Archive of 2011 December

27Dec2011
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SOA Blog
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Retirement
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Top retirement stories of 2011 Thumbnail

Top retirement stories of 2011

Many Americans reached retirement age in 2011, but that did not stop them from continuing to work. Market volatility, combined with a general lack of savings, hurt the retirement plans of many this year. Hopefully, we can learn from the “best laid plan” moments of this year and mitigate the risks inherent with our personal roadmaps to retirement. Here are some of the top stories in retirement news from this past year. Retirement: An Evolving Concept Call it news or just plain reality: the volatile stock market and uncertain economy has required many to postpone their retirements and remain in the workforce. Life expectancies are rising. Portfolio values are decreasing. As a result, the traditional retirement age of 65 is getting extended and the “golden years” are further from our reach. As reported by The New York Times’ Edward Glaeser, “Today nearly 450,000 Americans 65 and older are unemployed and looking to work.” In the last four years, the number of unemployed elderly job seekers has more than doubled. The New York Times went on to say that “nearly 40 percent of 55- to 64-year-old Americans don’t have retirement accounts.” Those who are investing in 401(k)s and making sensible investments along the way may not be much better off than their counterparts without retirement accounts, given the market volatility and risks associated with such investments. The question that remains unanswered is: how do we ensure a lifetime of savings is not undermined by forces beyond one’s control?  Alicia Munnell, director of the Center for Retirement Research at Boston College, has proposed a new type of savings account – supplemental to 401(k)s and Social Security – that would spread such risks among workers, retirees and government. (more…)

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22Dec2011
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SOA Blog
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Risk
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Links for the week of December 19, 2011

The penultimate weekly links round up for 2011 is in for risk management. Happy holidays and happy reading. The New York Times’ David Bornstein reports about progress the Freelancer’s Union has had in providing independent workers with health insurance and retirement savings. According to the article, about 42 million people (or a third of today’s U.S. work force) do not currently have “traditional” jobs. And as things stand, millions of these workers – many of whom have been laid off due to the weak economy – live day by day “without health and unemployment insurance, protection against discrimination and unpaid wages, and pension plans.” Health insurers assume these workers are riskier to insure simply due to the fact that they often lack reliable information about them. Financed with $17 million in loans and grants from social investors, the Freelancers Insurance Company currently covers 25,000 independent workers and their family members in New York State at premiums more than a third below the open market rate. (Source: New York Times) (more…)

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21Dec2011
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SOA Blog
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Healthcare
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Will the demise of CLASS be a net positive or negative for the private LTCI market? Thumbnail

Will the demise of CLASS be a net positive or negative for the private LTCI market?

by Malcolm Cheung, vice president, Prudential Financial The decision by HHS to not proceed with implementation of CLASS is not a big surprise from my perspective.  As defined in the ACA legislation, CLASS clearly had design features that would have invited significant adverse selection that would have jeopardized its long term actuarial viability.  Although changes to the program could have increased its chances of success, it appears that HHS has concluded that they either did not have the authority to make those changes without new legislation, or that they did not want to risk the political ramifications (especially in an election year) of arguing that they did have that authority.  From the perspective of the private LTC insurance industry, what is encouraging in the letter that Secretary Sebelius has sent to both houses of Congress is her recognition that insurance coverage for potential LTC expenses is critical to reducing the strain that these expenses will ultimately have on state and federal Medicaid budgets, as well as important in helping Americans preserve their options when they need this care. (more…)

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20Dec2011
Come one, come all! Actuaries as ringmasters Thumbnail

Come one, come all! Actuaries as ringmasters

by Mary Hegemann, senior consulting actuary, Wakely Consulting Group Comparing politicians to the circus is not a new concept, but the Affordable Care Act (ACA) has brought this comparison to a whole new big tent.  Some state politicians are quite the attractions, refusing to budge when it comes to planning for ACA implementation.  I feel like actuaries need to be the little monkeys at the circus clanging cymbals while riding a bicycle trying to get everyone’s attention (oh wait, maybe that was Curious George).  It’s not that doomsday is coming.  It’s that politics are getting in the way of preparation, and by the time the politics get sorted out, we may end up with an elephant-sized mess. Take risk adjustment for example.  Under the ACA, beginning in 2014 risk adjustment will be incorporated in the individual and small group markets in all states.  States without exchanges will default to having the feds administer risk adjustment.  States with exchanges can choose to administer risk adjustment on their own or to have the feds administer it for them.  (more…)

