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A Catalyst For Change

A Catalyst for Change

The following article addresses the reasons the SOA started a new member Section. Read on for an inside look at what this Section plans to accomplish.

By Jim Toole

Yes, the publically financed social insurance objects in your prospective mirrors are closer than they appear–since just last year! In the United States, Medicare is now projected to be insolvent in a scant nine years' time, two years sooner than the previous Trustees report concluded, while Social Security is expected to exhaust the trust fund by 2037, a full four years earlier. Driven in part by the current downturn, the downward revisions were also impacted by unrelated revisions to longevity assumptions and long-term economic growth estimates. The U.S. Treasury Secretary Tim Geithner borrowed a page from the American Academy of Actuaries' playbook when he stated, "The longer we wait to address [these problems] ... the harder the options will be."


So you are an industry veteran and you think your generation is guilty of fiscal child abuse and you want to be a catalyst for change. What's your first order of business? Form an SOA Section to assemble resources, sponsor research on the issues, and educate your fellow actuaries, of course!

That's exactly what we–Bob Shapiro, Bart Clennon, Jeremy Gold, Fred Kilborne, Mark Litow and Jim Toole, charter members of the Concerned Actuaries Group1–did when we decided to form the Social Insurance & Public Finance (SIPF) Section. After seeing the 2008 movie I.O.U.S.A. (think An Inconvenient Truth for public debt) and discussing existing professional resources and ways to channel them, our group concluded there was an important gap in the profession's tactical arsenal. While in the United States, the American Academy of Actuaries (the Academy) does an admirable job addressing policy issues and educating policymakers, the Concerned Actuaries identified the need to educate the broader membership on the challenges social insurance programs face. By informing and empowering actuaries the thinking goes, the influence of the profession is expanded in an area that falls naturally within our purview, consistent with the SOA strategic plan.


According to a 1998 letter from the Academy, social insurance is a government-sponsored insurance program that is defined by statute, serves a specific population, and is funded through premiums and/or taxes paid by or on behalf of participants. The accounting mechanism for benefit payments and income is often in the form of a trust fund. Participation is either compulsory or heavily enough subsidized that most eligible individuals choose to participate. Yet social insurance and its various financing mechanisms are not always well understood by actuaries or policymakers responsible for decisions affecting the wealth, and health, of nations.

Programs meeting this definition in the United States include, but are not limited to, Social Security, Medicare (or any government funded health system), and state-sponsored unemployment insurance programs. Most consider workers' compensation insurance to be a social insurance program, although it is administered by the private sector in the United States. Many feel such diverse programs as Federal Flood Insurance, Pension Benefit Guaranty Corporation and even Federal Deposit Insurance Corporation fall under the rubric of social insurance. In Canada, such programs would include Old Age Security, Canada Pension Plan/Quebec Pension Plan and the provincial health care systems. In addition, pensions and other post-employment benefits for public employees, while not traditionally thought of as social insurance, will be considered because of the significant taxpayer obligations these programs create.

Public finance is the means by which governments pay for the goods and services they provide to their citizens. Public finance mechanisms include taxation, debt, issuing currency (seigniorage), and asset sales. The choices and consequences of public financing decisions constitute an entire field of economics, so the Section's discussions will of necessity be of limited scope. Suffice it to say social insurance programs are intricately bound with their financing, and any discussion of one is not complete without considering the other.

Of primary interest to this group is intergenerational equity: who pays for today's services. Suppose a bridge is built today with an expected lifespan of 50 years. If debt is used to finance the bridge, future generations will pay off the debt, perhaps achieving a notional balance between usage (consumption) and cost. Borrowing to finance capital budget items is longstanding practice and considered to be responsible financing. However, borrowing to meet current consumption of goods and services may be symptomatic of a structural imbalance which is inequitable and ultimately unsustainable. All things being equal, every dollar borrowed today is a reduction in discretionary spending tomorrow and constrains the ability of future generations to determine their own goals and priorities.


The concept of a profession carries with it the idea of service to the public. In 2007, the major North American actuarial associations signed an agreement to operate in the public interest, agreeing that: "It is important to identify, protect and advance the public interest in the work of our profession–its organizations and its members."2

After reflecting on the need for education and research on the topic of social insurance programs and their related finance, and consideration of existing resources devoted towards meeting that need, we petitioned the SOA to form the Social Insurance & Public Finance Section. We believe this action is needed given the fiscal and demographic challenges social insurance programs face in North America and around the world, and the importance of addressing these issues with focus and actuarial discipline.

The mission of the Society of Actuaries is to "advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems involving uncertain future events." While there are some other SOA Sections that deal with social insurance issues, this is the first Section dedicated solely to addressing public sector issues. We envision this Section developing key content for informed decision making relevant to social insurance and its financing. This presents a unique opportunity for public service, one might argue a professional obligation, for actuaries.


The purpose of the Section is to develop consistent, high quality continuing education opportunities and sponsor research into evaluating and managing social insurance programs, including public pension plans, government-funded health plans, and unemployment insurance.

