On October 23, the Actuarial Standards Board (ASB) released Proposed Revision of Actuarial Standard of Practice No. 32—Social Insurance. This standard sets forth appropriate practices for actuaries who provide actuarial services for programs defined to be Social Insurance programs, including the Social Security program. The proposed standard revises the original standard adopted by the ASB in January, 1998 (and slightly modified in 2011). As with all proposed changes in ASOPs, this proposed revision is being released as an Exposure Draft for comments and suggested changes by actuaries and the general public. The comment deadline for this Exposure Draft is February 1, 2019.
I have submitted my comments and suggested changes on the proposed revisions.
My general comments on the proposed ASOP 32 revisions may be summarized as follows:
- The ASB should consider reviewing guidance provided in other ASOPs for consistency with proposed ASOP 32 guidance.
- To quantify program shortfalls projected after the 75th year of an annual valuation, the ASB should retain the guidance in Section 3.7 of the current version of ASOP 32, which states,
“The actuary should note any significant differences between program income and cost toward the end of the valuation period. Further, the actuary should disclose the expected impact of such differences on the actuarial status in future valuations.”
If the Social Security actuary expects the long-range actuarial balance to deteriorate over time solely because of changes in the valuation period used in future valuations (which has been the case in every year for at least the past 50 years), this expectation should be quantified. In my opinion, the existing guidance in Section 3.7 implies that the Social Security actuary should project future expected long-range actuarial balances as part of the Program’s annual valuation. Such a projection would be helpful to the general public and to members of Congress in assessing the program’s long-range financial adequacy. Therefore, I strongly believe the guidance in this section should not be deleted, as proposed.
- To avoid misinterpretation of the actuarial calculations used to measure Social Security’s financial status and test it for long-term financial adequacy, the standard should discourage use of the term, “Sustainable Solvency.” Instead, this condition should be described as one where the long-range actuarial balance is projected to remain in balance for a period of “n” years if all assumptions are realized.
