Automatic Enrollment and Choices of Pension Plans: an Experimental Study in Brazil

What are the levers of attractiveness of long-term care insurance that we need to act on? In France, the creation of a 5th branch of Social Security dedicated to autonomy is a significant step forward. However public finances will not be able to assume the costs linked to the loss of autonomy of all our fellow citizens and families will not have all the financial resources to absorb the remaining expenses of their elders. These issues undeniably argue for the use of insurance solutions to support the public authorities. It is therefore essential that we, as actuaries, continue to work on making our long-term care products more desirable and durable. This workshop will be an opportunity to present an overview of the long-term care insurance market, highlighting in particular the issues, practices, market projects and prospects specific to this risk.

Taxation, regional regulations and certain exogenous factors might affect a plan sponsor’s interpretation, approaches and success in achieving sustainability of their defined benefit plan. Rules regarding the design, funding and taxation of most defined benefit plans are regional, typically by country, or perhaps by state or province. The rules usually focus on encouraging sponsorship and participation, and/or ensuring sufficient funding. There are often other goals, such as limiting tax deductions or preventing discrimination by age, gender, pay-level, etc. While they may be well-intended, the rules can often constrain a sponsor’s ability to implement effective, long-term policies that seek to optimize plan sustainability. Layered on top of the general rules are often tax laws that can influence or reward sponsor and participant actions. These incentives, or sometimes disincentives, can lead to sponsor and participant choices that might be counter to a plan’s optimal path to sustainability. In addition, an organization’s approach to plan sustainability could be constrained by exogenous factors, such as: prioritization of short-term financial results diverting from long-term funding; demographic aging if benefit costs (intentionally or unintentionally) rely on intergenerational cross-subsidies; long-term global trends affecting capital market returns, long-term return expectations or inflation experience; and mortality improvements. The paper will examine how these constraints can affect a plan’s sustainability, how a sponsoring organization might better achieve sustainability if unconstrained, and a case study of the United Nations Joint Staff Pension Fund, which operates free of certain constraints that exist for plans operating under regional regulations and/or taxation regimes.