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News Items, by Subject

Actuarial - funding of pensions

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'Hibernation' Approach Recommended to Wait Out High Demand for DB Plan Derisking Transfers
"[G]rowing pressure on insurers' capacity to absorb more pension risk transfers (PRT) from an upswing in plan terminations is expected ... to continue and be 'more widespread in the near future.' ... So how should DB plans proceed that are still seeking to remove PBOs from their balance sheets -- or are still responsible for reduced pension plans remaining with non-standard features after partial derisking?" (HR Daily Advisor)
De-Risking: Options Available to Reduce Your Pension Plan Footprint
"The least costly de-risking solutions generally start with risk retention options where the focus is more on plan design modifications. Costs escalate as one moves along the de-risking spectrum away from risk retention. A lump-sum window would generally be more costly relative to making a one-time plan design change. A third-party risk transfer such as an annuity purchase would generally require the largest cash commitment from a plan sponsor." (Milliman)
[Opinion] Inspiring Trip to Columbus Brings Hope for Multiemployer Solution
"[H]undreds of activists headed to the Joint Select Committee on the Solvency of Multiemployer Pension Plans' hearing ... The hearing was held in Ohio because thousands of workers and retirees in the state would be devastated by reduced pensions, and hundreds of employers could be forced into bankruptcy." (Pension Rights Center)
CBO Preliminary Analysis of S.2147, the Butch-Lewis Act of 2017, as Introduced
"The estimated budgetary effects are highly uncertain because several key aspects of the legislation are broadly described ... CBO [previously] provided a preliminary and partial analysis ... that the bill would probably increase deficits by more than $100 billion over the 2019-2028 period. Under some interpretations of the bill language, however, few plans would qualify for loans and assistance, resulting in federal costs that would be substantially less than $100 billion." (Congressional Budget Office [CBO])
Present Consequences of Unfunded State Government Pension Liabilities and Ways Forward
"State governments with large unfunded pension liabilities are paying more to borrow from capital markets than are other states, according to [a paper by] Chuck Boyer of the University of Chicago Booth School of Business.... He asks two questions: [1] how are state governments' borrowing costs affected by unfunded pension obligations? and [2] do states with political constraints face higher borrowing costs?" (The Brookings Institution)
Boeing Loses $150M Fight With Spirit Over Pension Benefit Costs
"Boeing Co. couldn't persuade the Delaware Supreme Court to reverse a ruling that left it on the hook for about $150 million in employee benefit costs in a long-running dispute with Spirit Aerosystems Inc. Under the parties' purchase agreement, Spirit never agreed to assume Boeing's liability for pension and retiree medical benefits, a three-justice panel held July 12. Spirit agreed only to credit the Boeing employees' past service with Boeing for the purpose of determining their eligibility for benefits under Spirit's own benefit plans, the justices said in affirming a lower court ruling." [The Boeing Co. v. Spirit Aerosystems, Inc., No. 5, 2018 (Del. July 12, 2018)] (Bloomberg BNA)
[Official Guidance] Text of IRS Notice 2018-60: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for July 2018 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." (Internal Revenue Service [IRS])
New Actuarial Standard Requires Risk Disclosures in Pension Reports
"The intent of this new standard is to require pension actuaries to better educate (and disclose to) employers and pension plan sponsors about the risks facing their plans such as (but not limited to) plan maturity measures.... This alert describes some of the key features of the new standard and our view of the impact on plan sponsors in a question and answer format." (Cheiron)
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, August 2018
"The August 2018 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for July 2018, these assumptions represent no change in the immediate rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])
District Court Affirms Withdrawal Liability Calculations, But Appears to Leave an Opening
"What this opinion specifically does not say, however, is that the [plan's enrolled actuary's] judgment is infallible or indisputable. While the opinion did not address this, that the statute gives withdrawing employers the ability to challenge withdrawal liability calculations suggests that ERISA contemplates that there are, in fact, valid challenges. What might they be?" [Manhattan Ford Lincoln, Inc. v. UAW Local 259 Pension Fund, No. 17-5076 (D.N.J. July 3, 2018)] (Benefits and Compensation with John Lowell)
Thousands of Workers and Retirees Head to Ohio July 12 to Protest Pension Cuts and Pressure Congress to Act
"The rally is being organized to coincide with a field hearing that will be convened in Columbus on Friday, July 13th by members of the Joint Select Committee on the Solvency of Multiemployer Plans. The Joint Select Committee, created by Congress in a bi-partisan budget deal last February, is charged with developing a consensus solution to the multiemployer pension crisis affecting families across America." (Pension Rights Center)
[Opinion] Multiemployer Pension Alliance Letter to Joint Select Committee on the Solvency of Multiemployer Pensions (PDF)
"A well-designed loan program can save the most troubled plans and the PBGC's insurance program.... Interest rate assumption rules did not cause the solvency crisis facing troubled plans and are not an appropriate 'lever' to avoid future crises.... Sound multiemployer plans cannot pay for the administration's PBGC premium proposal without sustaining substantial harm.... PBGC premium increases do not -- and are not intended to -- address the solvency crisis facing troubled plans." (Multiemployer Pension Alliance)
What Explains the Differences in Public Pension Returns Since 2001?
