Actuaries Want Plan Sponsors to Provide More Complicated Benefit Statements

In its July 6, 2018 letter to Senator Johnny Isakson, sponsor of the Lifetime Income Disclosure Act, the American Academy of Actuaries (AAA) suggested several “improvements” to Senator Isakson’s act applicable to hard-copy defined contribution plan statements provided to plan participants.  As opposed to the relatively simple and straight-forward requirement proposed by the senator that at least one participant statement per any 12-month period contain “the lifetime income stream equivalent of the total benefits accrued with respect to the participant,” the AAA would like to see plan sponsors provide significantly more information to their participants.  Needless to say, this additional information would make the hard-copy benefit statement required by law much more complicated to prepare and potentially more confusing to participants.

While we agree with the AAA that the additional information set forth in Section 1 of their letter could be helpful to some participants, we question the need to make hard-copy statements more complicated than they already are.  As noted by the AAA, the additional functionality they would like to see could easily be provided electronically with required hard-copy statements simply referring participants to the relevant website.

In fact, each of the “improvements” suggested by the AAA in item 1 of their letter is currently available in our Actuarial Lifetime Retirement Income (ALRIE) workbook.  As discussed in our post of June 9, if the Academy is truly serious about the profession’s mission to serve the public and about having actuaries participate in increasing the public’s financial literacy, the AAA should kick the tires on ALRIE and take one (or a combination) of the following actions:

• Endorse it 
• Suggest changes to us for ways to improve it  
• Develop a better alternative to it with or without our input 
• Make it (or an improved version) available on the AAA website just as they do with the Actuaries Longevity Illustrator.
  

But…..despite the fact that

• ALRIE has all the functionality that the AAA recommends (and more), 
• it utilizes basic actuarial principles 
• it employs lifetime planning periods from the AAA/SOA’s Actuaries Longevity Illustrator, and 
• its existence has been made known to the AAA,
  

we have heard nothing from the AAA.   

We will let you know if we do.