Thirty Years of Continuing Education–What Have we Learned?
Richard Q. Wendt, FSA, EA, CFA1
There is currently a formal proposal by the American Academy of Actuaries (AAA) to adopt mandatory continuing education for actuaries; the SOA Board of Governors, at their March 2007 meeting, approved a motion to proceed with the establishment of a continuing professional development requirement. In addition, the recent CRUSAP report suggested a need for mandatory continuing education. Although many actuaries may believe that mandatory CE is a relatively new issue, requirements affecting thousands of Enrolled Actuaries have actually been in place for about 30 years.2 What learnings can we take from that substantial body of experience?
In 1974, the Employee Retirement Income Security Act (ERISA) was signed into law. This created a comprehensive scheme for the regulation of corporate defined benefit plans. ERISA introduced the concept of the Enrolled Actuary; only an Enrolled Actuary can choose actuarial assumptions, determine funding requirements and sign Schedule B’s.
To become an Enrolled Actuary, candidates need to satisfy significant experience, educational and examination requirements. Once the EA status is achieved, continuing professional education (CPE) requirements apply. Enrolled Actuaries must complete 36 hours of continuing professional education credit during each three-year enrollment cycle. Satisfying the requirements in a cycle qualifies the actuary for enrollment in the following cycle. Subject matter is split into two categories, core - pension funding rules and regulations–and non-core–actuarial topics, investment theory, pension accounting, etc. Core material must comprise at least 18 hours in each cycle. Initial and renewal enrollments are supervised by the Joint Board for the Enrollment of Actuaries (JBEA), a government agency with representatives of the Departments of Treasury and Labor.
The current CPE cycle runs from Jan. 1, 2005, to Dec. 31, 2007. The JBEA previously requested comments on possible modifications to the enrollment and CPE requirements; the AAA, SOA, ASPA, and several actuarial consulting firms submitted comments. I would speculate that, if any CPE changes were to be made, they would not take effect until the cycle starting in 2008.
Given that background, what have we learned from the thousands of Enrolled Actuaries who have been subject to the CPE requirements? The following comments are based on my personal observations:
- I have found the vast majority of Enrolled Actuaries to be diligent in fulfilling the CPE requirements. Enrolled actuaries monitor their CPE progress and plan to fulfill requirements by the end of each cycle. I have never found indications that actuaries have submitted false reports to the JBEA.
- It has become standard practice for program listings for national and local actuarial meetings to show the CPE credit expected to be awarded for each session. Meetings with concurrent sessions typically coordinate CPE sessions, so as to avoid conflicts.
- Attendance at CPE sessions at national actuarial meetings is recorded by submitting attendance cards to a monitor. A small number of actuaries are inattentive at meetings, perhaps sleeping, reading, or doing puzzles. Looking from the podium, audiences generally appear alert and interested.
- The split between core and non-core subjects is very significant, as EA’s typically need to scramble to obtain core credit. The majority of EA’s attend more than 36 hours of formal activity, but the excess credit is generally for non-core topics. The determination of whether a session is core is made by the JBEA; there are occasionally changes to announced CPE credits due to comments from the JBEA.
- Presenters earn quadruple credit, which seems to be a fair tradeoff for the effort involved in preparation. It continues to be difficult to recruit speakers, even with the extra credit.
- Enrolled actuaries are required by the regulations to retain, for a period of three years, the following supporting documentation regarding CPE:
- The name of the sponsoring organization
- The location of the program
- The title of the program and description of its content
- The dates attended
- The name of the instructor, discussion leader or speaker
- The certificate of completion and/or signed statement of the hours of attendance from the sponsor
- The total core and non-core credit hours.
- The SOA and other actuarial organizations routinely send printed attendance certificates to registrants, based on validated attendance at each session.
- The triennial reporting requirements to the JBEA are relatively straightforward, assuming that EA’s retain the records of attendance and participation.
- The Joint Board conducts random audits of claims for CPE credit, which includes the review of the documents listed above. However, I have heard of very few actuaries who have been audited.
- The national Enrolled Actuaries meeting has been held annually at the same hotel in Washington, DC for approximately 30 years. In the early years, it was the most important resource for EA’s, as government speakers would announce and explain the new requirements. Over time, the importance of the EA Meeting has diminished somewhat, as employers and other providers have established more cost-effective resources. However, many EA’s attend the EA Meeting to earn large blocks of CPE credit in a concentrated period – typically in the last year of the three-year cycle. Attendance at national meetings is expensive in terms of time, travel, and fees. Until recently, edited transcripts of almost all sessions were made available to attendees. As of 2006, transcripts were no longer produced, but EA’s may purchase audiotapes of the sessions.