"Investment returns for state and local pension plans varied over 2001-2016 from 6.3 percent for the top quartile to 4.6 percent for the bottom. The variation could be due to differences in asset allocation and/or to the returns by asset class. The analysis found that asset allocation -- in equities, fixed income, and alternatives -- was broadly similar across plans, while asset class returns showed more variation. Therefore, asset class returns turned out to be the primary reason for the disparities in overall returns." (Center for Retirement Research at Boston College)
Funded Status Rises in June by $23 Billion (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans increased by $23 billion during June ... The deficit fell to $118 billion from $141 billion at the end of May due to an increase in the benchmark corporate bond interest rates used to value pension liabilities.... As of June 30, the funded ratio climbed to 92.8%, up from 91.6% at the end of May. The mid-year funded ratio is well above the 87.6% at the start of 2018." (Milliman)
District Court Affirms Use of 'Segal Blend' to Calculate Withdrawal Liability
"[The court] upheld the arbitrator's findings that the use of funding assumptions is not required in calculating withdrawal liability and that Manhattan Ford Lincoln, Inc. failed to demonstrate that the actuary's selection of the Segal Blend rate for purposes of that calculation was unreasonable. This decision is consistent with every other decision handed down in similar cases except for one since 1980 when withdrawal liability became part of [ERISA]." [Manhattan Ford Lincoln, Inc. v. UAW Local 259 Pension Fund, No. 17-5076 (D.N.J. July 3, 2018)] (Segal Consulting)
The Appropriateness of the Current Assumptions Used for Funding Multiemployer Pension Plans (PDF)
"[T]he possibility of using more conservative interest rates for valuing multiemployer plan liabilities has been raised.... [T]he increase in the necessary contributions to meet current funding standards would not be sustainable for either of the plans studied, both of which are currently considered healthy. In fact, a change to a considerably lower discount rate would create a much greater pension crisis than the one that already exists." (Segal Consulting)
DB Endgame Strategies
"A number of factors are resulting in improved defined benefit plan funding. And as plans approach 'full funding,' some sponsors are considering plan termination as an option.... [This article reviews]: [1] the factors/moving parts affecting funded status; [2] (very generally) the effect of recent trends in those factors on plan funded status; [3] and the issues presented by different endgame strategies." (October Three Consulting)
Tax Wrinkle Spurs Pension Funds to Buy More Treasurys
"S&P 500 companies are contributing to pension plans this year at a pace expected to nearly match 2017's level, which at $63 billion was the most since 2003 ... Last year's contributions were spurred in part by companies anticipating changes in the U.S. tax-code overhaul. That and continued contributions this year have been a boon for the Treasury market because pension funds tend to invest in long-dated bonds to match their long-term liabilities." (The Wall Street Journal; subscription may be required)
June 2018 Pension Finance Update
"June was another decent month for pension sponsors, rounding out a solid quarter and first half of 2018 for pension finance ... Both model plans ... held steady again last month -- traditional Plan A gained 1% while the more conservative Plan B was unchanged during June. For the year, Plan A is 6% ahead, while Plan B is up 1%:." (October Three Consulting)
FAS87 ASC715 Discount Rates and Moody's Rates, Updated June 29, 2018
An unofficial monthly report as of June 29, 2018, of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans). (David Rigby, via BenefitsLink Message Boards)
The Multiemployer Pension System: An Analysis of Cohort Equity (PDF)
10 pages. "Cohorts that retired before 2003 will experience, or have already experienced, an average [internal rate of return (IRR)] in excess of 9%. As a result of contribution increases without commensurate benefit increases, a dramatic decline in IRR began in 2003. For a typical plan, the marginal IRR ... declined from over 6% in 2002 to about 2% in 2015.... A plan that avoids insolvency and manages to gradually pay-down its funding deficit could, in the long run, reduce its contributions or raise its benefits, leading to a rebound in the marginal IRR." (The Pension Analytics Group)