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19Dec2011
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SOA Blog
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Retirement
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Reflecting on 2011 and ahead to 2012: Anna Rappaport Thumbnail

Reflecting on 2011 and ahead to 2012: Anna Rappaport

What would you say were the biggest news events in your area of expertise? In the retirement sphere, there are a few areas that are highly important to me.  They include the growing focus on the need for retirement income and the consequences of the decline in defined-benefit plans. Were there any trends that came as a surprise to those following the industry? My biggest surprises include my work on ERISA’s Advisory Council because I had not yet considered the interaction of privacy and security issues with benefit plan issues.  This really reminded me that there is still a lot I do not know. The second surprise I experienced this year is that many people are realizing the importance of working longer, but few people are doing much to make this more possible. (more…)

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16Dec2011
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SOA Blog
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Risk
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Risk Management Links for the Week of December 12

The holidays are right around the corner, but risk management news does not seem to be taking a break. Here are the best risk management links for the week of December 12, 2011: A recent report from Britain’s Financial Services Authority (FSA) addresses the causes of and lessons learned from the demise of the Royal Bank of Scotland (RBS). The report brings to light many vulnerabilities related to the governance processes of the bank. Senior management apparently vigorously pushed back against FSA policies which limit the threshold for risk. The report concludes regulators were too lenient and should have done more to address concerns and ensure proper governance procedures were in place at RBS. (Source: Bloomberg) (more…)

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Book Review: Health Care Will Not Reform Itself

Credit: Jared RodriquezWe are vociferous readers at the Society of Actuaries and we want to pass on our review of a book that has gained renewed interest in health care circles. In his New York Times best seller, Health Care Will Not Reform Itself: A User’s Guide to Refocusing and Reforming American Health Care, Kaiser Permanente CEO George Halvorson addresses the inadequacies with the U.S. health care system and improvements that can be achieved through health care reform, which is “within our reach.” This book came out in 2009 as Congress prepared to debate the Patient Protection and Affordable Care Act. As the ACA heads to the Supreme Court it is interesting to look back at the arguments Halvorson put forth. (more…)

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09Dec2011
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SOA Blog
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Risk
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Links for the week of Dec. 5, 2011

At the Society of Actuaries, we read through a lot of articles on risk management each week. While many of us enjoy reading about the subject ad nauseum, we know many of our peers want to just get the best of the best. With that in mind, each Friday we will be providing links to the best online articles and conversations about risk management. If you would like to add to this list, just leave a summary and a link in the comments section. Enjoy the links for December 5, 2011. As battles over post-crisis efforts to change the way “too-big-to-fail firms” are structured and do business continue, next week’s hearing before a subcommittee of the Senate banking committee will focus on how new rules in the Dodd-Frank law should be implemented, whether the bill goes far enough or if it needs to be further built out. (Source: Bloomberg) InformationWeek contributor Michael Davis outlined tips for conducting a risk assessment of a company’s mobile strategy. In it he suggests four areas should be the focus of an assessment: data access, device risk, management risk and user awareness. (Source: InformationWeek) The Commodity Futures Trading Commission unanimously voted to approve the MF Global rule this week, which will limit how the brokerage industry can invest customer money and

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Will the role of retirement benefits (DB and DC) in competitive labor markets change? Thumbnail

Will the role of retirement benefits (DB and DC) in competitive labor markets change?

by Anna Rappaport, Anna Rappaport Consulting In my view, pensions and 401(k) plans have not been a major factor in individual decisions about taking jobs, although DB benefits can be a big factor in decisions about when to retire or leave, particularly at older ages. DC benefits have not been much of an influence on the timing of leaving. In contrast, health insurance has been an important factor in labor market decisions for many years in the U.S. Many people do not consider a job without good health insurance, and health insurance can be a significant factor in decisions about changing jobs and when to retire. In 2014, if the Health Insurance Exchanges are implemented as scheduled under the Affordable Care Act (ACA) , people without employer health insurance will have a new set of marketplace options. My view is that health benefits will be much less important at that point. I am interested in learning whether people think that pensions will become much more important in labor market competition and whether they agree with me about health benefits. I am interested in other ideas about how employers may compete for employees when the ACA is implemented. Please share your ideas below.

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