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CIA Annual Meeting

This presentation at the CIA Annual Meeting in 2005 discusses the discipline process for pension actuaries, including statistics, case studies, and tips to avoid disciplinary actions.

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CIA Annual Meeting

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  1. CIA Annual Meeting LOOKING BACK…focused on the future

  2. Discipline and the Pension ActuaryRobert J. McKayJune 28, 2005

  3. Agenda • Bottom Line • Refresher on Discipline Process • The Statistics • Case Studies • How to Keep Off the CPC’s Agenda

  4. Bottom Line • About 2 actuaries per year are sanctioned • Only 25% of cases produce sanctions • Pension area has most discipline issues

  5. Discipline Process—Begins • CPC receives a complaint • Can lay a complaint itself

  6. Initial Screening • After preliminary review, CPC may either: • Dismiss complaintor • Appoint Investigation Team

  7. IT Report • Based on the IT report, CPC may either: • Dismiss complaint (with or without letter of advice) • Charge and issue a private admonishment • Charge and offer plea with recommendation of sanction (fast track) • Charge and refer to public Disciplinary Tribunal

  8. Sanctions Available • (Private admonishment) • Public reprimand • Suspension or expulsion from CIA • Refresher training • Fine and/or costs • Combination of above

  9. Current Complaints • As of April 30, 2005, ten complaints against seven members: • Life: 3 • Pension: 7 • P&C: 0 • Workers’ Compensation: 0 • Actuarial evidence: 0

  10. Past Complaints Since 1992 • 98 cases completed • 50 dismissed • 48 referred to Investigative Teams • 26: no charges filed • 22: charges were filed

  11. Of the 22 Cases With Charges • 3: private admonishment • 7: fast-track • 12: disciplinary tribunal appointed • 1 not guilty • 11 guilty of some or all charges

  12. Frequent Issues in Complaints • Sloppy work • Cosigning/peer review • MEPP • Wind ups • Work outside area of expertise • Expert witness/actuarial evidence • Ethics

  13. How We Learn of Problems • Regulators • Rule 13 • Plan members/sponsors • Legal proceedings

  14. Do All Errors => Discipline? No • We all make mistakes/oversights • Rectification under Rule 13

  15. Do All Errors => Discipline? Discipline • Negligence • Numerous mistakes/pattern of sloppy work • Financial loss (potential or actual) • Magnitude of errors

  16. Do All Errors => Discipline? Discipline • Violation of Standards • Ethical issues • Hide errors

  17. Case 1—Issue • Surplus overstated in wind-up report • Plan ran out of money

  18. Case 1—Why Charged • Data checks not sufficient • In transit benefit payments missed • AVCs missed • Deferred pensioner missed • Review of results was insufficient • Inadequate disclosure of data sources and checks

  19. Case 1—Charges • Rule 1: Skill and care • Rule 3: Follow standard of practice

  20. Case 1—Result • Pleaded guilty and accepted a public reprimand

  21. Case 2—Issue • Incorrect determination of wind-up status

  22. Case 2—Why Charged • Minimum transfer values did not comply with Recommendations • Former methodology used in some cases • Inadequate disclosure of assumptions, methods, checks, etc. • No statement as to data, assumptions, methods, etc.

  23. Case 2—Charges • Rule 1: Responsibility to public • Rule 1: Skill and care • Rule 3: Follow standard of practice • Rule 15: Disclosure • Violated recommendations

  24. Case 2—Result • Pleaded guilty and accepted: • Public reprimand • Fine and costs • Two year peer review

  25. Case 3—Issue • Multiple errors in MEPP valuation report (DB and DC benefits)

  26. Case 3—Why Charged • Insufficient documentation • No evidence of data checks • No working papers on account balance calculations • No working papers on contingency reserve

  27. Case 3—Why Charged • Other actuary could not use report (multiple errors/lack of clarity) • Contribution requirements • Treatment of expenses • Indexed and unindexed pensions aggregated • Fund returns and interest credits differ • Gain and loss obviously wrong

  28. Case 3—Why Charged • Surplus overstated by $1.5 million • Liabilities reduced for asset impairment • Assets not reduced • “Error so basic…”

  29. Case 3—Charges • Rule 1: Responsibility to public • Rule 1: Skill and care • Rule 3: Follow standard of practice • Old Rule 15: Disclosure • Numerous other charges related to work as an insurance Appointed Actuary

  30. Case 3—Result • Guilty of violating Rule 1 in four instances • “Evidence showed multiple breaches of other Rules”

  31. Case 3—Result • Serious lack of competence • Grave failure to apply professional standards • Repeat offender

  32. Case 3—Penalty • 3 year suspension • Comply with CPD requirements for readmission • Significant costs

  33. Case 4 Issue • Failure to disclose commission payments Charges • Multiple Rules cited in charges

  34. Case 4—Result • Guilty of all charges • One year suspension • $10,000 fine • $140,000 costs

  35. How to Keep Off CPC’s Agenda • Get all work peer reviewed • Review Standards of Practice regularly • If something is new to you—ask for help

  36. How to Keep Off CPC’s Agenda • If you are new to a case/firm—spend more time • If you co sign a report—it’s yours • If you discover a problem—discuss with other actuary—Rule 13

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