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T HE N EWSMONTHLY
A MERICAN A CADEMY
Reckoning Retirement Risk
NRON GOT OUR ATTENTION. All of
a sudden, retirement security is a hot topic. And not a moment too soon, according to a new survey on Americans’ knowledge and attitudes on retirement risk, released Feb. 25 by the Academy and the Society of Actuaries (SOA) at a Capitol Hill news conference televised live by C-SPAN. Survey results indicated that Americans hold many unrealistic views on retirement, including underestimating average life expectancy and underestimating the probability they will need nursing home care. This skews their planning for the risks faced in C-SPAN cameras provide live coverage of the briefing. retirement. “This survey verifies that most people do not unyears of age for males; 85 to 86 years of age for females); derstand many of the issues they will face when they at the same time, three in five respondents expect to retire, and that should be a major cause for concern for outlive the average life expectancy by more than 10 policy-makers as they debate pension reform,” said years. ® Only one in three retirees has given a great deal of John Parks, the Academy’s vice president for pension issues. thought to preparing financially for the possibility of Key findings in the survey include: needing long-term care. ® Most respondents underestimated the life expectancy ® Only one in four retirees tries to increase savings of an average 65-year-old person (currently 81 to 83 See RETIREMENT, Page 8
Inside Updated Numbers A new table shows Academy membership by employment . . . . . . .PAGE 2 Come to the Forum A complete listing of sessions and speakers at the Academy’s 2002 Washington Forum . . . .PAGE 4 Social Security Reform The Academy’s Committee on Social Insurance weighs its role . . . . . . . .PAGE 6 Speaking to the States Academy members give state legislators an actuarial perspective . . .PAGE 8
2002 Washington Forum
New Challenges for the New Millennium
E LIVE IN INTERESTING TIMES.
Whether this is a curse or a blessing depends a lot on how you prepare yourself. The Academy’s 2002 Washington Forum is designed to help actuaries prepare for the challenges they will face in the future.
At the Forum, to be held May 15-16 at the Renaissance Mayflower Hotel, senior congressional staff and Bush administration officials will brief attendees on the major legislative and policy issues for 2002. A panel of experts from major trade See WASHINGTON FORUM, Page 7
Academy Press Conference
Calendar APRIL 4 Academy Social Insurance Committee meeting, Washington 8 Contingencies Editorial Advisory Board meeting, Washington 9 Academy Health Rate Filing Task Force meeting, Minneapolis 11 Academy Executive Committee meeting, Washington 18 ASB Pension Committee meeting, Washington 19 CIA pension seminar, Montreal 23 FASB 141/142 seminar, New York (Academy, SOA) 24 Academy Financial Reporting Committee meeting with AICPA, New York 25 Academy Financial Reporting Council meeting, New York 30 Academy Life Capital Adequacy Subcommittee meeting, Washington
MAY 5 Academy Pension Practice Council meeting, Savannah, Ga. 6 Academy Pension Committee meeting, Savannah, Ga. 5-8 ASPA business leadership conference, Lake Tahoe, Nev. 16 Academy Washington Forum, Washington 17 Academy Board of Directors meeting, Washington 20 Academy Council on Professionalism meeting, Detroit 21 Academy Casualty Practice Council meeting, San Diego 19-22 CAS spring meeting, San Diego 30-31 SOA spring meeting (life), Colorado Springs, Colo.
Academy NEWS Briefs And Now, the Numbers
table on Page 93 of the 2002 Academy Yearbook shows Academy membership by employment category. The November 2001 data in that table were incorrectly sorted; among other things, they made it appear that there had been a sharp drop in the number of Academy members who are employed by governmental organizations. In fact, the number of government actuaries who are members of the Academy—an important constituency in light of the Academy’s public policy mission—continues to increase, a statistic of which we are very proud.
JUNE 5 Academy Life Practice Council meeting, Philadelphia 8-11 NAIC summer meeting, Philadelphia 18 ASB meeting, Washington 18 Academy Life Financial Reporting Committee meeting, Newark, N.J. 20-21 ASB Pension Committee meeting, San Francisco 24-26 SOA spring meeting (health, pension), San Francisco 25-26 SOA retirement issues symposium, San Francisco 26 Academy Health Rate Filing Task Force meeting, San Francisco 27-28 CIA annual meeting, Halifax, Canada
JULY 26 Academy Life Capital Adequacy Subcommittee meeting, Chicago 27-31 ASPA ssummer accademy, San Diego 28 Academy Pension Practice Council meeting, Santa Fe, N.M. 29 Academy Pension Committee meeting, Santa Fe, N.M.
