The Actuary--April 1992 2

Task Forte on Papers Pension actuaries Clyangesto Mercenaríes or professíonds? ímproveTSA by J. Bruce MacDonald by f rancis P. Lemery n interesting and valuable early in our careers,and it was article by Étienne Brodeur possible to know ahnost everyone in ave you wanted to write in the December 1991 the Toronto actuarial community. a paper and publish it in Bdetin of the CanadianInstitute of 1 had the good fortune to work the 7kansactfonsbut Actuaries is tided “Pension Actuaries: for the late N. Douglas Campbell,then were unsure about the processand Do They ServeEmployers or Plan Crown’s associateactuary, and bis your probability of success?Do you Membersl” This started me thinking boss, the late Frederick Hffl, the assis- e your Transactiohson a shelf about our profession in general,its tant general managerand actuary. r you receiveit becauseyou professionaland moral issues,and the (The CEO’stitle was general manager db uld not find articles that benefit question of for whom we really work. in those days.) Nothing 1 leamed from you in your practice? a look back other actuarieswho influenced my The Society’sBoard was con- When I graduated from university in careerhas led me to believe that cerned about the papers process,the 1949and began work for the Crown Campbelland Hffl were atypical in value of the Transactions,and other Life in Toronto. young actuarieswere their approach to the profession. Both issues.and it decided to do some- in short supply becauseof the war. were strong individualists: one might thing. At its January 1991meeting, Many potential actuarieshad enlisted. even consider them characters. the Board appointed a Task Forte on (Rememberthat the war for Cana- They taught me that an insurance Papersto addressthese issues. company’sprime responsibihty was The task forte addressed dians started in September 1939,not December 1941.) Many ex-servicemen to its policyholders. While many of severa1concerns, including the need were not repared to settle into the the Canadian companieswere stock to simplify the arduous review grind of t Re actuarial examinations, companies.almost all issued partici- process,a need to standardizethe having already had severa1years pating policies. Under Canadianlaw, a acceptancecriteria, and a need to taken out of their lives. We had little minimum of 90%of the profits on improve communications with competition and were promoted . such policies went to the policy- authors. In addition. the task forte holders. The Canadianinsurance looked at the usefuh-iessof the rapidly if we passedexaminations. Z’kansacffonsto its members. We worked with senior actuaries Conlinued on page 3 column 1 The Society memberswho served on the task forte included members I In this issue: of the Board. t-heacademic community, Penslon actuartes - Mercenaries SOA members prepare for IACA ‘92 those involved in the papers process. or professlonals? Mary Hardiman Adams 8 and past 2kansactfonsauthors. J. Bruce MacDonald 1 Risk aversion. rattonal insurance The task forte surveyedauthors Task Force on Papers - Changes to purchase in the long run who submitted papers during the past Improve TSA Tapen Sinha and two years. Their comments provided Francis R Lemery 1 Jay Sounderpandlan 8 EdItorial - Keeping up with Merger hfe: The mortgage option uable input and positive sugges- the economy Lloyd A. Foster 9 a s for improvements. Mary Hardiman Adams 2 The complete actuary - Effectlve The task forte submitted its final Timing of expense recognltion meeting management report to the Society’sBoard at its for retiree medical benefits Charles R. Haskins 10 Erlc F! Lofgren 4 October 1991meeting. The board On the ltghter side 12 approved the task force’srecommenda- Researchcomer 7 Letters to editor 15 tions, and its report was referred to Actucrossword 16 Contlnued on page 7 column 1 The Actuary--April 1992 2 Editorial Keeping up with the economy by Mary Hardiman Adams Society of Actuaries VOLUME 26, NO. 4 ust about one ~ ~ APRIL 1992 year ago, I Editor responsible for this issue wrote an Mary Hardiman Adams editorial for The Actuary bemoaning that we were in an economy everyone (except the economists, up to a month earlier) considered recessionary. As a will these survivors act with respect pension actuary responsible for setting to voluntary separation from active the actuarial assumptions for plans service? What can the expectations be lot for which I am the enrolled actuary, for new entrants? Will these future Editor the economy posed enormous prob- participants move freely about the Linda B. Emory. FSA lems with the economic and demo- marketplace, with little more service Associate Editors graphic assumptions (especially with each employer than needed for Mary Hardiman Adams. ASA separations from active service). vesting? Will they stay with one Barbara J. Lautzenhetser.FSA employer until full benefits are Robin B. Leckie. FSA The quandary now is much the Michael E. McGuinness. FSA same, although the demographic payable? Will they retire