June 2012

A View from the SOA’s Staff Fellow for Retirement

By Andrew Peterson

In my last column for the February Pension Section News (PSN), I highlighted the importance of retirement actuaries learning more about mortality improvement and longevity-related topics. That theme is continued in this issue in an article I co-authored with Larry Pinzur, the chair of the SOA’s Retirement Plan Experience Committee, as we call attention to the recently released Mortality Improvement Scale BB exposure draft report.

While mortality is not the intended theme of this issue’s column, that topic also is related to the late-April news made by Ford that I want to briefly highlight. Ford announced a voluntary program to provide lump-sum payouts to salaried retirees and former employees in the United States in exchange for receiving no further payments from the company’s pension plan in the future. While it is early going in that program, it has nevertheless garnered much media attention and the attention of other plan sponsors. I wrote a short article for the SOA blog on the topic and there was a healthy discussion on the topic going for awhile on the SOA’s LinkedIn group.

In talking with several consulting actuaries, I understand that Ford’s announcement is prompting plan sponsors to ask about the implications for their plans. I’ve also received a suggestion from a pension section member about possible research ideas that might focus on following Ford’s experience and the “success” of their de-risking strategy. The Pension Section Council intends to discuss the implications of this announcement for our members at an upcoming meeting.

Finally, in past columns I’ve mentioned that one of the unique aspects of my staff fellow role is to attend various retirement-related seminars and policy-events. In February I attended an event in Washington, DC sponsored by the rather unusual alliance of Covington & Burling, the Pension Rights Center, and the Urban Institute, called “Re-Imagining Pensions: Using Innovative Pension Plan Design to Reduce Risk and Increase Retirement Income.” The event was consistent with the themes we (as the SOA Pension Section) have been working on in our Retirement 20/20 project. And similar to our Retirement 20/20 events, the audience represented a wide variety of constituencies including policy-makers, regulators, plan sponsors, unions, employees and the benefits consulting community.

There were three distinct panels that presented specific plan design options with an emphasis on risk sharing and facilitating secure retirement income. For a bit more detail on the context I encourage you to see the separate article in this PSN issue or feel free to browse the event website where presentations and video are available.

While there were many interesting presentations, a key observation for me was the level of engagement from key U.S. administration officials. Three administration speakers were Mark Iwry, Deputy Assistant Secretary for Retirement and Health Policy, Department of Treasury; Joshua Gautbaum, Director, Pension Benefit Guaranty Corporation; and Phyllis Borzi, Assistant Secretary of Employee Benefits Security Administration, Department of Labor. Not only did they speak, but at least two of them stayed for the majority of the symposium participating and listening to other panels even after they were finished speaking (not necessarily a usual occurrence based on other events I have attended).

Getting positive solutions for better retirement designs was a key goal of this event, as it is for Retirement 20/20. While I believe that innovation needs to be driven by the private sector, the regulatory framework is a key aspect for enabling and not inhibiting successful innovation. Mark Iwry observed that there may be a need to change statutory rules to allow for more flexibility and called for evidence-based results to move creative ideas forward. The “evidence-based results” is something we as actuaries should strive to provide. As such it was encouraging to me to hear the policy-makers and regulators participating in this event and being open to new ideas. I acknowledge that much work is needed and it can be difficult to move from talk to action. But I am happy to report that the actuarial profession was well-represented at this event and is understood to be a key contributor to better solutions.

I encourage you to review at least one presentation from this event as a way of expanding your thinking.

Andrew Peterson, FSA, EA, MAAA is staff fellow, retirement systems at the Society of Actuaries in Schaumburg, Ill. He can be reached at apeterson@soa.org.