The Section will cross disciplines, including enterprise risk management, health and pension. The participation of academics is also anticipated. At an appropriate time we anticipate the Section will encourage the involvement of other member partners to address the complete spectrum of social insurance programs. While the Section will promote the involvement of affiliate members (nonvoting, nonactuaries), North American actuaries are the primary target membership. Some of our earliest member pledges are from European members, so we anticipate the Section will appeal to actuaries outside of North America as well.

Membership in the SIPF Section is intended to complement, not diminish, the importance of membership in other SOA Sections and committees. Historically, there has been coverage of social insurance programs in the Health and Pension Sections, although the primary focus of these Sections has traditionally been serving private sector interests. However, some of the constituencies targeted by this Section are specifically addressed by existing services. In particular:

The Pension Section sponsors the Committee on Social Security, a longstanding and productive committee.

The Health Section recently formed a network serving the needs of a broad spectrum of Medicare practitioners, both private and public sector.

It is the intention that the SIPF Section complement their work and provide additional resources to accomplish more while raising the visibility of the profession in the space. Of immediate interest is the impact of the baby boomer generation and other trends on current social insurance programs. Considerations of intergenerational equity and the impact of social insurance programs on private sector programs are also of interest. The specific functions and activities of this Section will include, but not be limited to:

Developing opportunities for consistent, high quality continuing education on fiscal and other issues surrounding the measurement and management of risks associated with existing and developing social insurance and public finance programs;

Forming networks to support the needs of practitioners in specific areas of interest and bringing results to the broader membership;

Sponsoring research in social insurance programs and their related finance to further develop the intellectual capital from an actuarial perspective; and

Transferring intellectual capital to the broader membership and the public via Section publications and various venues for SOA professional development.


The SIPF Section understands the only way to accomplish these goals is to leverage resources both inside and outside the profession. Strong relationships with the Academy, the Canadian Institute of Actuaries (CIA) and the National Academy of Social Insurance are a must. According to the Academy Web site, the Social Insurance Committee provides and promotes actuarial reviews and analyses of U.S. social insurance systems. The committee prepares comments on pending legislation regarding federal social insurance programs and government reports on these programs. One of their key issues is Social Security reform. The Academy's Social Insurance Committee supports activities like the 2007 monograph on Social Security Reform Options and created an election guide that contained questions for candidates and an overview of possible areas of reform. Options discussed included raising the retirement age, changing Social Security's financing and benefit levels, means testing, and instituting some form of individual accounts. Most recently, the Academy's Public Interest Committee issued a public statement in August 2008 advocating raising Social Security's retirement age.

The CIA, through various committees and task forces, has played an active role in issues affecting the major social insurance programs in Canada, particularly the CPP/QPP pension system, the Employment Insurance (EI) system and Workers' Compensation. The CIA's recent work on EI financing helped put this issue on the federal government's agenda. In addition, three fellows of the CIA conducted the external peer review of the 23rd Actuarial Report on the Canada Pension Plan (CPP). Committees such as the Pension and Social Security Liaison Committee monitor ongoing issues with regard to public security programs and formulate submissions to government panels and commissions when required.

The National Academy of Social Insurance (NASI) is a nonprofit, nonpartisan organization made up of the leading U.S. experts on social insurance. Founded to help voters, taxpayers, journalists and scholars better understand the role that social insurance programs play in their lives, its mission is to promote understanding and informed policymaking on social insurance programs through research, public education, training and the open exchange of ideas. The NASI convenes steering committees and study panels that are charged with conducting research, issuing findings and, in some cases, reaching recommendations based on their analysis. Members of these groups are selected for their recognized expertise and with due consideration for the balance of disciplines and perspectives appropriate to the project.


We believe formation of the SIPF Section will advance the profession, extend its influence, create opportunities for actuaries, and serve a broad community of stakeholders. The Section will strive to maximize the synergy from bringing to bear the abilities of actuaries in multiple disciplines in multiple countries. The goal is to develop actuarial research and continuing education capabilities for social insurance programs that are held in the same high regard by stakeholders as existing SOA programs for the private sector.

All of us are impacted by social insurance and other publicly financed programs, and the better informed we are the better policy decisions will be. It will be impossible to address the matrix of programs and drivers at once. The scope and speed at which the Section takes on projects will only be limited by its volunteer base. For those of you who are not yet members of the Section, we hope you will consider joining by visiting the SOA Web site at Clearly, this is an important time to participate in the discussion. The first council elections are coming and have an impact on the direction of the Section. If you are already a member, thank you, and we hope you will consider volunteering your time and energy. We are looking for writers, speakers and program ideas. Contact Kate Quan at if you want to be placed on the volunteer list.

Jim Toole, FSA, CERA, MAAA, is managing director, Life & Health, with MBA Actuaries Inc. He can be contacted at


  1. Not affiliated with the Society of Actuaries.