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Society of Actuaries backtracks, will publish controversial paper

The Society of Actuaries plans to publish a paper challenging the standard actuarial practice of valuing public pension plan liabilities, reversing a previous position prohibiting any release of the paper.

Citing attention from the media about the prohibition, Craig W. Reynolds, SOA president and consulting actuary at Milliman, in an open letter posted on the SOA's website Aug. 26, said the society plans to post an updated draft of the paper on its website the week of Sept. 5.

It will be followed by publication of the paper in the SOA's Pension Forum publication, which will include “discussant debate from a range of perspectives,” Mr. Reynolds' letter said.

“The authors of the paper have important ideas that are germane to the profession, and we encourage them to explore opportunities to communicate these ideas,” Mr. Reynolds said.

The move is a reversal from the joint position of the American Academy of Actuaries and SOA on Aug. 1 when they immediately disbanded their joint Pension Finance Task Force, objecting to the paper that was written by four of the task force members and banning any publication.

The paper calls for measuring public pension plan liabilities using risk-free rates, instead of the prevailing standard of using the long-term assumed rates of return. The change would raise pension liabilities and required contributions, while decreasing funding levels.

David Mendes, academy assistant director of communications, said in an e-mail the academy leadership is aware of the SOA publication plans. “After seeing the initial round of review comments, some members of the task force decided they simply did not want to complete the normal academy review process,” Mr. Mendes said. “As a result, the task force was unable to continue with the steps required to bring the last draft of the report seen by academy reviewers up to the standards laid out in the academy’s publication guidelines.”

Mr. Mendes pointed to a statement by Thomas F. Wildsmith IV, president of the Washington-based academy and president and senior manager of public policy at Aetna, saying the academy “will shortly be publishing a paper on public pension plans that will include concepts from financial economics.”