The ASB has discussed the Oct. 1, 2020 effective for ASOP No. 56, Modeling. In light of the importance of this standard, the Board believes that there is sufficient lead time between now and the effective date of the ASOP and that an extension of the effective date is not now in the best interest of the profession or the public. Should circumstances warrant, the Board is free under its Rules of Procedure to reconsider that conclusion, but sees no need at this time to alter the effective date. The Pension Practice Council’s letter can be viewed here.
The ASB released its 2019 Annual Report. In 2019, the ASB had another banner year in standards-setting, adopting two new ASOPs, approving eight exposure drafts for comment, approving a proposal to revise one existing ASOP, and issuing one Request for Input on an ASOP on rate filings. In addition, the ASB presented a professionalism series webinar on reliance in ASOPs and provided content for several Actuarial Update “Professionalism Counts” articles.
The ASOP provides guidance to actuaries when performing actuarial services with respect to measuring obligations under a defined benefit pension plan also referred to as “plan” or “pension plan” throughout this standard and determining periodic costs or actuarially determined contributions for such plans. Notable changes since the first exposure draft include expanding the ASOP’s scope to clarify the guidance when an assumption or method is not selected by the actuary; renaming the Investment Risk Defeasement Measure section to Low-Default-Risk Obligation Measure and substantially modifying its guidance for calculating such a measure; and modifying the Output Smoothing Method section to clarify how to determine whether a reasonable relationship exists with the actuarially determined contribution without regard to the output smoothing method.
The comment deadline for the second exposure draft, which can be viewed here, is April 30, 2020.
The ASB adopted ASOP No. 56, Modeling. The ASOP provides guidance to actuaries when performing actuarial services with respect to designing, developing, selecting, modifying, using, reviewing, or evaluating models. Notable changes made to the fourth exposure draft include deleting the section on margins because it did not provide sufficiently clear guidance. In addition, “hold-out data” in predictive modeling was defined and added to the list of items that may be included in the model output validation. The ASOP, which underwent four exposure periods and received over 100 combined comment letters, was developed in response to the increases in the number and importance of modeling applications in actuarial science, with the results of actuarial models sometimes being reflected in financial statements. ASOP No. 56 is effective for work commenced on or after Oct. 1, 2020, and can be viewed here.
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About The ASB
The Actuarial Standards Board (ASB) sets standards for appropriate actuarial practice in the United States through the development and promulgation of Actuarial Standards of Practice (ASOPs). These ASOPs describe the procedures an actuary should follow when performing actuarial services and identify what the actuary should disclose when communicating the results of those services.