DAVID LANGER COMPANY, INC

ARTICLES BY TOPIC ¦ MEMOS TO CLIENTS

May 3, 1999

RE: Proposal for a blue ribbon panel to review practices of Social Security's actuaries

The President of the American Academy of Actuaries, Richard Robertson, has replied to my April 7 letter in which I asked that the Board "consider the violations of the actuarial standards may have occurred and, if so, then contemplate appropriate action to remedy any resulting misperceptions that the public may now have." he states that, since the question here is one of the apparent violation of the Code of Professional Conduct, the Academy's Bylaws require that it be referred to the Actuarial Board for Counseling and Discipline ("ABCD").

However, I feel this is not appropriate, and my April 28 reply is enclosed explaining why and suggesting that the Board appoint a blue ribbon panel.

Call me if you have any question or comment. With best regards,

Sincerely,

David Langer

April 28, 1999

Mr. Richard S. Robertson
Senior Vice President
Lincoln Re
1700 Magnavox Way
PO Box 7808
Fort Wayne, IN 46801-7808

Dear Mr. Robertson:

I appreciate your thoughtful reply to my April 7 letter. It appears to me there are two issues here, one public and one professional, namely:

Whether there were violations of the Actuarial Standards of Practice. Significant violations would be a profound matter that concerns virtually the entire country. Our national leaders need unbiased actuarial assistance to consider the status of Social Security and the remedies for any problems.

How any violations should be dealt with. This is primarily the concern of actuaries in order to keep standards high and retain the public's confidence in the profession.

It would thus seem that the first step is to determine if, in fact, there were violations. This raises the question of the most appropriate party to do this. The ABCD is geared, as I understand it, to local situations, such as where a client has a complaint about an actuary or one actuary has a complaint about the program. Also, the ABCD's members may not be able, for lack of expertise or time, to ascertain whether there have been violations of the standards involving actuarial assumptions for a social insurance program like Social Security.

Since the matter is invested with a strong national interest, I concur with the recommendation by Douglas Borton, in his April 8 letter to you (copy enclosed), for the appointment of an ad hoc blue ribbon committee. If the Academy's Board were to adopt his suggestion, the public would clearly have a high degree of confidence in such a committee's findings and accord the Academy a great measure of respect.

I would encourage the Board to therefore leave open at this time the question of how to deal with any violations for the following reasons: it remains to be seen if there were violations and, if so, the Board would then be in a better position to asses whether the ad hoc blue ribbon committee or the ABCD should deal with them. In fact, it may prove prudent not to pursue this aspect at all.

I must emphasize that what is required initially is a review by a respected group of actuaries of the extent to which professional standards were or were not observed, with the intent to enlighten both the public and actuaries on a vital national subject. The use of the Actuarial Board for Counseling and Discipline, on the other hand, conjures up a quasi-legal adversarial setting and would miss the mark of what is needed to guide the public and our colleagues in evaluating whether the Social Security actuaries carried out their duties in an appropriate way.

I shall look forward to hearing from you.

Sincerely yours,

David Langer

April 18, 1999

Mr. Richard S. Robertson, MAAA, President
American Academy of Actuaries
1100 Seventeenth Street, NW, 7th Floor
Washington, DC 20036

Dear Dick,

David Langer has shared his letter of April 7, 1999 to the Directors of the Academy with me.

Previous correspondence from Mr. Langer indicates that neither the Actuarial Standards Board nor the Actuarial Board for Counseling and Discipline is an appropriate forum to investigate these matters. Therefore, in view of their importance, I recommend that the Academy Board of Directors utilize some other vehicle, such as an ad hoc blue ribbon committee, to determine if there have been violations of actuarial standards of practice.

It first should be determined whether the basis of Social Security projections has been skewed in favor of a particular proposal. If this is the case and the Social Security actuaries have either adopted inappropriate assumptions or used inappropriate assumptions recommended by a third party without a suitable disclaimer, it is incumbent on the actuarial profession to let the public know about it. On the other hand, if the Social Security actuaries have acted properly, they should be given a vote of confidence.

I do not see such an investigation as a "witch hunt" against the Social Security actuaries, but rather as an essential process to maintain the high regard in which actuaries are held by those outside the profession.

Sincerely,

Douglass C. Borton, MAAA

cc: Mr. David Langer. MAAA