- Over the last several years, many employers of EA’s have started to offer internal programs, using Webcasts and other cost-effective methodologies. This has reduced the number of actuaries who need to attend national or regional meetings in order to obtain CPE credit. In addition, it increases the number of presenters, who may earn quadruple credit. Employers must be approved as educational sponsors by the JBEA.
- Local offices of actuarial consulting firms offer educational sessions for actuaries in the office, using either resources supplied by corporate headquarters or developed by the presenter. At least three EA’s must be in attendance for a session to qualify for CPE credit.
- The SOA, among other organizations, developed distance-learning programs that allow individual EA’s to complete their CPE requirements. EA’s who listen to an audiotape and return a questionnaire with answers to subject-related questions can receive CPE credit. Unlike group sessions, where only attendance is required, the distance learning option requires the EA to actively learn and answer questions. I have not come across any EA’s who have used this resource.
- The SOA and other organizations provided additional resources near the end of the 2002-2004 CPE cycle, specifically designed to allow EA’s to meet the CPE requirements for that cycle. These offerings included the SOA’s distance learning program and re-presentations of videos of prior educational sessions.
- Most Enrolled Actuaries engage in significant informal education, including reading news and journal articles, company memos, and performing independent research. This would not qualify for CPE credit.
- Many Enrolled Actuaries would benefit from education in financial theory, which is not a major part of the pension syllabus and is not considered a core topic.
- While some claim that mandatory CPE affects the public perception of actuaries, the experience of CPE for Enrolled Actuaries indicates that the public has very little knowledge that such requirements exist.
Based on my personal experience and observations, I would offer the following recommendations:
- A three-year cycle is superior to an annual requirement, as it both maintains currency of the educational sessions and avoids unnecessary burdens on both the EA and the JBEA. Actuaries may not be able to attend national actuarial meetings in each and every year; a multi-year cycle allows the actuary flexibility in planning meetings and educational sessions.
- 36 hours of required CPE in a three-year period is sufficient to maintain an appropriate skill level. In 2004, the AAA specifically commented to the JBEA that 36 hours were sufficient for CPE requirements, while the SOA suggested that the proportion of core credit be changed within the 36-hour requirement. ASPA (now known as ASPPA) stated that requirements should be expanded to 45 hours. (See http://www.irs.gov/taxpros/actuaries/article/0,,id=97436,00.html3 for comments submitted to the JBEA in 2004.)
- The requirement for 18 hours of core credit, with a narrow definition of core subjects, is unduly burdensome for both EA’s and educational sponsors. The SOA suggested that more core credit is needed early in the EA’s career and less thereafter. Many would prefer the segmentation to be eliminated; otherwise, expansion of the definition of core topics or adoption of the SOA proposal would provide needed flexibility.
- If CPE requirements were to apply to all actuaries, with sub-categories of required CPE, some central authority would need to determine whether specific sessions fit within designated categories of topics. Creating such a segmented structure for the various actuarial practice areas would be difficult to manage.
- There should be a multiple of credit awarded for presenting a CPE session. This would not only reflect the higher skill level required for presenters and the additional time spent on preparation, but also encourage actuaries to make presentations.
- Employers should be expected to continue development of cost-effective educational programs; reliance on traditional providers has diminished somewhat. CPE requirements should facilitate employer participation, as well as participation from educational vendors.
- The higher the fees charged for educational meetings, the greater will be the incentive for employers and others to provide cost-effective education. CPE may not be overly profitable for actuarial organizations.
- Record keeping should be streamlined. Ideally, education providers would automatically provide a record of attendance (which might be captured in a centralized, automated data base) and actuaries would have an easily accessed electronic record of their CPE.
- Adoption of AAA or SOA requirements affecting Enrolled Actuaries should be coordinated with any changes in the JBEA regulations.
A recent survey at www.FutureRisk.org indicated that 90 percent of responding actuaries engaged in continuing education within the last two years. This statistic can be interpreted in two different, and opposite, ways. One interpretation is that 90 percent of actuaries are already participating in continuing education; therefore, making it mandatory would not be a hardship. Another interpretation is that, if 90 percent of actuaries are voluntarily participating in continuing education, then there is little to be gained by imposing mandatory requirements. The interpretation that one prefers is probably more related to the individual’s philosophical bent than to objective analysis.
1The author recently retired from an actuarial consulting firm and does not expect to be subject to any future mandatory continuing education requirements. These comments are based on my personal observations and do not reflect the views of any other party.
2There were approximately 3200 SOA members who were also Enrolled Actuaries.
3This URL was valid as of May 18, 2007.
Dick Wendt is based in Philadelphia, Pennsylvania. He can be reached at firstname.lastname@example.org.