U.S. Public Pension Plan Mortality Assumptions (PDF)
"This study compares the mortality assumptions used for funding purposes by state-based and large-city public pension plans in terms of the annuity factors they produce ... Roughly one-third of the plans had adopted RP-2014 mortality base rates or a variation of them.... While 58% of plans use generational projection, about 37% of plans use static projection and 5% of plans do not project mortality.... Mortality assumptions for teachers tend to reflect longer life expectancies than for other job categories." (Society of Actuaries)
North Carolina Creates Solvency Fund to Pay Down Unfunded Employee Benefit Liabilities
"The Unfunded Liability Solvency Reserve Act creates a reserve that will be funded through several sources, including General Assembly appropriations, overflows from the state's rainy day fund, or savings from refinancing of general obligation bonds. Between pension and health care, the state has $50 billion in unfunded liabilities, $35 billion in health care alone. The solvency fund is believed to be the only one of its kind in the nation[.]" (Pensions & Investments)
The Impact of Alternative Discount Rates on Multiemployer Pension Plan Funding (PDF)
13 pages. "This study uses the latest available Form 5500 data for all multiemployer plans to explore the impact of using alternative discount rates on the multiemployer pension plan system ... The overall funded percentage of the multiemployer system is 73% when measured with current discount rates. This funded percentage falls to 51% if liabilities are determined using corporate bond rates, and to 43% when using 30-year Treasury rates." (Horizon Actuarial Services LLC)
Summary of Enrolled Actuaries Meeting Discussion of the Pension Protection Act: Successes, Shortcomings, and Opportunities for Improvement (PDF)
"PPA assaulted pension funding at the worst possible time ... Funding Relief delayed a return to historical funded status standards ... PPA added several administrative requirements creating time consuming computations with little added value and increased exposure to errors and missed deadlines.... Employer defaults to Section 401(k) and IRA-type arrangements as the path of least resistance these past few years is producing massive waives of retirees with little retirement income security." (H. C. Foster and Company)
Companies Race to Top Off Pension Plans to Capitalize on Tax Break
"Pension contributions made through mid-September can be deducted from income on tax returns being filed for 2017 -- when the U.S. corporate tax rate was still 35%.... With the deadline less than three months away, corporations are preparing to top off their pension plans to take advantage of the beneficial tax treatment. This one-time incentive is helping corporations close a pension funding gap that topped $680 billion for S&P 1500 companies after the financial crisis[.]" (The Wall Street Journal; subscription may be required)
Connecticut Municipal Pensions: The Affordability Gap (PDF)
16 pages. "What has been overlooked ... is the challenge that the state's five largest cities by population -- Bridgeport, New Haven, Hartford, Stamford, and Waterbury -- face in paying for their own retirement benefit promises.... All five of these cities have promised hundreds of millions of dollars in benefits, a promise that is backed, ultimately, by their tax base. With the exception of Stamford, however, they all have weak economies and elevated rates of poverty." (Manhattan Institute)
Catholic Bishop of Providence, Hospital Operators Accused in Pension Lawsuit
"The suits filed in state and federal courts accuse Bishop Thomas Tobin and hospital operators of deliberately underfunding St. Joseph Health Services's pension plan and then lying about the plan's financial condition to beneficiaries and state regulators.... The pension was set up as a 'church plan' ... The federal lawsuit, however, says the plan did not qualify as a church plan at least since 2009, meaning the plan's operators would have been required to meet specific funding thresholds." (Rhode Island Public Radio)
Finance Leaders Show an Appetite for Pension De-Risking
"The passage of the Tax Cuts and Jobs Act is driving how finance executives view their corporate defined benefit pension plans, with 64% of respondents saying they are 'very likely to use the tax savings from the new law to increase funding of our DB pension plan(s).' " (Prudential)
[Opinion] The Pension Train Has No Seat Belts
