STUMP » Articles » Requesting a Public Hearing on Public Pension Actuarial Practice » 1 December 2014, 06:01

As noted in a prior comment, the Actuarial Standards Board put out a request for comment on issues surrounding public pension actuarial practice, and public pension funding in general. The comment period ended November 15.

I have made a summary guide to the 55 comment letters on Google Docs — most are from actuaries, though a few letters are from users of actuarial reports. Of note is the letter from multiple executive directors of public plans.

Having noticed Jeremy Gold’s call for public hearings at the beginning of his response letter, I have emailed the Actuarial Standards Board (asb@actuary.org) to request public hearings as well.

Below is a copy of my email:

To the members of the Actuarial Standards Board:

I would like to request that a public hearing be held on the issue of public pension practice. Reference to the appropriate part of the ASB procedures manual is in a postscript to this message.

Given that multiple U.S.-based actuarial organizations have commented on public pension funding, the large number of responses to the call for comment, and recent events (to pick two significant ones: the reduction of current retiree pensions as part of the Detroit bankruptcy workout and today’s Illinois Circuit Court decision that their recent pension reform was unconstitutional), this seems to be a topic of such significance that public hearings are called for.

I understand the ASB’s next meeting will be December 9 – 10. Please send this request to them in time for their meeting.

Thank you for your consideration,
Mary Pat Campbell, FSA, MAAA

ASB Procedure Manual:
http://www.actuarialstandardsboard.org/pdf/procedures_117.pdf

Pages 12 – 14

Relevant portion (emphasis added)

“E. Public Hearings

1. Public hearings are not required, but may be authorized by the chair of the ASB. Factors to be considered in deciding whether a public hearing should be held include the following:
a. the complexity of the proposed standard;
b. the anticipated level of controversy;
c. the significance to the profession of the guidance contained in the proposed standard; and
d. other relevant considerations, if any. “

I encourage other interested parties to make similar requests. If you do, please CC or BCC me at marypat.campbell@gmail.com, so I can keep track of these requests.

As noted in my own response letter, actuaries have little control over how public pensions are actually funded. But we can help inform stakeholders as to the condition of the funds, how the funds got into the condition, and perhaps we can help point the way out of the mess.

No, the message is unlikely to be a happy one in many cases. This is partly the reason actuaries need more robust standards to back them up.

I have known cases of insurance actuaries walking away from jobs, because they could not sign off on reserve adequacy…and signing off on deficient reserves is dangerous if you’re an appointed actuary for an insurer. There are standards developed for these actuarial opinions, which came in the wake of a slew of insurer insolvencies.

It unfortunately took disaster to get this sorted out, and it looks like the same may be true for public pensions.