SEPTEMBER 7-10 NAIC fall meeting, New Orleans 19-20 SOA valuation actuary symposium, Orlando, Fla.
19-20 CIA appointed actuary seminar, Toronto, Canada
PLANNING AHEAD? Bookmark the complete calendar at www.actuary.org/calend.htm.
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From left, Rep. Earl Pomeroy (D-N.D.) and Anna Rappaport at the Saver Summit.
Saver Summit Six Academy members were among 200 appointed delegates to the Labor Department’s 2002 National Summit on Retirement Savings, which ran from Feb. 27 to March 1 in Washington. Delegates included Robert Krinsky, chairman of The Segal Co. in New York; John Lounds, vice president of Allstate Life Insurance Co. in Northbrook, Ill.; Thomas Marra, president and CEO of The Hartford Life Insurance Cos. in Hartford, Conn.; Russell Mueller, director of health and retirement policy for Verner Liipfert Bernhard McPherson & Hand in Washington; Anna Rappaport, a member of the Academy’s Pension Practice Council and a consulting actuary with William M. Mercer Inc. in Chicago; and Larry Zimpleman, a former Academy president and executive vice president, pension, of Principal
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Reflecting the dynamic nature of the Academy’s membership, the table below shows updated values as of March 6, 2002. Academy Membership by Employment TYPE OF BUSINESS
Insurance and related organizations Consulting practice Government Academic institutions Other Retired Unaffiliated Total
Financial Group in Des Moines, Iowa. Also appointed as delegates were Bridget Flynn, the Academy’s pension policy analyst; Brian Graff, executive director of ASPA; Mathew Greenwald, who conducted the SOA survey on attitudes to retirement risk recently released by the Academy (see Page 1); and Craig Hoffman, president of ASPA and a member of the Academy’s board of directors. ASB action At its March meeting, the ASB adopted two actuarial standards of practice (ASOPs). The new ASOP No. 41, Actuarial Communications, provides guidance to actuaries with respect to written, electronic, or oral actuarial communications. It supersedes the guidance previously found in Interpretative Opinion No. 3, Professional Communications of Actuaries. The ASB also adopted a revision of existing ASOP No. 17, Expert Testimony by Actuaries. It applies to actuaries who testify as actuarial experts at trial, in hearing or arbitration, in deposition, or by declaration or affidavit, but does not apply to actuaries providing litigation support other than the expert testimony itself. The new standards, and the
6,566 5,135 251 44 694 1,407 434 14,531
repeal of Interpretative Opinion No. 3, become effective July 15. To read the new standards, go to www.actuary.org/asb/asops.htm. Editorial changes Former Academy President Richard Robertson retired from the Contingencies Editorial Advisory Board in February. Taking his place on the board is Barbara Lautzenheiser, former Academy vice president for life insurance issues. Best job in the country Several Academy members were quoted in a St. Petersburg Times article on the growing demand for actuaries to help businesses weigh the risks of opportunities such as investing in emerging markets or expanding into e-commerce. They included Lijia Guo, director of the actuarial science program at the University of Central Florida in Orlando, Fla.; Rade Musulin, chairperson of the Academy’s Communications Review Committee and vice president and actuary for the Florida Farm Bureau Insurance Co. in Gainesville, Fla.; Michael Shackleford, a consultant for the gaming industry in Las Vegas, Nev.; and Steven Zoldos, president of Wakely Consulting Group in Clearwater, Fla.
