40 Years of Actuarial Work -- Nothing but Change, Change, Change

Forty years ago this morning, I walked into an office with no idea what I would be doing. I was starting my career as an actuary -- technically an actuarial student in the parlance of Hewitt Associates, a grand firm that no longer exists. I was one of five new Associates in the Rowayton office -- also known as The Mansion and as the Eastern Center -- and three of us were budding actuaries. I was proud of my two freshly passed exams, but then learned that my two fellow budding actuaries both had Masters Degrees in Actuarial Science and had passed four exams apiece. Oh well.

After orientation and paperwork, I was assigned my first tasks to perform at my desk. My desk was barren. There was no computer. In fact, there were no computers in the entire office, but there were a few mainframe terminals on a different floor of The Mansion from which we could access the central system. 

My first task was to complete a Form 5302 for a defined benefit plan. I wondered what a 5302 was and what a defined benefit plan was. No idea about either. I learned. After completing that, I was asked to calculate actuarial equivalence factors for modified cash refund annuities. Without Excel (or Lotus 1-2-3 which we used before we used Excel). 

On day 2, I began to learn ValCalc, the homegrown mainframe software program that we used to perform actuarial valuations. In addition to learning the coding, the most important part was that unless there was a good reason not to, I had to run all my ValCalcs overnight. The daytime charges were simply too high.

Actuarial valuations were different then. The Enrolled Actuary -- something I would become -- chose all of the actuarial assumptions and the actuarial cost method and asset valuation method which in combination were the funding method. There were lots of funny rules to learn, but nothing compared to where we are today. I learned that each plan had its own vesting schedule and there were generally four choices:

• 10-year cliff
• 5-15 graded
• 4/40 vesting
• class year vesting

While I could still tell you the details of each, don't ask. 

I only had to do one valuation for each plan. it was to determine the funding requirements for the plan. No separate valuation was needed for accounting as we followed APB 8 (Accounting Principles Bulletin if you care) under which a company simply expensed what it funded. It seemed so common-sense; the accounting profession disagreed.

Labor Day came early that year and right after it, my work life changed. It was Schedule B time. The Schedule B, a predecessor of Schedule SB was a 2-page form that sometimes had a less than 1-page attachment. I had to do lots of them for N0941 and G1799 (if you worked for Hewitt, you'll understand). 

And then the world began to change. The FASB issued Statements No. 87 and 88 telling us how pension accounting should really work. (Funny aside: I was giving a performance review at the end of 1988 and one of my direct reports said to me that we got FAS 87 in 1987 that told us about pension accounting and FAS 88 in 1988 that told us about special pension accounting, so what would FAS 89 be in 1989? In her mind, we now knew everything we needed to know about pension accounting, so FAS 89 was unnecessary.)

There were also rumblings about something being called "Treasury 2." For those that don't remember, Treasury 2 was the blueprint of the Tax Reform Act of 1986. And snuck in, but little heralded at the moment was the Single-Employer Pension Plan Amendments Act, a nasty little law that raised PBGC premiums from $2.60 per person to $8.50. It also banned insufficient standard terminations.

In 1986, the Tax Reform Act passed and the world changed. Faster vesting, more rapid amortization of unfunded liabilities, and lots of other little annoyances in addition to the change of virtually everything else dealing with taxes in the US. 

So we had this new law and these new accounting standards. I noticed the experienced people struggling with them. So I made up my mind that I would learn them better than anyone else. I don't know that I succeeded, but I certainly learned them better than most. 

And around this time, we got an internal memo from "Wilson." For whatever reason, internal memos were from the author's [last name]. It told us how to value a cash balance plan. 

A what?

It seemed that some other firm that I had never heard of -- Kwasha Lipton -- had designed a newfangled defined benefit plan for its client BankAmerica. Who cared? Some strange thing in San Francisco. I didn't work on any cash balance plans, so I sure didn't need to know what to do with them.

I passed more actuarial exams. I was most proud of passing my Enrollment exams quickly. But then I found out that I could not be an Enrolled Actuary without 3 years of responsible pension experience. I didn't have 3 years period, so I certainly didn't have 3 responsible years. It was 37 years ago today, however, that I sent in my application for Enrollment that did not come through until early 1989.

