Dear Actuary: What are demographic and longevity risks?

Longevity and demographic risks are described in Actuarial Standards of Practice (ASOP) 51 as the risk that longevity or other demographic experience will be different than expected. This report, organized as a response to a question by a hypothetical plan sponsor, titled “Dear Actuary,” provides more information on the topic for public pension plans. It takes a closer look at the different types of actuarial assumptions and the associated risks. The answer covers the basics behind the following assumptions: mortality, withdrawal, disability, and retirement.