Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Pension - Social Security
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Search Actuarial Jobs by State @ DWSimpson.com:
AL AK AR AZ CA CO CT DE FL GA HI ID IL IN IA KS KY LA
ME MD MA MI MN MS MO MT NE NH NJ NM NY NV NC ND
OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY

Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 04-23-2018, 07:45 AM
Johnny B Johnny B is offline
CCA AAA
 
Join Date: Apr 2018
College: Bridgewater State College
Posts: 1
Default Setting actuarial equivalence

Newbie public sector actuary here

The Law in my state defines actuarial equivalent as follows: "Any benefit of equal value when computed upon the basis of a mortality table to be selected by the actuary and an interest rate determined by the actuary." So clearly, the actuary has quite some latitude.

Currently, the basis used is the RP-2000 mortality table (50/50 male/female) and a 7% interest rate. (I'm pretty sure it's a combined mortality table, but not positive.) This basis was set in 2004. We'd be looking to update this in the next few years.

What are other public sector actuaries currently using as the mortality and interest rate bases for their actuarial equivalence and how did they reach these bases? Is it set statutorily or does the actuary have input? How often does the basis change?

Any and all insight is greatly appreciated.
Reply With Quote
  #2  
Old 04-23-2018, 09:11 AM
KernelMustard's Avatar
KernelMustard KernelMustard is offline
Member
SOA
 
Join Date: Aug 2015
Posts: 637
Default

If it's up to the plan actuary then why not use valuation assumptions for AE?
Reply With Quote
  #3  
Old 04-23-2018, 09:35 AM
Kenny's Avatar
Kenny Kenny is offline
Member
Non-Actuary
 
Join Date: Jan 2003
Posts: 7,464
Default

What state is this? Is it a statewide plan or is it a local plan? Approximately how man plans are in the state? Have you looked at the valuations for other plans in your state to see what they are using (that is likely to get you more data than asking here)?
__________________
I am a scientist. I am sorry to disappoint you but I have never seen an elf or a troll. But who am I to exclude their existence? - Arni Bjoernsson
You are stupid and evil and do not know you are stupid and evil. ... Dumb students are educated stupid. - timecube.com
Usually while I'm reading, I'm actually thinking about...midgets riding toy horses - Roto


Reply With Quote
  #4  
Old 04-23-2018, 05:22 PM
sail648 sail648 is offline
Member
 
Join Date: Feb 2005
Posts: 43
Default Actuarial Equivalence

Be careful with this. I assume you are setting this assumption for use by the plan in converting amounts for the various optional forms and potentially determining the amounts of lump sums and service buy-backs.

As such you are making a determination of what is a fair basis for converting between uncertain benefits. The easiest one to think about is the lump sum.

If you were going to trade an annuity over your own lifetime for a single pot of cash, what assumptions would you think are "fair" or reasonable?

If the current assumption is 7% and RP-2000, that is saying that you think longevity measured for US private sector workers back on 2000 (18 years ago) is a good guess for longevity now for the group covered by this plan and that a consistent 7% return year in and year out for the rest of your life is fine.

I would be worried that longevity rates are better now and will get better in the future and that 7% expected return is too high a hurdle year in and year out.

Other factors will be important as well. Is a change of assumptions a big deal/high cost change? If so, you will want to pick something that will be ok for a while and not require annual adjustments.

There is a new public sector table coming out from the SoA in the next year or so. You may want to wait for that.
Reply With Quote
Reply

Tags
actuarial equivalence, public sector

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 03:35 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.29236 seconds with 9 queries