chairperson of the Academy’s Communications Review Committee, vice president and actuary for the Florida Farm Bureau Insurance Co. in Gainesville, Fla., and chairman of the Florida Insurance Council, was the author of a recent column in the National Underwriter on the need for Congress to enact terrorism insurance legislation. FINANCIAL REPORTING NEWS
Karl Madrecki, an
actuary with Blue Cross and Blue Shield Association in Chicago, is a new member of the Academy’s Federal Charters Work Group. HEALTH NEWS
Rod Turner, chair-
person of the Academy’s health insurance HighRisk Pools Work Group, and Cori Uccello, the Academy’s senior health fellow, submitted written testimony to a House Ways and Means Committee hearing on health care tax credits to reduce the number of uninsured. Copies of the testi-
mony were also distributed to the staff of the House Education and the Workforce Committee. ® Jan Carstens, a member of the Academy’s Board of Directors, vice chairperson of the Health Practice Council, and a consulting actuary with Milliman USA in Minneapolis, is the chair of the Academy’s new Terrorism/Extreme Events Work Group. Other members are Jeff Allen, a senior manager for
Ernst & Young in Chicago; Rowen Bell, an associate actuary with Blue Cross and Blue Shield w w w. a c t u a r y. o r g
Association in Chicago; Cecil Bykerk, a member of the Academy’s Board of Directors and executive vice president and chief actuary of Mutual/United of Omaha Insurance Co. in Omaha, Neb.; Lina Cheung, a consulting actuary with Milliman USA in New York; Thomas Corcoran, a consulting actuary for Tillinghast-Towers Perrin in Weatogue, Conn.; Alan Ford, a member of the Academy’s Board of Directors and a consultant; P. Anthony Hammond, public programs director for Humana, Inc. in Louisville, Ky.; Burt Jay, a consultant to Mutual/United of Omaha Insurance Co. in Omaha, Neb; Darrell Knapp, a partner with Ernst & Young in Kansas City, Mo.; Leonard Koloms, president of Leonard Koloms and Associates in Arroyo Grande, Calif.; Scott Lockwood, an actuary for Humana Inc. in Louisville, Ky.; Karl Madrecki, an actuary with Blue Cross and Blue Shield Association in Chicago; Kevin Rease, a consultant with Reden & Anders Ltd. in Duluth, Ga.; Bruce Richards, a senior consultant with William M. Mercer Inc. in Glen Allen, Va.; Albert Riggieri, vice president and actuary for UnumProvident Corp. in Portland, Maine; Geoffrey Sandler, the Academy’s vice president for health issues and assistant vice president and actuary for Empire Blue Cross and Blue Shield in New York; Michael James Thompson, a principal with PricewaterhouseCoopers in New York; Lisa Tourville, vice president, health analytics, for Ingenix in Minnetonka, Minn.; George Wagoner, principal for William M. Mercer Inc. in Glen Allen, Va.; and Thomas Wildsmith, policy research actuary for the Health Insurance Association of America in Washington.
® Richard Coyle,
an actuary with the Centers for Medicare and Medicaid Services, has joined the Academy’s Medicare Supplement Work Group. ® Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services and a member of the Academy’s Health Practice Council, was quoted in a Boston Globe article about differences between the Medicare projections in President Bush’s 2003 budget and those by the Congressional Budget Office. PENSION NEWS
The Dallas Morning News ran a column based on the Academy’s Feb. 25 press conference on an SOA survey of Americans’ knowledge and attitudes on retirement risk (see Page 1). The column quoted John Parks, the Academy’s vice president for pension issues, and Anna Rappaport, a member of the Academy’s Pension Practice Council and chairperson of the SOA’s Committee on Post-Retirement Needs and Risks. Parks was also quoted in CongressDaily on removing disincentives to employers providing DB plans.
Tom Bakos is the new chairperson of the Academy’s Committee on Professional Responsibility, replacing Allan Ryan, who re-
mains on the Academy’s Council on Professionalism. ® Curtis Huntington, chairperson of the Academy’s Committee on International Issues, Godfrey Perrott, a member of the Academy’s Council on Professionalism, and Lauren Bloom, the Academy’s general counsel and director of professionalism, participated in two mock ABCD hearings at the 27th International Congress of Actuaries in Cancun, Mexico. ON THE MOVE
Donald Southwell has been
promoted to president, chief operating officer, and board member at Unitrin, Inc. in Chicago. He was previously senior vice president. Robert Sackel has joined New York Life Insurance Co. in New York as vice president and actuary in its Special Markets Dept. He was formerly an actuary for Guardian Life Insurance Co.
Mike Abroe, chairperson of the Academy’s Medicare Supplement Work Group, talks about claim costs trends at the National Conference of Insurance legislators (see story, Page 8).
