EA18 (2) ASOP 51

The first general session at the 2018 Enrolled Actuaries meeting is:

SESSION 001 Talking Risk Marriott Ballroom Credits: EA Core 1.50, CPD 1.50 While all sponsors of a defined benefit plan have assumed some risk, the approach in measuring and managing that risk varies depending on the type of plan and nature of the plan sponsor. Panelists representing each area of pension practice (single-employer, multiemployer, and public plans) share best practices for communicating risk to plan sponsors, and explain how they plan to modify their practice in light of the new risk ASOP. Learn how their approaches are similar, their important differences, and how to up your game when talking risk.

That new risk Actuarial Standard of Practice is No. 51 which will be effective for any actuarial work product with a measurement date on or after November 1, 2018. There will be a regular session on it also:

604 – New Risk ASOP: The Actuarial Standards Board recently released Actuarial Standard of Practice (ASOP) No. 51, a new standard on the Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions. The panelists provide a more detailed discussion of the specifics of this new ASOP following the general session, Talking Risk.

I look forward to an explanation of this ASOP but, after a quick read…..

If the nature of the actuary’s assessment of risk requires the selection of methods, the actuary should use professional judgment in selecting these methods.  (page 5 – twice)

Not amateur judgment? Seriously, wouldn’t asking amateurs (ie. politicians) for their opinion and giving it any weight at all be a violation?

2.12 Prescribed Assumption or Method Set by Another Party—A specific assumption or method that is selected by another party, to the extent that law, regulation, or accounting standards gives the other party responsibility for selecting such an assumption or method. For this purpose, an assumption or method se t by a governmental entity for a plan that such governmental entity or a political subdivision of that entity directly or indirectly sponsors is deemed to be a prescribed assumption or me thod set by another party. (page 3)

This definition kicks in on page 9 which may be what it’s all about:

3 responses to this post.

  1. Posted by Tough Love on April 8, 2018 at 12:23 am

    I have a problem with the inclusion of the word “significantly” in 4.2 (a).

    It provides too big of an “safe haven” for the actuary to NOT identify such assumption or method as unreasonable.


  2. The language of probability has been misused for decades.

    As in if you run up a massive debt, there is a risk someone will have to pay it back.


    • Posted by Tough Love on April 9, 2018 at 10:06 pm

      I would have much preferred that the 4.2(a) words …

      “that significantly conflicts”

      were instead…

      “that conflicts with by more than a modest amount”


      As written now, the actuary only has to identify such (“prescribed methods or assumptions set by another party”) if they SIGNIFICANLY conflict “with what in the actuary’s judgement would be reasonable…”

      This seems like far too a loose a standard for NOT having to identify such assumptions/methods (set by another party).

      My wording would STILL leave the actuary free to NOT identify such (“prescribed methods or assumptions set by another party”) even if they DO conflict “with what in the actuary’s judgement would be reasonable…”, as long as they do not do so by “more than a modest amount”.

      That’s far enough.


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