Restructuring of Enrolled Actuary Examinations

Background

The Joint Board was established by the Secretary of the Treasury and by the Secretary of Labor under the authority of section 3041 of the Employee Retirement Income Security Act of 1974 (ERISA). The Joint Board is responsible for the enrollment of individuals who wish to perform actuarial services under ERISA. Consistent with that mandate, the Joint Board has promulgated regulations governing eligibility for enrollment. Those regulations are published at 20 CFR Part 901. An individual who wishes to be enrolled may satisfy the examination requirements for enrollment by passing the examinations offered by the Joint Board. At present the examinations leading to recognition as an Enrolled Actuary consist of two examinations, one of which is in two segments. The basic actuarial examination covers actuarial mathematics and consists of two segments, namely, actuarial mathematics (EA-1A) and pension actuarial mathematics (EA-1B). The pension law examination covers ERISA and other relevant statutes and their application to specific problems (EA-2). The last major revision of the format of the enrollment examinations was in 1984. Since the last revision of the enrollment examinations, the law and regulations relating to pension plans have been amended many times. As a result, the current format of the enrollment examinations no longer provides the examiners with a sufficient opportunity to test the candidate's knowledge of the relevant pension law and of actuarial mathematics. The need to cover the types of actuarial problems arising under current pension laws and the need to conform the Joint Board's examination programs to recent developments in actuarial theory and practice have led the Joint Board to conclude that its current examination structure needs to be improved. The Board has determined that a restructuring of its examinations will improve its ability to determine whether those who seek enrollment have demonstrated competence in both the law and the actuarial theory which is relevant to the performance of pension actuarial services. These matters were discussed by the Advisory Committee on Actuarial Examinations and the public at a meeting held for that purpose on June 30, 1998. Further consideration has been given to these issues by the Joint Board and by the co-sponsors of its examinations, the Society of Actuaries and the American Society of Pension Actuaries. As a result of these discussions, the Joint Board, the Society of Actuaries, and the American Society of Pension Actuaries have agreed that a restructuring of both the basic actuarial examination and the pension law examination is needed for adequate testing of candidates for enrollment.

Executive Order 12866

Executive Order 12866 requires agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Since no modification of any regulation is contemplated in this Notice, Executive Order 12866 does not affect this notice.

Regulatory Flexibility Act, Unfunded Mandates Reform Act of 1995, and Small Business Regulatory Enforcement Fairness Act of 1996

Because the changes to the examination program of the Joint Board contemplated in this Notice do not require any change to existing regulations, the statutes cited in the caption of this section do not affect this Notice. Drafting information. The principal author of this Notice is Ms. Paulette Tino, Chair, Joint Board for the Enrollment of Actuaries.

Proposed Modification

The Joint Board for the Enrollment of Actuaries has under consideration the restructuring of the examinations it offers under 20 CFR 901.13(d)(1). The need for restructuring is based on the expansion of the body of law affecting the private pension system and the corresponding increase in the complexity of the work for which enrolled actuaries are responsible. The syllabus of the current law examination, one of two examinations an individual must pass in order to meet the knowledge requirement for enrollment,

does not provide sufficient opportunity to test a candidate's knowledge of the relevant pension law. In addition, the pension mathematics segment of the basic actuarial examination does not cover sufficient material to test a candidate's ability to apply sound actuarial techniques to the increasingly complex regulatory environment in which defined benefit pension plans operate. As a result of discussions held at a public meeting on June 30, 1998, and in other public forums, the Joint Board and the examination co-sponsors, the Society of Actuaries and the American Society of Pension Actuaries, propose to restructure the examination program. The major topics for the restructured basic actuarial examination would be (1) compound interest, and (2) life contingencies. These topics are now covered in the first segment of the basic actuarial examination (EA-1A). The restructured examination covering these topics would be 2\1/2\ hours long, the same length as the current EA-1A examination. The restructured pension law examination would be offered in two segments. The first would cover basic pension mathematics, including the law and regulations that relate to funding qualified defined benefit pension plans that are neither overfunded nor seriously underfunded. The second segment would cover the remaining relevant law and regulations. This would include treatment of overfunded plans, deficit reduction contributions, qualification standards, etc. A minimum standard of competence would be established for each segment. Each segment of the restructured pension law examination would be 4 hours long. It is the Joint Board's intention to offer each examination once a year. The basic actuarial examination and the second segment of the pension law examination would be offered in the spring. The first segment of the pension law examination would be offered in the fall. It is anticipated that the restructured program will take effect in the spring of 2001 when the basic actuarial examination and the second segment of the pension law examination will be offered. Appropriate transition credits would be accorded to persons who have successfully completed portions of the enrollment examination before 2001. The Joint Board is considering the following system of transition credits:

(1) A person who has successfully completed the first segment of the current basic actuarial examination before 2001 will receive credit for the restructured basic actuarial examination and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes both segments of the restructured pension law examination. (2) A person who has successfully completed both segments of the current basic actuarial examination before 2001 will receive credit for the restructured basic actuarial examination and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes both segments of the restructured pension law examination. (3) A person who has successfully completed the first segment of the current basic actuarial examination and the current pension law examination before 2001 will receive credit for the restructured basic actuarial examination and for the second segment of the restructured pension law examination and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes the first segment of the restructured pension law examination. (4) A person who has successfully completed the second segment of the current basic actuarial examination and the current pension law examination before 2001 will receive credit for both segments of the restructured pension law examination and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes the restructured basic actuarial examination. (5) A person who has successfully completed the current pension law examination before 2001 will receive credit for the second segment of the restructured pension law examination and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes the restructured basic actuarial examination and the first segment of the restructured pension law examination. (6) A person who does not meet the requirements of one of the preceding five paragraphs before 2001 will receive no credit for any examinations passed under the current examination program and will satisfy the examination requirement of the Joint Board's regulations only if he or she passes the restructured basic actuarial examination and both segments of the restructured pension law examination.

The above restructuring is subject to approval by the respective co-sponsors of the examination. This proposal is intended to reflect the views expressed at the public meetings held by the Joint Board and by the co-sponsoring organizations up to the present time. However, the Joint Board welcomes further public comments on the restructuring. Persons desiring to submit comments should submit them in writing on or before April 26, 1999, to the address given above. Examination candidates will be furnished with more details on the restructuring after it has been approved. Paulette Tino, Chair, Joint Board for the Enrollment of Actuaries. [FR Doc. 99-5868 Filed 3-10-99; 8:45 am] BILLING CODE 4810-25-P