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2002 WASHINGTON FORUM—NEW CHA WEDNESDAY, MAY 15 5:00 pm–7:00 pm Washington Forum Opening Reception
THURSDAY, MAY 16 8:00 am–9:15 am Opening Breakfast — The PolicyMakers’ View from Washington A panel of key congressional and Bush administration officials will provide an overview of the status and prospects of some of the major legislative and policy issues being debated on Capitol Hill. Moderator: Daniel J. McCarthy, consulting actuary, Milliman USA; Academy president Speakers: Robert Gordon, senior counsel, Committee on Financial Services, U.S. House of Representatives*; Sarah A. Kline, counsel, Committee on Banking, Housing and Urban Affairs, U.S. Senate*; Ann L. Combs, assistant secretary, Pension and Welfare Benefits Administration, Department of Labor*
9:30 am–10:50 am General Session 1 — Key Issues and Action for 2002 A panel of experts from major public policy and trade organizations will discuss the key public policy issues in the P/C, health, life, and employee benefits areas. Moderator: Robert A. Anker, Academy president-elect Speakers: Christopher M. Bowlin, senior vice president for federal and public affairs, Health Insurance Association of America; Gary E. Hughes, senior vice president and general counsel, American Council of Life Insurers; James Delaplane, vice president, retirement policy, American Benefits Council; TBD, American Insurance Association
11:00 am–12:15 pm Concurrent Sessions Descriptions ® 2A—Terrorism: A New Challenge
for the P/C Actuary Property and casualty insurance losses from the Sept. 11 terrorist attacks are estimated to be $30-50 billion, by far the largest ever one-day loss to the P/C insurance industry. This loss is the result of an event never contemplated in actuarial analysis of rates, probable maximum loss, or capital requirements. Hurricane Andrew in 1992 and the Northridge earthquake of 1994 brought dramatic changes both in the actuary’s role in providing property coverage for areas prone to natural catastrophe and the methods and models they use to analyze those risks. *Speakers invited but may change depending on congressional schedule
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Will the events of Sept. 11, which affected a much broader array of P/C coverages, have an even greater impact on the P/C actuary? This panel will address the short-term and possible long-term challenges faced by actuaries as a result of our new understanding of the terrorist exposure. Moderator: Mavis Walters, actuary and consultant, Miller Herbers Lehmann & Associates Inc.; former Academy president Speakers: Debra Ballen, executive vice president, American Insurance Association; Albert J. Beer, president, direct insurance company operations, American Re-Insurance Company
2B—Demographic Pressures on Social Security and Medicare: Are We Ready? The Social Security and Medicare programs will experience cash flow shortfalls beginning around the middle of the next decade. This will coincide with the arrival of large numbers of baby boomers joining the beneficiary rolls. Continuing increases in longevity, combined with the fact that post-baby boom cohorts of workers are smaller, will cause the programs’ financial problems to steadily worsen. In response, Congress in 1983 gradually raised Social Security’s normal retirement age to 67. What else is likely to be done in reaction to these demographic forces? And is there still time to enact the necessary reforms? ®
Moderator: Bruce Schobel, corporate vice president and actuary, New York Life; chairperson, Academy Social Insurance Committee Speakers: Stephen C. Goss, chief actuary, Social Security Administration; Richard S. Foster, chief actuary, Centers for Medicare & Medicaid Services; Gene Steuerle, senior fellow, Urban Institute
2C—Bioterrorism: A Future Catastrophe for Health Care Actuaries? The events of Sept. 11 and the resulting exposure to bioterrorism and terrorist events raise significant issues for health insurers. How can health plans and insurers prepare for the possibility of a previously unimaginable attack? Will the potential cost affect overall coverage levels for medical, disability, and long-term care insurance? What will be the potential impact on the use and cost of specific benefits, such as mental health and prescription drugs? How are health care providers (hospitals and physicians) preparing? What is the exposure to catastrophic/per event losses, and will reinsurance be available to cover the exposure? This panel ®
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will address the impact of bioterrorism and extreme events on health plans, insurers, and reinsurers. Moderator: Janet M. Carstens, consulting actuary, Milliman USA; member of the Academy Board of Directors Speakers: Jeffrey G. Allen, senior manager, Ernst & Young; Patricia J. Wang, senior vice president, Greater New York Hospital Association
2D—Emerging National and International Reporting Paradigms In light of the growth of increasingly complex financial products and services, efforts to harmonize banking and insurance capital standards, and the desire for international convergence, what does the future hold? Those who are working on Basel II’s three-pillar approach to solvency and the IASB’s draft international accounting standards may be able to provide some clues. From the use of actuarial modeling techniques to estimate capital requirements to the possible implications of the Enron debacle, this session will offer a broad, forward-thinking, strategic view on the cutting edge of accounting and capital standard developments at both a national and international level. ®
Moderator: David Sandberg, corporate actuary, Allianz Life Insurance Co. of North America; chairperson, Academy International Task Force Speakers: Allan Brender, senior director, actuarial division, Office of the Superintendent of Financial Institutions, Canada; Sam Gutterman, director and consulting actuary, PricewaterhouseCoopers; chairperson, Insurance Accounting Committee of the International Actuarial Association; Richard W. Kopcke, vice president and economist, Federal Reserve Bank of Boston
12:30 pm–2:00 pm Academy Washington Luncheon Keynote Address: Lawrence Kudlow Presentation of the 2002 Robert J. Myers Public Service Award
This year’s keynote address will be delivered by Lawrence Kudlow, CEO of Kudlow & Co., an economic and investment consulting firm located in New York. Kudlow is also a nationally syndicated columnist, a contributing editor of National Review, a columnist for Investor’s Business Daily, and the author of American Abundance: The New Economic and Moral Prosperity. He is a regular panelist on The McLaughlin Group and a frequent guest on Hardball with Chris Matthews.