More laws changed. The Pension Protection Act of 1987, embedded in the Omnibus Budget Reconciliation Act (OBRA), was a biggie. It changed the way we do actuarial valuations forever. It took levels of discretion away from actuaries and it began to try to put DB plans in a coffin.

In 1988, I changed firms and cities. Towers, Perrin, Forster, & Crosby (TPF&C) in Atlanta wanted me and off I was. We got another new law with small pension effects called the Technical and Miscellaneous Revenue Act (TAMRA). If ever the name of a law made it, on its face, seem like a sham, that was it. At least, that was it until we got the One Big Beautiful Bill Act (OBBBA doesn't even sound like a real law acronym). And, in the biggest shocker of all, I had a PC -- a personal computer -- on my desk.

Every year, we got new laws that affected pensions and every year, they got more confusing. With that confusion, companies sponsoring the plans doubted their commitments. As they doubted their commitments, I started to learn new topics among them retiree medical valuations, equity compensation, golden parachute rules, and a myraid of other things I had never heard of just a few short years earlier.

We got another interesting law in 1993 -- another OBRA. By 1993, I was occasionally supporting the Technical Services group and as such, I was asked to dig deep into a specific chapter of OBRA 93. In doing so, I found an interesting provision that going from memory called for unspecified cuts of something likts $2 billion to be enacted in years 8 through 10 of the Act. 

Unspecified cuts ... a new way to balance a budget.

Pension law continued to change nearly every year. Plan sponsors didn't care. Virtually every non-union pension plan in the US was overfunded due to still high interest rates and a booming stock market. Someday that would come to an end, however, and with it we would see a massive exodus from pensions.

As we fast forward to 2025, I am now a Partner with October Three Consulting. I'm nearing the end of my 10th year with the firm. We specialize in ... wait for it ... cash balance plans. The laws have continued to change. Remember those PBGC premiums that had increased to $8.50 per person for 1986. In 2025, depending on how well funded a plan  is, they range from $106 per person to $823 per person. 

That's $823 per person per year for the right to pay each of those people a pension in the future. Just wow!!

I remember that when I first got my PC on my desk, I got really good at Lotus 1-2-3. I built macros and created complex pension design software. Today, I am perhaps the weakest person in my firm at spreadsheets.

But I still know all those pension laws. I probably know the ones from the 70s and 80s better than, or at least as well as, I know the more recent ones. I can still tell you how to do a Proof of Integration under Revenue Ruling 71-446 or to test multiple plans for comparability under Revenue Ruling 81-202. I still know how Q&As 24 and 26 apply to excess [pension] parachute payments under the Deficit Reduction Act of 1984. I remember that automatic cost of living adjustments to pensions vest under Q&A V-12 of Technical Information Release 1403 -- a bulletin that helped to explain, or at least purportedly did, some of the challenging changes brought to us by the Employee Retirement Income Security Act of 1974 (ERISA).

I've done my best, however, to learn in a little bit less detail some of the new changes that simply don't apply to my work. My clients often don't care. When they do, I learn them, but when they don't, I peruse them. 

We're in a different world and pensions are certainly different. My work is different. My home is different. 

I stumbled into this profession 40 years ago today. It's been good to me. I've won some awards. That's nice. I had the opportunity to serve my profession as President of the Conference of Consulting Actuaries. That was an honor and a privilege.

These days, my greatest professional achievements are all ones that I am quite proud of. I've placed my focus on clear communication whether it be in writing, on the phone, through Teams or Zoom, or in person. I'm working on developing the current generation and next generation of great consulting actuaries. Seeing them succeed is a great cource of pride.

My work is very different than it was 40 years ago. I still enjoy it though, but the reasons while different remain the same. I like the people interaction and because of it, at least part of me mourns that I am no longer in a physical office in space allocated by my firm. And I love solving problems ... difficult problems that others say they can't. 

It's no longer about determining actuarial equivalence factors for modified cash refund annuities. Today, it's likely to be evaluating financial risks related to pensions in mergers and acquisitions. 

In 1985, I took on challenges that some of my peers didn't want. In 2025, while the challenges are very different, I guess I'm still doing the same thing. 

There won't be another 40 years, but this is also not a retirement speech. It's been fun looking back for these few minutes and doing so without regrets.