The podcast speakers dismiss the application of basic finance theory and disparage the SOA Blue Ribbon Panel. It’s probably not coincidental that the speakers’ signatures each appeared on multiple comment letters against the new measure.
Around 18:35: “The Society of Actuaries published a thing called a Blue Ribbon Panel which was an odd little political exercise that we won’t say anything else about.” I think the BRP was actually fairly significant in the movement toward the new measure. There was a good reason the SOA went outside the profession for members, much to their credit.
At around 30:00: "I could find myself writing that we don’t believe that the LDROM provides any information about benefit security because it’s not really a settlement type of measure” (I couldn’t really hear the last word but am inferring it.) The idea of the LDROM was not to disclose a settlement liability, but a more generally economically meaningful one.
At 42:30: “Describe it [difference between AAL and LDROM] as a way of describing how much reasonable risk is reducing the ongoing cost of the plan by comparing that to the actuarial accrued liability.” It’s actually the opposite, the difference demonstrates how much the AAL is understated vs. a liability more consistent with basic finance theory. “Cost” is not used in an economically meaningful way. It should not be used to mean: the amount that we will have to contribute if assets earn the 50th percentile expected return every year.
So basically, the Reason article (confession: I wrote it) was anticipating that the wagons would be circled and it turns out that was right (I hadn’t known of the podcast before). LDROM is being belittled. I believe the profession needs to get to consistency with finance theory or we’ll become laughingstocks (maybe we already are).
Here’s something good to watch: Jeremy Gold speaking at MIT