COPA Comments on Qualification Standards to the Academy of Actuaries

To: qualifications [at] actuary [dot] org

Date: July 10, 2006

These are comments on the SECOND EXPOSURE DRAFT—Qualification Standards (January 2006). We reference this draft, here, as the “exposure draft.”

These comments are made on behalf of the College of Pension Actuaries (COPA). Membership in COPA is restricted to Enrolled Actuaries and is open to any Enrolled Actuary who is either actively enrolled or retired in good standing.

At this time, COPA has not adopted the Code of Professional Conduct (“the Code”) that has been adopted by the other five US-based actuarial organizations. Thus, membership in COPA does not, by itself, subject an individual to the qualifications standards referenced at Precept 2 of the Code. However, an overwhelming number of COPA members are also members of one or more of the other five organizations. Strictly speaking, we offer our comments only on behalf of such members. Nevertheless, beyond this, we believe the profession is well served by voluntary adherence of all practicing actuaries to a common set of qualification standards.

We acknowledge that the period for comments on the exposure draft in question was closed on July 1, 2006. However, if the qualifications committee has not begun its deliberations on comments it received before the period was closed, we ask that our comments be given consideration.

Discrepancies between Joint Board Rules and the Exposure Draft

Members of COPA who are actively practicing as pension actuaries are subject to the continuing education requirements promulgated by the Joint Board for the Enrollment of Actuaries. At Section 2.2, the exposure draft has this to say about practicing actuaries subject to Joint Board requirements:
Enrolled Actuaries who issue Statements of Actuarial Opinion other than Schedule B (Form 5500) certification and other government-required forms must supplement the Joint Board’s continuing education requirements with the continuing education requirements of the Qualification Standards. Each hour that satisfies the Joint Board’s continuing education requirement can also be counted as an hour of continuing education for purposes of these Qualification Standards.

The section seems to imply that if, in addition to signing a Schedule B, the pension actuary renders any advice, for example, on maximum deductible contributions, merely following the rules of the Joint Board is not necessarily adequate. The section seems to leave unanswered a question involving the actuary who attaches a valuation report to the signed Schedule B, whether or not the valuation report discusses any issues other than those relevant to the Schedule B.

Discrepancies of this type might be justifiable if it were established that the requirements of the exposure draft were always more stringent than the rules of the Joint Board. The rationale might be that issues relating to pension actuarial work in general cover more ground and require more sophistication than the mere completion of a Schedule B or other government-required forms. In point of fact, we do not believe this rationale stands up. Proper completion of a Schedule B can require knowledge of some of the most detailed rules with which a pension actuary must wrestle.

In any event, it is not the case that the requirements of the exposure draft are consistently more stringent than the rules of the Joint Board. On occasion, the requirements of the exposure draft seem to be different just for the sake of being different. Consider these rules:

• In the exposure draft, an hour is 60 minutes. In the Joint Board rule, it is 50 minutes.

• In the exposure draft, self study is acceptable. In the Joint Board rule, self study is not acceptable.

• In the exposure draft, presenters receive triple credit. In the Joint Board rule, they receive quadruple credit.

• In the exposure draft, there is no limitation on the number of hours that can be satisfied by presenting. In the Joint Board rule, not more than half the requirement can be satisfied by presenting.

• In the exposure draft, requirements are applied on an annual basis, with provision for a 10-hour carryover. In the Joint Board rule, requirements are applied on the basis of three-year cycles.

We urge that the Academy qualifications committee sit down with the Joint Board and work out a program that does not involve detailed and pointless differences. To do otherwise will result in unnecessary duplication of records and, ultimately, a great deal of confusion and non-compliance. Indeed, we recommend that these discussions result in language that is word-for-word identical, where the intended meaning of the two sets of rules is the same.

We recognize that there may be members of both the qualifications committee and the Joint Board who will quarrel with our reference to “pointless differences.” However, before small differences in the rules are endorsed, we urge that the requisites of different skill sets be carefully weighed against the requisites of avoiding administrative confusion.

That having been said, we do acknowledge that the current 36 hours every three years required by the Joint Board rules is inadequate. We suspect the Joint Board may have under consideration the possibility of amending this requirement.

Definition of Self-Study

At Section 2.2, the exposure draft has this to say about self-study:

Self-study is a worthwhile source of continuing education, although it does not offer the same opportunities for dialogue that organized activities typically do. Careful reading of relevant articles in journals and learned treatises, publishing relevant papers or articles in actuarial or other professional journals, listening to tapes of actuarial meetings or other relevant seminars or conferences, studying for actuarial exams, or drafting actuarial exam questions can all provide an actuary with meaningful continuing education.

Either this paragraph must be interpreted as being ambiguous, or it misses the point on one of the most important continuing education requirements the pension actuary faces. This is the requirement that the pension actuary must stay current on a continuing stream of new rules. These rules are contained in new law, new pronouncements of various governmental agencies, and other statements having legally binding authority such as standards of the Financial Accounting Standards Board.

A pension actuary wishing to stay current on this continuing stream must devote far more than 30 hours per year to keeping up with them. The nature of this stream is such that it cannot be absorbed solely through organized activities. There is no substitute for solitary study of the source documents evidencing this continuing stream. In terms of competent service to clients, this continuing stream must take somewhat higher priority than relevant articles in journals and learned treatises. To ask that the pension actuary keep up with this continuing stream and, in addition, devote 30 hours to other activities is to ask too much.

We urge clarification that the definition of self-study includes keeping up to date with this continuing stream.

Documentation

If the definition of self-study is clarified, the suggested log at Appendix 5 can be significantly simplified. In its current form, it is needlessly burdensome. It should be acceptable, for example, for pension actuaries to certify, simply, that in the course of a year they spend at least one hour weekly on self-study.

We are mindful that any documentation this simple can be viewed as open to abuse by an irresponsible practitioner. However, once self-study has been admitted into the fold, the possibilities for abuse will exist no matter what documentation might be required. We suggest that the only solution is to rely heavily on the requirements of Precept 1 of the Code, and assume, until proven otherwise, that the actuary is preparing documentation in an honest manner. If the qualifications committee is unwilling to make this assumption, it has no alternative but to revert to a rule that creditable continuing education includes only organized activity. If this is done, the only sane approach is to return to hours requirements and definitions of cycles similar to those now applicable under Joint Board rules.

Request for Clarification

At Section 2.1, the exposure draft includes these statements:

In addition, in order to sign statements of actuarial opinion in an area covered by a specialization track offered by the Society of Actuaries, the Casualty Actuarial Society, or the American Society of Pension Professionals and Actuaries, one of the following must be met….

We are curious to know what specialization track is offered or contemplated by the American Society of Pension Professionals and Actuaries.

Sincerely,

COLLEGE OF PENSION ACTUARIES

By
Edward E. Burrows, COPA, MAAA, MSPA
President