Actuaries Respond to Congress on Multiemployer Plans

The Joint Select Committee on Multiemployer Plans put written questions to Ted Goldman of the American Academy of Actuaries with the responses for the record (just released) reviewing some pension history, shooting down a few leading questions (like the one about applying single employer plan funding rules to multiemployer plans) and touching on one truly significant flaw in pension funding that hopefully someone else picks up on.

In response to Question #2 from Senator Hatch on discount rates used for funding the answer provided (page 4) included this definition:

Actuarial accrued liability. This is the measurement of the plan’s accrued liability for benefits earned to date and is based on a valuation interest rate assumption that represents the expected return on plan assets over the long term. Under ERISA, the assumption is the actuary’s best estimate. For most multiemployer plans, the assumption is in the range of 7.0 and 7.5 percent, which is set considering the plan’s investment policy, asset class expectations, and other factors. The actuarial accrued liability generally serves as the basis for determining ERISA minimum funding requirements, budgeting for long-term sufficiency of contribution rates, and PPA zone status.

No mention of the funded status of the plan which, per my explanation here, is an absolutely critical factor that the actuarial community has chosen, for a host of reasons (mostly of convenience), to ignore.

All it would take is one perspicacious staffer to get his boss to ask this simple follow-up and bulbs would light up – though a few worms would also be abandoning their cans.

8 responses to this post.

  1. Posted by Tough Love on June 8, 2018 at 11:27 pm

    Readers: There is a wealth of “information” (i.e. “learning”) in the (38 page) first linked reference.


  2. Posted by Analyst on June 10, 2018 at 6:50 am

    And that question is ???


  3. actuaries are some of the most corrupt people on the planet


  4. when is an actuary lying? when their lips are moving


  5. […] it be helpful if the AAA explained how these underfunded plans developed due to flawed funding rules (unrelated to limits on overfunded […]


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