February 2012

Exploring Pensions: SOA Annual Meeting Recap

By Ellen Kleinstuber

I attend three or four actuarial conferences each year and sit through many, many continuing education breakout sessions in the process. While at the Annual Meeting in Chicago, I spent my CPD hours attending various sessions sponsored by the Pension Section, and presenting at a couple of them. As chair of the Pension Section's Continuing Education Team, I knew going into the meeting exactly what pension-related sessions were being offered, so it was no surprise to me that I had the chance to choose from among nearly 20 sessions sponsored by the Pension Section on a wide range of topics, including traditional pensions, defined contribution plans, investments, and risk management. What struck me though, even with my inside knowledge, was the way in which the panels on these sessions challenged my thinking and provided me an opportunity to explore those topics in an "outside the box" sort of way. In some cases, this involved hearing questions asked by actuaries that practice in an area other than pensions. At other times, it came from hearing from a panel comprised of entirely non-actuaries sharing their knowledge and expertise to help expand ours.

Here's a brief glimpse at my three days at the SOA Annual Meeting...

Monday–Exploring Longevity Issues
Having just listened to Nick Bontis' keynote address at the opening general session, I set off to be bombarded with many new pieces of information at the breakout sessions.

First up: Mortality Projection Issues and Modeling Methods. Mortality improvement and its various implications is one of the hottest topics in the actuarial profession today, as evidenced in part by the three mortality issues sessions at this year's meeting. During the first of these, the panelists presented their perspectives on mortality improvement, the factors influencing improvement, and the potential implications for how we value benefit plan liabilities in the future. As a pension actuary, it was informative to learn about the models being used by actuaries in other practice areas to model future mortality trends. After an update on the progress being made by the RPEC to update the RP-2000 tables, we heard from an M.D. specializing in epidemiology who shared his insights into some of the underlying drivers of future mortality trend, including cardiovascular and other diseases.

My afternoon featured the virtual session DC Plans: Moving from Accumulation to Consumption. About 300 people listened in live or through the virtual feed while the panelists updated us on the latest means of providing lifetime income options to DC plan participants. They also shared with us some of the existing legislative and regulatory obstacles, as well as issues plan sponsors face and the concerns of participants who may elect to convert a portion of their retirement accumulation to an income option. The recent trends in mortality improvement show us that converting retirement savings into an income stream that will last a retiree's full lifetime is a critically important issue to be faced in the coming years. This session made it clear that our skills as actuaries prepare us to play an important role in the rapidly expanding lifetime income marketplace.

Tuesday–A Trip Around the U.S. Pension World
Day Two was spent delving into issues that are in the news in some way nearly every day–corporate bankruptcies, pension plan underfunding in the public and private sectors and ERISA fiduciary liability.

When we planned the session Underfunded Pension Plans: The Low-Hanging Fruit of the Corporation Bankruptcy Process, it seemed that this was a true statement given all of the attention garnered by plan participants whose pension plans are turned over to the PBGC due to their employer's financial hardship. The panelists for this session challenged us to consider as we listened whether this should instead be a question rather than a given. We also explored the challenges faced by a plan's actuary in serving the key constituents when the plan sponsor has filed bankruptcy. Actuaries in this situation were well advised to stick to high quality professional service to these constituents of the bankruptcy process, rather than advocating for them, due to their often times competing interests.

If you have occasion to do so, ask Dave Sandberg, 2011-2012 President of the American Academy of Actuaries and a speaker at the session Public Pension Plans–Financing, Accounting and a Framework for Risk Management to tell you the story of the jelly bean and the laser and how it relates to pension plan risk management. It's very enlightening (and a little amusing as well). He and the other panelists went beyond merely updating session attendees on the details of the new GASB accounting rules by discussing how risk management principles play an important role for public sponsors and the emerging practices for effectively managing pension risk, including developing risk tolerance budgets and identifying the Pension Event Horizon. As an actuary practicing primarily with U.S. private pension sponsors, I thought that many of the principles discussed in this session would carry over into work I do with my clients as well.

Before heading to the day's final session to join a panel that included 2010-2011 President Donald Segal and 2011-2012 President-Elect Tonya Manning discussing on Late Breaking Developments and Regulatory Update for Retirement Plans, I spent my post-lunch hours learning about Fiduciary Liability and how insurers price the policies that help protect plan sponsors and other fiduciaries from the losses that may occur if they fail to carry out those duties. While I've had many opportunities to learn about the proposed changes to the definition of fiduciary and fee disclosure requirements, this session provided a unique angle by looking at the factors affecting the cost obtaining personal liability insurance for those acting in a fiduciary capacity who must deal with these requirements. For me, this session epitomized the approach the Pension Section has been taking to providing continuing education–take the current hot topics of the day and address them with a fresh perspective or from a different angle to increase the breadth and depth of knowledge of our members.

Wednesday–Diving In
The final day of the Annual Meeting gave pension actuaries two opportunities for an in-depth exploration of a two very different topics. I opted for the four-part Plan Termination Seminar, although I was equally intrigued by the three-part series that reviewed the work of the Committee on Postretirement Needs and Risks relating to Retirement Security in the New Economy. The plan termination seminar had so many good sessions that we are working on ways to expand and share this information with a wider audience in 2012–stay tuned!

A Great Alternative
Pension actuaries, particularly in the United States, have a variety of venues available to them for obtaining their required continuing education credits. So what makes the SOA Annual Meeting different? For me, this meeting provided an opportunity to hear from a wide range of speakers with varied backgrounds addressing issues I deal with in my everyday consulting assignments in a way that goes far beyond the nitty-gritty technical minutiae that can overtake many other continuing education offerings. I hope that others attending had as much fun as I did and gained as much as new knowledge and insight into the issues affecting our profession today as I did. See you next year in Washington, D.C.!

P.S. The Pension Section Continuing Education Team will start planning the 2012 Annual Meeting sessions in early February. We welcome your ideas and suggestions for sessions you'd like to see offered.

Ellen L Kleinstuber FSA, FCA, EA, MAAA, MSPA, is managing consultant with Savitz Organization Inc. in Philadelphia, Pa. She can be reached at EllenKleinstuber@savitz.com.