ALLENGES FOR THE NEW MILLENNIUM Kudlow was the chief economist for ING Barings and chief economist and senior managing director of Bear, Stearns & Co. During President Reagan’s first term, Kudlow was the associate director for economics and planning, Office of Management and Budget. 2:15 pm–3:15 pm General Session 3 — Professionalism and International Practice This panel will focus on the professionalism aspects of international practice. Topics include a discussion of a white paper that is being developed by the Council on Professionalism’s Committee on International Issues on the application of standards to international practice. The panel will also look at the professionalism work of the International Actuarial Association and the professionalism aspects of the Code of Professional Conduct. Moderator: Robert J. Rietz, director of employee benefits for Deloitte & Touche; Academy vice president for professionalism issues Speakers: Lawrence A. Johansen, actuary, New York State Teachers Retirement System; Academy immediate past president; Curtis E. Huntington, professor, University of Michigan; chairperson, Academy Committee on International Issues; William J. Falk, principal, Tillinghast-Towers Perrin; chairperson, Academy Joint Committee on the Code of Professional Conduct
3:25 pm–4:30 pm General Session 4 — Academy Open Forum The open exchange of ideas, across practice areas and the public and private sectors, is critical to the development of a forward-looking public policy agenda that represents the interests of all actuaries. Attendees will be encouraged to share their ideas with Academy leadership in what promises to be an engaging, spirited, and enlightening discussion that will help set the Academy’s agenda for the future. Moderator: Daniel J. McCarthy, Academy president Panelists: Robert A. Anker, Academy president-elect; Steven G. Lehmann, Academy vice president for casualty issues; Patricia A. Teufel, Academy vice president for financial reporting issues; Geoffrey C. Sandler, Academy vice president for health issues; Stephen J. Preston, Academy vice president for life issues; John P. Parks, Academy vice president for pension issues; Robert J. Rietz, Academy vice president for professionalism issues
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2002 Washington Forum Headquarters
Renaissance Mayflower Hotel Centrally located only four blocks from the White House and next door to the Academy’s offices, this landmark four-star hotel brings together all the prestige, splendor, and history that characterizes our nation’s capital.The Mayflower is conveniently located within a short walk to Washington’s major Metro lines, providing easy access to Capitol Hill, Reagan National Airport, and major tourist attractions, including the historic monuments and museums on the National Mall. The Mayflower is just 15 minutes from Reagan National Airport and 10 minutes from Union Station. Washington Forum attendees will enjoy complimentary coffee and newspaper delivery, and free access to the hotel’s health club with a full line of state-of-the-art exercise equipment. Special Conference Discount Rates and Reservations Call Renaissance Reservations at 1-800-468-3571, 24 hours a day, seven days a week. The Renaissance Mayflower Hotel’s reservation desk can be reached at 202-347-3000. To receive the special room rate, be sure to identify yourself as an attendee of the Academy Forum. Washington Forum Special Rate Single/Double . . . . . . . . . . . . . . $229.00** Executive Suites . . . . . . . . . . . . . 329.00**
**Rate does not include local taxes. All reservations must be guaranteed with a major credit card, or a first night room deposit. Guaranteed reservations held after 4:00 pm on the arrival date and not utilized will be charged a one night’s room and tax penalty. Check-in time is 3:00 pm, and check-out time is noon.
