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Macheide’s Aurelian Dream

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The more we know what we know, the more we know we don’t.

Almost a quarter century ago, I wrote an article for an early issue of Contingencies, the #1 magazine for actuaries, entitled “Next Best Thing to an Aurelian Dream“. Now standing at retirement’s shoreline, I am realizing that vision to be as recurring a dream as all those I’ve ever kept dreaming. Maybe if I start now, then a quarter century from now I can look back claiming to have made my dream at least more vivid, if not ever to be real. Or at least to have been content spending an entire lifetime dreaming it . . .

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Written by macheide

30 March 2015 at 4:08 pm

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Pension Cost — All v Traditional

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Net Periodic Pension Cost - All Companies vs Traditional Spreading - 2014 all (205)As noted in an earlier post in which employer contributions to pension plans were compared with pension costs, the trends for net periodic pension costs have been confused the past 4 years by a small subset of companies that have chosen to switch to immediate recognition of gains and losses. Previously, that subset of companies followed the traditional accounting still in use by the majority of companies, involving a deferral-disregard-spread approach to gains and losses: (1) gains and losses, including changes in measurement of obligations due to changes in interest rates, are not recognized until after the year in which the gains or losses actually arise, at the earliest; (2) cumulative gains or losses up to 10% of the greater of the value of pension assets or pension obligations are disregarded; and (3) gains or losses outside that 10% corridor are spread over the future service life of active employees (i.e., generally about 15 years).

In very sharp contrast, the small subset of companies that are departing from the traditional approach recognize pension gains or losses in full in the fiscal year in which those gains or losses arise. The influence of this small subset on aggregate global trends is obvious in this graph. The blue curve with open circles represents the aggregate global pension cost for 205 of the largest U.S. companies that sponsor defined benefit pension plans for fiscal years 2000 through 2014, showing an increase in pension cost for 2014 relative to 2013 cost. This is similar to the chart that will be published by most if not all of the major pension studies; and more likely than not, none of those published studies will point out what has been the source of most of the volatility in pension cost the past 4 years.

Of those 205 companies, the red curve with closed circles shows the aggregate global net periodic pension cost for the 196 companies that continue to use the traditional deferral-disregard-spread approach. If all companies had continued to use that traditional approach, pension costs would have declined in 2014 relative to 2013 costs, as seen by the trend for those 196 companies.

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Written by macheide

17 March 2015 at 2:46 pm

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Work Bucket

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practical lessons in actuarial scienceOne of the key items on my work bucket list, which holds a fast-dwindling collection of things I wish to accomplish before my work life is over:

Click on the image of this book’s title page, then enlarge that if need be, and you’ll find this second edition to have been published by The Spectator Company in 1905! As in, 39 years older than the Society of Actuaries. As in, the book is some 13 years older than our dear neighbor, who celebrates his 97th birthday next week. As in, if the book had been born in the year it was published, then it would now be 10 years older than the last age given in the mortality table given in the book!

Which if nothing else demonstrates that good word survives its own author’s breath. And does still get itself read. And put to good use. ‘And “Miles” to go before I sleep . . . ’

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Written by macheide

25 January 2015 at 9:22 am

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My Last Picture Show

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I may have already attended my last Enrolled Actuaries Meeting, last year. After 26 consecutive annual conferences, I may be done.

Things have moved on. I doubt I’ll be missed. Nobody will remember what I did to things. Oh well. It was fun while it lasted.

I think my favorite moment was when I created a visual representation of the general nondiscrimination test completely on the fly, off the cuff, just spare change and pieces of paper on a blank overhead projecter.

And there was the memory that wasn’t: the year I could have “owned” a speaker’s seat for all seven breakout sessions, a record that never would have been bested.

And the year the hotel gave me a luxury suite because my room reservation had been screwed up.

Thousands of other memories over a quarter of a century at the pulse of the profession, now more than likely behind me. I doubt I’ll miss it. Oh well. Send no flowers.

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Written by macheide

28 March 2012 at 5:40 am

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