when an AnthonyT. Spano, FSA assumption selection might not be early retirement benefit is most Competition Editor as difficult. Or is the selection valuable to them? It will be years John W. Keller,FSA more difficult? before answers are available. Meanwhile, we can use select Features Editor Demographic concerns Deborah Adler Poppel. FSA The downsizing of some pension and ultimate assumptions where Assistant Editors plans' memberships has created the downsizing information is available. Peter J, Bondy,FSA largest part of the demographic Long-term assumptions will have to Charles Habeck, FSA be analyzed and adjusted as any Curtis E. Huntington,FSA assumption problem. '~Nindow plans" Eric P. Lofgren,FSA that provide incentives for employees changing patterns emerge. This truly J. Bruce MacDonald, FSA to elect early retirement do not cause is long-term. Society Staff Contacts much long-term concern because of Economic concerns 708-706-3500 their definite time frames, groups of Each day brings different news about Cecilia Green employees, and selection of benefits the economy or of a certain writer's Staff Editor within the time frames. The value of view of the economy. Looking at daffy Judith Bluder Assistant Staff Editor a window as an amendment to a reports is of no use for the long-term. Linda M. Delgadillo pension plan is measurable. Of itself, Recent reporting can be of use if dear Director of Communications a window provides no surprises. short-term trend information is avail- Correspondence should be addressed The gradual downsizing by attri- able (we might at least have reliable The Ac~ary tion does cause some concern. Will select values). What use are headlines P.O. Box 105006 the probabilities of separation from such as, "Next It May Be Economy Atlanta, GA 30348-5006 service be affected by employees' Up, Stocks Down," (New York Times Copyright© 1992, Society of Actuaries knowledge of a decrease in the work- Feb. 16, 1992)? The Actuary is published monthly force? On one hand, employees may The best we can do is try to sort (except July and August) by the be afraid to move because of the lack through the daffy gyrations of the SOCIETYOF ACTUARIES, various investment vehicles and 475 North Martingale Road. Suite 800, of re-employment opportunities. On Schaumburg. IL 60173-2226. the other, they may look quickly at decide on the long-term horizon. Donald R. Sondergeld, President outside openings or receive generous Conclusion David M. Holland,VP and Secretary offers that are not part of an "official Are we better off now than we were James F, Reiskytl,VP and Treasurer window." This is a relatively short- Kenneth A. McFarquhar, Director last year at this time? We hope so. We of Publications term concern, and perhaps we can have become more used to the fluc- Non-member subscriptions: obtain information about the near- tuating economy. We might expect students, $6.00; others, $15.00. Send term prospects from the plan sponsor. long-term economic expectations to subscriptions to: Societyof Actuaries, The real concern is the long-term change very slowly even though day-~ P.O. Box 95668, Chicago, IL 60694. pattern of separation from active The Societyis not responsible for to-day conditions are uneven. The statements made or opinions expressed service. We have the survivors of question remains whether our conclu- herein. All contributions are subject to downsizing by incentive plans and by sions form a suitable basis for the editing. Submissionsmust be signed. attrition. As actuaries, we should not long-term projections inherent in ~) Printed on recycled paper have a problem with mortality or with pension plan actuarial valuations. well underwritten disability. But how The Actuary- Aprill992 3 Pensfonactuarles cont’d It has been suggestedthat if an becauseof “top hat” pension plans. actuary is paid from the pension They used overly conservativeassump- industry was very proud that no fund. even if retained by the com- tions, leading the authorities to believe licyholder had ever lost anything. pany, this makes the actuary an agent the plans were merely tax scams, l To paraphrasean oft-quoted of the members.which restricts the which some were. As a res&, per- remark, we believed that what was relationship with the sponsor.1 mission to set up plans primarily good for the policyholders was good would like to seea legal opinion on for significant shareholderswas for the company and the share- thh. If true, the position of the withdrawn on at least two occasions. holders. Eometimeswe were so con- actuary can be even more complicated. While ‘designated plans” may be estab- scious of our moral rectitude that we 1 believe strongly that the actuary lished for shareholders,connected were not aware others did not regard has a responsibility to safeguardthe persons, and highly paid executives us so highly. interests of plan members in the bene- now, their terms and actuarial assump- 5aOancing the interests of fits already eamed.

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