View from the Top: Jeff Wadle

By Alan Stone • April 10, 2018 • 0 Comments

This inaugural “View from the Top” article features Jeff Wadle, an actuary at Greenspan & Associates, Inc. in California. Jeff is arguably the biggest contributor to the ACOPA listserv. Recently he was kind enough to answer some questions regarding his vast knowledge and how he goes about answering posted questions in such a comprehensive way.

Q: Do you answer the questions off the top of your head or do you have to look up sections from the code?

A: Many times, I might know – or think I know – the answer off the top of my head. But I will still often look it up in the law or regulations. I usually do this because I always prefer to explain the reasoning of my answer and not just assume my answer needs no justification. I also would like the questioner to understand the reasoning so they can apply that to other questions and not have to just rely on others telling them the answer in the future. Of course, this is one major cause of my responses often being long – explaining the reasoning. And sometimes that off-the-top-of-my-head answer I think I knew turns out to not be quite correct when I actually look at law and regs for reasoning. I do occasionally mention in replies that my initial thought changed upon further analysis, but it is more common than I mention.

Other times, especially with interesting questions, I do not know the answer right away and have to look at law or regs to figure out what I think is correct.

And sometimes I am pretty sure that I know the correct answer but cannot remember exactly where it came from – this is usually if it is from a revenue ruling, procedure, etc. rather than a regulation or law. I am not always going to take the time to track that down – and I am not as organized as some others who have cites always ready at their fingertips. I tend to state my position as somewhat tentative or based on “my understanding” in that case. And hope maybe someone else can provide the correct cite. 

Q: When you were younger, did you ever think about becoming a lawyer? Did you ever aspire to be a major partner at a large firm?

A: Never really much when I was younger – in school or soon afterward. But, as years have passed and it turns out what I do day-to-day is closest to being a lawyer, I wonder whether that might have been the best choice. But the problem with being a lawyer is that then you end up having to interact with other lawyers all day long – I much prefer interacting with actuaries (said only partially jokingly). And I was also not someone who wanted the workload that usually goes with starting with a law firm as a new attorney. 

Q: There is so much ambiguity in the IRS regulations, or at least open to interpretation. No other actuary ever pointed that out to me. WHY?

A: Of course you are exaggerating greatly if you are implying that I am the only one who points out ambiguities. But some of this, I think, is due to a different orientation in answering questions. There is often the technically correct legal answer – which is often not clear at all due to ambiguities – which should be found from actual literal language in law and regulations. And then there is the “practical” answer – which often is some sort of consensus developed by “insiders” at the IRS and private actuaries and TPAs. And that practical consensus answer sometimes seems to bear little relationship to what the law and regs actually say. But the practical answer will often work in practice, as it will be accepted by the IRS if audited. 

Sometimes the practical answer is easy and definitive, so it can be stated without much ambiguity. But the law and reg answer is messy and ambiguous. The practical answer sometimes is one of several possible alternative interpretations of law (although maybe not the best literal one) and sometimes flatly not even a reasonable interpretation at all.

This also related to how much respect you give things like revenue rulings, internal memos and, worst of all, grey book answers. I give them only as much deference as they legally deserve – which is only to the extent they have sound reasoning, while conceding they might provide a good practical answer.

I would think that most other actuaries who provide a lot of replies are fully capable of seeing all the ambiguity in law and regs as I am – it is just that they would prefer to stay with the consensus practical answer and ignore any legal ambiguity. I am sure that I annoy some here as often being the only one willing to challenge the legal validity of a consensus answer. Sort of being the little boy pointing out that the emperor has no clothes.

Q: What will you do when you retire?

A: When I retire, I think I might do a little more poker playing and take it more seriously. I don’t think I could ever be good enough to really compete in big tournaments or high-level cash games, but I might try moving up to mid-level and see if I can still come out ahead. I used to play more often, but less so today. Also am considering perhaps volunteering in some political activities.

Q: Will you miss the listserv when you retire?

A: Of course, I will miss the listserv – probably more than any other part of being an actuary.

Q: Did you have this skill of understanding pension rules right away, or did it take years to develop? Was there ever a topic that you just could not understand?

A: Learning the legal rules is, to a great extent, just taking the time and having an interest in legal interpretation. Since I enjoy that and find I have an aptitude for it, I just tended to become the person at firms I have worked for that specialized in the legal research part of the job. Then, since you spend more time doing it, you learn the rules.

But one thing that really helped me to know a lot of things that otherwise I might not have been as familiar with is the process of drafting volume plans. You really have to delve into a number of laws and regulations that you do not need in day-to-day practice much at all. So that means I sometimes have answers on topics that I have never once had any practical experience in actual administration.

I suppose I may have had an aptitude for legal interpretation from the beginning. But of course, it takes a lot of time to develop. Although I was most skilled in mathematical subjects going into college, I ended up doing social science majors. That might have been an indication of my eventual inclinations.

But maybe I will just relate a story about something I did not understand and took time to develop knowledge.

I did not pass the old EA-2 (the more legal one) my first time. This was because I had not had the time to learn enough and was somewhat arrogant in thinking I could.

My first pension job was a few years out of college, and I only took it because there was absolutely nothing available in my college major (this was during the early ’80s recession). After a couple of years as an actuarial assistant, I figured I should decide whether I might want to stay in the field as a career and try to become an EA. At that first job, we were not allowed to actually look at law or regulations or any IRS guidance – had to only refer to memos explaining them written by the chief actuary. So I knew zero about what they actually said. And the firm did not support – and strongly discouraged – any assistant from taking any exams, wanting you to be a supervisor first. But, after a couple of years, I decided to take EA-1 on my own with no idea of passing it. Just wanted to see what it was like. So I only started studying actuarial math two or three weeks before the exam.

Surprising myself, I managed to barely pass EA-1 after a few weeks of study. The reason was that the actuarial math concepts all fit together and made sense. Once I got the overall concepts, it just all came together for me conceptually. And I did not need hours and hours of study once the overall concept clicked in.

So a year later, I had moved on to my second job at a higher level and a firm where you could actually research law and regs on your own. I had just started doing so, and now wanted to take EA-2 to become an enrolled actuary. Being a bit arrogant from my EA-1 experience, I put off studying until less than a month before the exam.

I was thinking that I could do the same and try to understand the overall concept tying all of pension law together as a coherent whole. And once I got the basic ideas, everything would all make sense. Well, big mistake. There is no overall concept tying everything together. Pension law is a lot of disjointed, contradictory, ambiguous and sometimes nonsensical rules that really do not always work together. If you are relying on seeing some higher theory that everything fits into, you are going to be disappointed. 

After a week of trying to find that missing overall concept, I realized I was in trouble. I tried to cram studying all of pension law into the few remaining weeks, and did not make it. After getting a ‘6’ and barely passing EA-1 after a few weeks of study, got a ‘5’ on EA-2 after a much more intensive few weeks of study.

And the moral of the story is that it just takes TIME to learn all of this pension law. Nothing else is going to substitute for that.

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