"This is the base challenge: How can a shrinking group of working-age people support a growing number of retirement-age people? The easy and quick illustration to this question is to talk about the number of workers supporting each Social Security recipient. In 1940, it was 160. By 1950 it was 16.5. By 1960 it was 5.1.... [It] will be 2.3 by 2030." (Mauldin Economics)
[Opinion] The 'Public Pension Crisis' Is a Myth, Part Eight
"The proposed change [to an Actuarial Standard of Practice (ASOP)] would require actuaries to calculate ... a 'defeasement number' for public pension plans. [This] is basically what it would cost, in total, for an employer to close its plan and pay an insurance company to take care of its pension obligations ... [T]his is a meaningless number for almost all public plans, as they are neither closing their plans nor selling them to insurance companies." (National Public Pension Coalition)
Pension Funding Index June 2018
"In May, the funded status of the 100 largest corporate defined benefit pension plans worsened by $2 billion ... The deficit rose to $141 billion from $139 billion at the end of April due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. As of May 31, the funded ratio was unchanged from 91.6% seen at the end of April." (Milliman)
[Official Guidance] Text of IRS Notice 2018-56: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for June 2018 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." (Internal Revenue Service [IRS])
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, July and Third Quarter 2018
"The third quarter 2018 interest assumptions under the allocation regulation will be 2.53 percent for the first 25 years following the valuation date and 2.64 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2018, these interest assumptions represent an increase of 5 years in the select period ... an increase of 0.26 percent in the select rate, and an increase of 0.05 percent in the ultimate rate ... The July 2018 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for June 2018, these interest assumptions represent no change in the immediate rate and no changes in i1, i2, or i3." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] Testimony of U.S. Chamber of Commerce to Joint Select Committee on Multiemployer Pension Plans: Employer Perspectives
"[R]escue legislation is urgently needed. Congress can no longer kick the can down the road.... Our recommendation is for long-term, low-interest loans that will protect taxpayers from financial liability.... [W]hile the PBGC may ultimately need more money, in the form of increased premiums paid by employers, these increases must be evaluated after tools to restore the solvency of these plans are put in place.... [C]omposite plans must be authorized so that healthy multi-employer plans can stay that way." (U.S. Chamber of Commerce)
The Multiemployer Pension Plan Crisis: Businesses and Jobs at Risk (PDF)
15 pages. "The funding problems that currently exist are unprecedented in the more than 70 years that these plans have been in existence. While most of the focus, and rightly so, has been on the catastrophic effect pension plan insolvencies will have on plan participants ... the employers that employ these participants (and in many cases, that employ many more people than just the plan participants) are at extreme risk of being put out of business." (U.S. Chamber of Commerce)
Ninth Circuit's Expansion of Successor Liability May Make Asset Purchases More Costly
"Purchasers can no longer rely on the representations of sellers regarding the funded status of multiemployer pension plans and whether withdrawal liability exists. Under a constructive notice standard, asset purchasers are deemed to have knowledge of facts which reasonable care or diligence would disclose." [Heavenly Hana LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, No. 16-15481 (9th Cir. June 1, 2018)] (Ogletree Deakins)
DB Plan Assets Increase in Q1 While DC Plan Assets Decline
"Corporate defined benefit plan assets rose by $9 billion in the quarter ended March 31, to $3.212 trillion, a 0.28% increase ... Corporate defined contribution plans decreased by $40 billion in the first quarter, or 0.64%, to $6.249 trillion." (Pensions & Investments)
[Official Guidance] Text of Treasury Department Letter Authorizing Benefit Reductions for Alaska Ironworkers Pension Plan (PDF)
"Because a majority of voters identified as eligible by the Plan did not vote to reject the benefit reduction, the benefit reduction is permitted to go into effect. Treasury, in consultation with DOL and PBGC, has issued a final authorization to reduce benefits under the Plan as described in the Application, effective July 1, 2018, subject to the conditions described [in this letter]." (U.S. Department of the Treasury)