Notice on Continuing Education Credits The American Academy of Actuaries is a provider of continuing education for actuaries under the Qualification Standards for Prescribed Statements of Actuarial Opinion. For actuaries practicing in the life, health, and casualty areas, up to six hours of organized continuing education activity credit may be earned by attending the breakfast and luncheon, one of the concurrent sessions, the morning general session, and the afternoon general session on professionalism. For pension actuaries, up to one hour of organized continuing education activity credit may be earned by attending the luncheon and the afternoon general session on professionalism. While the Academy has taken all steps reasonably necessary and appropriate to ensure that these sessions will meet the requirements set forth by the Joint Board for the Enrollment of Actuaries, we cannot guarantee credit, either as core or non-core, since the final determination rests with the Joint Board.
Washington Forum Registration Fees EARLY BIRD April 19
REGULAR April 20–May 10
LATE May 11–15
Academy Member—Government Actuary
Actuary—Academy Non-Member (see below)
Non-Profit Public Policy Think Tank
Trade Association/Private Sector
FURTHER INFORMATION Go to the Academy website at www.actuary.org for a registration form and further information, or call (202) 223-8196.
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Social Security: Offering Fair, Objective BY
BRUCE D. SCHOBEL
HE ACADEMY’S COMMITTEE ON SOCIAL INSURANCE
has been busy this year monitoring the Social Security debate and providing input to help guide policy-makers in their deliberations. This has been a challenging task under the circumstances. Social Security reform remains one of the most contentious, partisan issues in American politics. While some politicians have taken a more serious tone in the past few years, Social Security reform still remains the “third rail” of American politics. Its power will be on full display this fall as both Republicans and Democrats use it as a campaign issue, and the control of Congress may well hinge on which party is most successful in turning this issue to its advantage. The Academy’s commitment to nonpartisanship requires that its analysis of public policy be conducted in a fair, objective manner. Actuaries’ reputation for technical expertise and integrity makes any statement the Academy issues resonate with credibility. These are the Academy’s, and the profession’s, greatest assets. Today, the political dynamics of reform remain highly charged, and the Academy finds itself trying to carefully navigate a political minefield. That is why the Committee on Social Insurance has focused on those areas of the debate where it can make a positive impact, and has avoided being pulled into those parts of the debate which could place it in an untenable position with respect to objectivity and nonpartisanship. While monitoring the various Social Security in-
dividual account proposals under consideration in Congress and elsewhere, we were struck by the fact that most focused on the “accumulation phase” of the accounts, not on the equally important issue of the distribution of assets during retirement. Here was an opportunity for the Academy to make a contribution to the debate. So the committee wrote an issue brief on the annuitization of individual accounts. (To read the issue brief online, go to www.actuary.org/pdf/socialsecurity/ annuity_nov01.pdf.) Writing the issue brief took time because it was crucial that the paper be as complete as possible. In keeping with the Academy’s neutral role, the committee did not advocate the use of individual accounts or the use of annuities as the best means of distributing the assets. However, we were able to inform policy-makers on the issues related to using annuitization as a distribution option, and we explained why it was important to focus on the “payout phase” of Social Security reform. The paper was released last November, timed to be available to President Bush’s Commission to Strengthen Social Security before it issued its final report in December. It became clear during the latter stages of the commission’s deliberations that distribution options had become a sticking point, and annuitization had become the subject of intense debate. Some commission members believed that retirees should have free access to their accumulated accounts, while others argued that some methodical distribution method should be
Chief Actuary Calculates Reform In a memo released on Jan. 31, the office of the chief actuary of the Social Security Administration provided estimates of the financial effects of the three reform proposals contained in the Dec. 21 final report of President Bush’s Commission to Strengthen Social Security. The memorandum from Chief Actuary Stephen Goss and Deputy Chief Actuary Alice Wade includes extensive financial analysis of the effects of each of the commission’s reform proposals on: ® Social Security’s trust fund status ® The federal unified budget ® Cash flow transfers between the general fund of the Treasury and Social Security trust funds. “We also included detailed illustrations of the effects of these proposals on expected future market levels for a range of hypothetical situations,” said Goss, who is a member of the Academy’s Committee on Social Insurance. Goss said his office worked closely with members of the commission throughout their deliberations. For a copy of Goss and Wade’s report, Estimates of Financial Effects for Three Models Developed by the President’s Commission to Strengthen Social Security, go online to www.csss.gov/reports/OCAC_MEMOPCSSS-0131021.pdf. Or contact Denise Murray in the Office of the Chief Actuary, 410-965-3001.
