GUIDES TO PROFESSIONAL CONDUCT (Issued by Authority of the Board of Directors, November, 1969) Professional conduct involves the actuary's own sense of integrity and his professional relationship with those to whom he renders services, with his employer, with other members of the profession, and with the world at large. In all these relationships every member of the profession is concerned with his own behavior and, as the good name of the profession is the concern of all its members, with the behavior of his colleagues. In order to assist the Board of Directors and the Academy in achieving the objectives of the Academy and, more importantly, to guide members of the Academy when they encounter questions of professional conduct as actuaries, the following "Guides to Professional Conduct" have been prepared by order of, and approved by, the Board. As is true of codes of ethics generally, these Guides deal with precepts and principles only. They are not precise rules and are subject to interpretations in relation to the variety of circumstances that occur in practice. Any member wishing advice regarding the application of these Guides to a particular set of facts is urged to consult the Chairman of the Professional Conduct Committee. 1. Professional Duty. a) The member will act in a manner to uphold the dignity of the actuarial profession and to fulfill its responsibility to the public. b) The member will bear in mind that the actuary acts as an expert when he gives actuarial advice, and he will give such advice only when he is qualified to do so. c) The member will not provide actuarial service for or associate professionally with any person or organization where there is an evident possibility that his service may be used in a manner that is contrary to the public interest or the interest of his profession or in a manner to evade the law. 2. Relationship of the Actuary to His Client or Employer. a) Matters will be so ordered that all concerned are clear as to who is the member's client or employer and in what capacity the member is serving his client or employer. 152 Guides to Professional Conduct b) The member will act for each client or employer with scrupulous 3. Nature of the Actuary's Responsibility to His Client or Employer. 4. Calculations and Recommendations. a) The member will customarily include in any report or certificate quoting actuarial costs, reserves, or liabilities a statement or reference describing or clearly identifying the data and the actuarial methods and assumptions employed. b) The member will exercise his best judgment to ensure that any calculations or recommendations made by him or under his direction are based on sufficient and reliable data, that any assumptions. made are adequate and appropriate, and that the methods employed are consistent with the sound principles established by precedents or common usage within the profession. c) If, nevertheless, a client or employer requests the member to prepare a study which in his opinion deviates from this practice, any resulting report, recommendation, or certificate submitted by him will include an appropriate and explicit qualification of his findings. Guides to Professional Conduct 5. Advertising and Relations with Other Members. 153 a) The member will neither engage in nor condone any advertising or other activity which can reasonably be regarded as being likely to attract professional work unfairly, or where the tone, form, and content are not strictly professional. b) The member will conduct his professional activities on a high plane. He will avoid unjustifiable or improper criticism of others and will not attempt to injure maliciously the professional reputation of any other actuary. He will recognize that there is substantial room for honest differences of opinion on many matters. 6. Remuneration. The member will make full and timely disclosure to a client as to all direct and indirect compensation that he or his firm may receive from all sources in relation to any assignment the member or his firm undertakes for the client. 7. Tilles, The member will use a designation dependent upon elective or appointive qualification within the Academy, such as "President," "Member of the Board of Directors," or "Member of the Education and Examination Committee," only when he is acting in such capacity on behalf of the Academy. This statement is submitted on behalf of the American Pension Conference which is composed of more than 800 professional and technical personnel engaged in the development, installation, administration, and funding of retirement plans. The Conference is directed by a Steering Committee elected by the membership of the Conference, assisted by an appointed Committee on Legislation which prepared this statement. the S. 3598, the "Retirement Income Security for Employees Act", covers many topics and some in considerable detail. A careful reading of S. 3598 shows the need for some editing to clarify some of the provisions and more study to test and improve the technical accuracy and feasibility of others. Also, it is possible that certain parts of the Act could be deleted as having no practical value. An example of this is Section 215 Optional Election to Divide Pension Plan. Furthermore, there is substantial uneasiness at having so much of the Act, particularly as it applies to the special problems of fixed-contribution multiemployer plans, left to the Secretary to create through regulation. However, the purpose of this statement is not to deal with these matters of detail and construction, but to concentrate, and briefly, on the principal proposals. widespread. We believe that vesting of pension benefits is desirable and should be more However, in our opinion, the mandatory vesting provision in Title II of S. 3598 places too much emphasis on benefits for service at a young age. The benefits accrued during an individual's early years of employment when his earnings are low are, in our economy, unlikely to be of much value by the time he reaches retirement age. Alternatively, we suggest the "rule of 50" in HR 12272 or some variation thereof makes more sense as a mandatory provision and can be accommodated more readily within the structure of existing plan provisions. Furthermore, it is more helpful to the individual who enters a plan at a mature age when retirement benefits are of more concern. The vesting provision now in S. 3598 would add considerably to the recordkeeping expense of any plan. Much more appropriate would be to require recognition for vesting purposes of service rendered before the effective date of the legislation, especially after the attainment of some minimum age, such as 40, and possibly for only a portion of the prior benefits accrued after such time. Closely related to the vesting provision are the six months and age 21 eligibility requirement, and the remarkably unusual requirement of Section 202(b) that, for the most part, service with the employer need not be continuous. The eligibility requirement of three years and age 30 in HR 12272 seems more appropriate as a general minimum. The 202(b) requirement would seem to make it necessary to maintain a record of anyone who was ever covered by the plan, however, briefly, on the possibility that he might reenter. The expense impact of this provision must be apparent. Also, it is not clear how the liability of the plan on account of possible reentries would be actuarially calculated. The funding requirements of Title I seem to be related to the accrued liabilities produced by the actuarial method and assumptions employed for ongoing plan calculations. We urge, instead, that funding requirements be related to those for benefits vested on the mandatory basis, the same standard as proposed for the plan termination insurance pro 82-079 072 - pt. 3 - 19 2. |