. The third plan, with 8,300 participants, will be frozen and remain with the company." (Pension Benefit Guaranty Corporation)
[Official Guidance] PBGC Web Site Now Accepting E-Filing of 2013 Premiums
"What's New in My PAA (01/2013) ... Premium filings for plan year 2013 may be prepared and submitted via My PAA.... For plan years beginning in 2013, the per-participant flat-rate premium is $42.00 for single-employer plans and $12.00 for multiemployer plans.... The 2013 premium filings include new and changed data elements, e.g., additional plan contact information and a new cap on the variable-rate premium. The 2013 Premium Payment Instructions include a summary of What's New ... and the updated illustrative forms[.]" (Pension Benefit Guaranty Corporation)
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