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Analysis mandatory, with annuitization being one such option. I discussed the issue brief with one member of the commission, and she liked it so much that she asked us to send copies to all the commission members prior to their Nov. 29 meeting. Several members and staff thanked the Academy for the quality of the analysis. The Bush commission’s final report was issued on Dec. 21, and contained three separate reform proposals, all of which would corporate individual accounts and return the program to sound financial condi- Steve Goss (left) and Bruce Schobel at the Academy’s January Capitol Hill briefing on Social Security reform tion. The details of these proposals can be obtained from the commission’s website, system incorporating funded individual accounts. Though http://csss.gov/reports. not the first proposals to use general revenues, they are On Jan. 18, the Academy held a Capitol Hill briefthe most prominent and indicate that general revenues ing on Social Security reform for more than 100 conare now a respectable funding option. Accordingly, the gressional staff. Steve Goss, chief actuary of the Social Committee on Social Insurance is going to explore the Security Administration and a member of the Academy’s implications of general revenue financing in an upcomCommittee on Social Insurance, described the three Bush ing issue brief. We hope to assist in the development of commission proposals in detail (see next page). I spoke new criteria for evaluating proposals that use general revon the Academy’s annuitization issue brief and mentioned enue and for comparing them against each other. other Academy publications on the issue. Bridget Flynn, If any member of the Academy has information that the Academy’s pension policy analyst, moderated (to read would be helpful to the committee in its work, please do online coverage of the briefing, go to www.actuary.org/ not hesitate to contact Bridget Flynn (202-223-8196; flybriefings/ss_0102.htm). firstname.lastname@example.org) or me (email@example.com) with your All three of the commission’s proposals would uti- suggestions. lize significant amounts of general revenue—in contrast Bruce D. Schobel is the chairperson of the Academy’s Social to dedicated payroll taxes—to finance at least the transi- Insurance Committee and a member of the Academy’s tion from essentially pay-as-you-go financing to a new Board of Directors.
Washington Forum, continued from Page 1 organizations will discuss key policy issues in the casualty, health, life, and employee benefits areas. Concurrent sessions focusing on terrorism insurance, bioterrorism, demographic pressures on Social Security and Medicare, and emerging national and international financial reporting paradigms are scheduled. “What we will learn at the Forum is valuable, but it is the exchange of ideas between actuaries that is most important,” said Academy President Dan McCarthy. “The Forum is our opportunity to help shape the future by identifying the best ideas and distilling them into an agenda that represents the interests of actuaries to policy-makers at the state, federal, and international levels.” Actuaries in the casualty, life, and health practice areas can earn up to six credits, and pension actuaries up to one credit, of continuing education activity credit at the Forum (see Page 5).
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The Forum also includes the Academy’s annual Washington luncheon. This year’s keynote speaker is economist Lawrence Kudlow, who will bring both his Wall Street and Washington experience to bear as he discusses emerging financial and regulatory trends. Another feature of the Washington luncheon will be the presentation of the 2002 Robert J. Myers Public Service Award. Forum registration fees start at $375 for Academy members who register by April 19. Academy members who work as government actuaries may attend the forum at no cost (see Page 5 for a complete schedule of fees). A registration packet was mailed to all members last month. To register online or to download a registration form, go to www.actuary.org/wf, or contact Meeting Planner Denise Winston (202-223-8196; firstname.lastname@example.org).
