ASOP 27

The 2014 Enrolled Actuaries meeting kicked off with a review of ASOPs and I had a question about ASOP 27 as it applies to public plans.

 

GRS explained the issue in their summary of the changes:

the revised ASOP also requires the actuary to identify the sources of any “prescribed” assumptions or methods.  Most public plan assumptions are established by the Board of Trustees based on input from the actuary and other professionals, and considered by ASOP 27 to be prescribed assumptions or methods set by another party.  If the actuary is unable to evaluate a prescribed assumption or method set by another party, or if a prescribed assumption or method set by another party significantly conflicts with what would be reasonable in the actuary’s professional judgment, that should be disclosed under the revised ASOP.

As explained in this session states are considered other parties.  A standard is set by law only if it is set by the federal government.  They didn’t get to questions at this session but mine would have been:

If some state asks their actuary what assumptions would be needed to allow for a certain (low) contribution and the actuary comes back with UP84 mortality and 15% interest then when the valuation reports come out with UP84 mortality and 15% interest what must the actuary disclose to comply with ASOP 27?

Sorry if this is rushed but I’m rushed to get to this session on Ethics.  Maybe I can ask there.

14 responses to this post.

  1. I would like to hear what they say about that.

    Reply

  2. Posted by Jim Palermo on March 24, 2014 at 3:41 pm

    If you look hard enough you may find some Illinois plans using the 1971 GAM table

    Reply

  3. Posted by Anonymous on March 27, 2014 at 11:56 am

    Your question was addressed in Session 504, setting discount rates.

    Reply

  4. Posted by Anonymous on March 27, 2014 at 12:32 pm

    Why does John Bury care about Actuarial Standards of Practice? He is not a member of the Academy. He can ignore them with impunity.

    Reply

  5. Posted by Jim Palermo on March 27, 2014 at 12:37 pm

    I wasn’t at the conference because I’m not an actuary–what was said at Session 504?

    Reply

    • Posted by ASOP follower on March 27, 2014 at 1:00 pm

      In a nutshell, this is where ASOP 27 takes us:
      States can enact laws. Therefore, the states can prescribe assumptions and methods. If the actuary is uncomfortable with the assumptions prescribed by the States, he is compelled to state his objections.
      Municipalities cannot enact laws on this level, but their Boards may direct the actuary to use a certain set of assumptions. Again, the actuary is compelled to state his objections.
      Note that all Members of the Academy MUST follow these guidelines. They are all compelled to do the RIGHT THING. To answer Mr. Tough Love, it is not an option for Members of the Academy to follow the ASOPs, as it is with non-Members.

      Reply

      • Posted by Tough Love on March 27, 2014 at 8:35 pm

        Not sure how you are “answering” me when I asked no question. I was merely giving support to what I see as Mr. Bury being quite fed up with (some) Public Plan actuaries being a cog that help perpetuate a badly structured Public pension system

        Reply

  6. Posted by Jim Palermo on March 27, 2014 at 1:29 pm

    So an actuary who is an Academy member and prepares a valuation using the 1971 GAM or UP 1984 table and fails to state an objection or aversion to the table due to statute or board direction is deemed to make that recommendation himself? If was an actuary using those tables I think I’d be happy to point the finger at the group that mandated its use!!

    Reply

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