SOA seeks comments on new mortality assumptions for public pensions
Over half of the pension plans studied have been applying mortality scales that were last updated before 2014.
Long overdue updates to mortality tables produced by the Society of Actuaries will begin being applied to private sector pension plans next year. Now, the SOA is looking to update the mortality assumptions used by public pensions sponsored by states and large cities.
Stakeholders have until the end of October to comment on an exposure draft released by SOA this week.
Analysis by the Society’s Retirement Plans Experience Committee (RPEC) shows wide variance in the mortality assumptions used by public pension actuaries.
RPEC’s preliminary findings show the assumptions used by “many plans” may be “lagging behind” actual mortality trends. Using lower longevity assumptions impacts the accuracy of future liability calculations, and thus the contributions required to adequately fund pensions.
Of the plans studied by the SOA, at least 55 percent have been applying mortality scales that were last updated before 2014. SOA produces annual updates to its generational mortality scale to provide up-to-date mortality assumptions for pension actuaries.
SOA found that 5 percent of public pensions do not project mortality assumptions into liability calculations.
Actuaries are finding distinct trends in the life expectancies between general public employees, safety employees, and teachers, suggesting updates to mortality assumptions should account for the patterns.
Previous tables have built in assumptions for all employees; some tables have distinguished the life expectancies of white-collar and blue-collar workers.
Teachers, for instance, are living longer than safety workers and general employees.
Women in safety jobs have a shorter life expectancy than general female employees. Men working as safety employees are living longer than their counterparts working as general employees, according to SOA.
Some state sponsors of public pensions have taken the initiative to update mortality tables in recent years. CalPERS, the largest public pension fund in the country, updated its tables in 2013. CalSTRS, California’s public pension for teachers, updated its assumptions in 2017. Those changes in part led to a 4.5 percent decrease in the plan’s funded level.
Vermont updated its mortality assumptions in 2017, which increased the state’s unfunded liabilities by $10 million.
New York updated its assumptions in 2015 to reflect the SOA’s MP-2014 scale. That move forced annual contribution increases of 4 percent for two of the state’s pension funds.