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The Actuarial Update ASSOCIATE EDITORS
Michael Braunstein William Carroll Ronald Gebhardtsbauer Rade Musulin Peter Perkins Adam Reese EDITOR
Linda Mallon (email@example.com) DESIGN AND PRODUCTION
BonoTom Studio Inc. PRODUCTION ASSISTANT
American Academy of Actuaries PRESIDENT
Daniel McCarthy PRESIDENT-ELECT
each year, even though the biggest concern of retirees is keeping savings growing faster than inflation. “Regrettably, most people do not have actuarial training—and it shows,” said Mathew Greenwald, whose firm, Mathew Greenwald and Associates Inc., conducted the survey with the help of the Employee Benefit Research Institute. “We are very concerned about the risk that retirees will outlive their assets,” said Anna Rappaport, a member of the Academy’s Pension Practice Council and chairperson of the SOA’s Committee on Post-Retirement Needs and Risks, which sponsored the survey. Noting that the main financial planning tool of older retirees is to reduce spending, Rappaport said such belttightening may not work, but often someone will realize that only after 10 years. “Later on, we often see a decline in economic status, particularly with widows,” said Rappaport. The survey points up the need for greater public education on retirement risk, including variability of life spans, and instruments such as annuities and longterm care insurance that can help mitigate that risk, said Rappaport. “Rather than focus simply on building up assets, we need to go a step beyond,” Rappaport said. “We
John Parks (left) and Anna Rappaport field questions from attendees after the news conference.
need to educate people on how to manage those assets in retirement.” Equally important, said Parks, legislation is needed to level the playing field between defined benefit (DB) and defined contribution plans, making regulations less onerous for businesses that provide DB plans for their employees. Similarly, legal restrictions that create financial disincentives for phased retirement need to be modified, Parks said. More than 75 people attended the luncheon press conference, including reporters and House and Senate staffers. The survey is available online at www. actuary. org/newsroom/retire_survey.htm.
Peter Perkins VICE PRESIDENTS
Steven Lehmann John Parks Stephen Preston Robert Rietz Geoffrey Sandler Patricia Teufel EXECUTIVE DIRECTOR
Richard Lawson DIRECTOR OF COMMUNICATIONS
Noel Card ASSISTANT DIRECTOR FOR PUBLICATIONS
Steven Sullivan MANAGING EDITOR, NEW MEDIA
Anne Richardson EXECUTIVE OFFICE
The American Academy of Actuaries 1100 Seventeenth Street NW Seventh Floor Washington, DC 20036 Phone 202-223-8196 Fax 202-872-1948 www.actuary.org Statements of fact and opinion in this publication, including editorials and letters to the editor, are made on the responsibility of the authors alone and do not necessarily imply or represent the position of the American Academy of Actuaries, the editors, or the members of the Academy.
State Legislators Seek Actuarial Input Academy members got a warm reception as they provided state insurance legislators with actuarial perspectives on Medicare supplement insurance and on bioterrorism issues at the National Conference of Insurance Legislators (NCOIL) meeting in Charleston, S.C., Feb. 28 to March 3. “It’s very important to have actuaries involved in these discussions,” said Cheye Calvo, program manager for the Employment and Insurance Program of the National Conference of State Legislatures. Agreeing, New York state Sen. William Larkin Jr., president of NCOIL, thanked Academy members for attending the conference and presenting findings from Academy work on various issues. “The speakers were wonderful,” said Ralph Scott, director of state services for the Blue Cross and Blue Shield Association. “They presented concise, relevant data useful to legislators.” Mike Abroe, chairperson of the Academy’s Medicare Supplement Work Group and vice chairperson of the Academy’s Committee on State Health Issues, spoke to NCOIL’s Health Insurance Committee about Medicare supplement insurance. The work group is currently updating its 2000 report, which examined factors that may be affecting the cost of Medicare supplement insurance policies. Abroe is a consulting actuary with Milliman USA in Chicago. Jeff Allen, a member of the Health Practice Council’s newly formed Terrorism/Extreme Events Work Group, gave an actuarial perspective on bioterrorism risks to NCOIL’s Task Force on Terrorism. Allen is a senior manager for Ernst & Young LLP in Chicago. Speaking as president of the National Association of Insurance Commissioners (NAIC), Academy member Terri Vaughan gave an overview of recent NAIC action. This marks the second time that Academy members have made presentations to NCOIL. Last summer, members of the Academy’s Casualty Practice Council spoke to NCOIL on catastrophe reserve and workers’ compensation issues. —Joanna Ossinger
©2002 The American Academy of Actuaries. All rights reserved.
Actuarial U P D A T E
April 2 0 0 2
Published on Mar 8, 2012
Published on Mar 8, 2012
Inside 2002 Washington Forum Academy Press Conference T HE N EWSMONTHLYOFTHE A MERICAN A CADEMYOF A CTUARIES E LIVE IN INTERESTING TIMES . W...