June 6, 2007

Dear Academy member:

The Academy’s Board of Directors just completed a two-day board meeting in Washington, D.C. Let me brief you on some of meeting’s major outcomes.

Since the Academy was founded in 1965, one of its major responsibilities has been to ensure that the actuarial profession adheres to high professional standards and that it reviews those standards periodically. The actuarial profession looks to the Academy to monitor professionalism standards because the U.S. actuarial profession is primarily self-regulated – U.S. actuaries are not licensed by any state or federal government or agency, with the exception of Enrolled Actuaries under ERISA and the Joint Board for the Enrollment of Actuaries.

On behalf of the profession, one of the Academy’s functions is to promulgate and monitor the profession’s Code of Professional Conduct and the Qualification Standards. The Joint Committee on the Code of Professional Conduct, which is comprised of liaisons from all five U.S.-based actuarial organizations, is charged with reviewing the Code to determine if changes are needed from time to time. The Academy’s Committee on Qualifications (COQ) in turn is charged with promulgating and revising, as necessary, the Qualification Standards.

Beginning in 2004, the COQ began soliciting input from the profession by exposure of a revised draft of the Qualification Standards on whether the scope of the Qualification Standards should be expanded from focusing solely on statutory and regulatory work to include all Statements of Actuarial Opinion (SAOs), among other issues addressed in the exposure drafts. There have been two exposure drafts issued and over two hundred comments received. I am happy to report that the Academy’s Board adopted substantially all of the COQ’s recommendations on May 24th, with a caveat for the COQ to clarify language in connection with “draft” SAOs to be completed within 30 days. Therefore, the new Qualification Standards are not expected to be final until July or August 2007, and the new continuing education requirements (explained below) will not likely be required until 2008.

These revised Qualification Standards represent a significant step forward for the integrity of our profession. They will enhance the actuary’s reputation and, ultimately, increase the value proposition actuaries bring to clients. In our fast-paced, competitive global economy, our profession must stay relevant, reputable, and accountable to our clients. These new Qualification Standards are a major step in that direction.

But what do these changes to the qualification standards mean to you, the practicing actuary? We will post the new Qualification Standards on www.actuary.org, once they become final, as well as communicate further with you on the details. However, here are the major highlights of the Board’s decision:

• The new Qualification Standards will apply to all actuaries that issue SAOs. The current Qualification Standards applied only to “Prescribed” Statements of Actuarial Opinion (PSAO). PSAOs are statements of actuarial opinion issued for purposes of compliance with law or regulation or with Actuarial Standards of Practice as promulgated by the Actuarial Standards Board. A PSAO could also be an actuarial communication issued for purposes of compliance with, among other things, standards promulgated by the Financial Accounting Standards Board, Governmental Accounting Standards Board, Cost Accounting Standards Board, American Institute of Certified Public Accountants or the Federal Accounting Standards Advisory Board.
• Annual continuing education requirements will increase under the new standards from 24 hours every two years to 30 hours per year, of which a minimum of three CE credit hours must cover professionalism topics and a minimum of six must be from “organized” activities (the year 2008 will be a transition year with only 24 CE hours being required under the new qualification standards). A credit hour is 50 minutes for all purposes. “Organized” activities involve interaction with actuaries or other professionals working for different organizations. In-house meetings can satisfy the requirement of interaction with actuaries or professionals working for different organizations by using outside speakers.
• Other than the six “organized” CE credit hours, the remaining 24 credit hours under the new qualification standards may be obtained from “Other Activities,” which include reading actuarial literature, statutes or regulations and other books, papers or articles on relevant technical or professional topics.
• To satisfy the general qualification standard (i.e. to be considered a “qualified actuary”), actuaries will need three years of responsible actuarial experience – defined as work that requires knowledge and skill in solving actuarial problems, among other general qualification requirements.
• To satisfy additional “specialty track” requirements, actuaries may be required to have responsible actuarial experience in the specific area of actuarial practice relevant to the subject of the SAO depending on the actuarial credentials attained.
• Currently, an Enrolled Actuary is deemed to meet the continuing education requirements under the current qualification standards for the issuance of PSAOs in the pension practice area if they are in compliance with the Joint Board for the Enrollment of Actuaries’s continuing education requirements. Through 2010, Enrolled Actuaries who issue Statements of Actuarial Opinions related to retirement plans to which ERISA applies will be exempt from the continuing education requirements of the new qualification standards. However, beginning in 2011, the EA exemption will be very limited. EAs who issue statements of actuarial opinion other than the Form 5500 Schedule B certification and other ERISA forms will need to satisfy the continuing education requirements of the new qualification standards.

This major change to our professionalism standards will undoubtedly raise questions. I can assure you that the Academy is committed to making these standards as accessible and understandable as possible. Look for more information about the new Qualification Standards in the near future.

In other major decisions by the Board:

• Volunteer Resource Committee Established. I am happy to report the establishment of a Volunteer Resource Committee, a presidential committee of the Academy that will follow up on the volunteer survey just completed May 31st. This committee will have responsibility for volunteer recruitment, management and development going forward. I’ve named Bob Conger as chair of this committee and he is making this recruitment effort a top priority. As of May 31, almost 500 members responded about volunteering at the Academy. For a first-of-its-kind request by the Academy, that is indeed a gratifying response. Thank you for your dedication to the Academy’s work!
• Strategic Planning. Strategic planning for the Academy over the next five years took up the bulk of the board meeting. We made major progress on the plan and plan to have it finalized for a vote in time for the next Board meeting in October.

As always, I would be pleased to hear from you, and again, look for further communication from the Academy on the scope and details of the new qualification standards in the near future.

Sincerely,

Steve Lehmann
lehmann@actuary.org