[Official Guidance] Treasury Department Notice of Multiemployer Pension Plan Application to Reduce Benefits: Western States Office and Professional Employees Pension Fund
"The Board of Trustees of the Western States Office and Professional Employees Pension Fund (WSOPE Pension Fund), a multiemployer pension plan, has submitted an application to reduce benefits under the fund in accordance with [MPRA].... [which] has been published on the website of the Department of the Treasury ... [C]omments on the application [are requested] from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the WSOPE Pension Fund." (U.S. Department of the Treasury)
Latest Investment Return Assumptions for Public Employee Pension Plans
Chart shows latest distribution of investment return assumptions for over 100 state and local government pension plans. Updated May 2018. (National Association of State Retirement Administrators [NASRA])
Was Kentucky's Pension Bill Legal? Court Will Decide
"Attorney General Andy Beshear says Kentucky's new pension law illegally cuts benefits of public employees and was zipped through the General Assembly in rapid process that violated state law. Gov. Matt Bevin says the bill honors all contract rights of teachers and public employees and is a badly needed step toward dealing with the worst funded public retirement system in the country, with unfunded liabilities officially reported at more than $43 billion." (The Courier-Journal)
Pension Finance Watch, May 2018
"Domestic equity returns in May boosted the Willis Towers Watson Pension Index for its third consecutive monthly increase. Decreasing bond yields partially offset this improvement, but the net effect was still an index increase of 0.6% to 79.3." (Willis Towers Watson)
[Opinion] No, Illinois Hasn't Solved Its Pension Crisis
"[T]he pre-retirement lump sum buyout takes advantage of financially vulnerable people.... [T]he COLA buyout is an invitation to anti-selection.... [It] is not yet clear to what extent the calculation of the savings from these buyouts were the result of genuine actuarial analysis versus a back-of-the-envelope calculation.... [T]he projected savings is a drop in the bucket compared to the overall $130 billion shortfall." (Elizabeth Bauer, in Forbes)
Illinois Budget Bill Features Pension Buyout for State Workers
"Under the bill, current public workers can exchange the 3% compounded cost-of-living adjustments for a lump sum payment of 70% of the value and a 1.5% COLA that is not compounded. Also, vested former workers can opt to receive a lump-sum payment amounting to 60% of the value of their pension balance.... Up to $1 billion in pension obligation bonds would be issued to fund the accelerated pension payments[.]" (Pensions & Investments)
Pension Finance Update, May 2018
"Pension sponsors saw modest improvement in funded status during May, due mainly to higher stock prices. Both model pension plans ... gained ground last month -- both traditional Plan A and the more conservative Plan B improved a fraction of 1% in May. For the year, Plan A is 5% ahead, while Plan B is up 1%[.]" (October Three Consulting)
Most 2018 Calendar-Year Multiemployer Plans Are in the Green Zone (PDF)
"90% of plans are not in critical and declining (C&D) status.... Nearly two-thirds of plans in the survey have a Pension Protection Act of 2006 (PPA '06) funded percentage above 80%, and more than one-quarter of plans in the survey are fully funded on that basis." (Segal)
FAS87 ASC715 Discount Rates and Moody's Rates, Updated May 31, 2018
An unofficial monthly report, as of May 31, 2018, of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans). (David Rigby, via BenefitsLink Message Boards)
California Proposal Would Make Member Agencies Liable for Pension Obligations of Joint Powers Authority
"The California Legislature is considering legislation that would, if enacted, prohibit public agencies that form a Joint Powers Authority (JPA) from contracting out of liability for the JPA's pension obligations.... CalPERS appears to be more concerned with retroactive rather than future application of these JPA financial liability requirements.... CalPERS can already refuse to contract with an employer if neither the state nor a political subdivision is liable for its debts." (Hanson Bridgett LLP)
Pension Funding's 7-Year Itch
"What the [Pension Protection Act (PPA)] actually said was that the original funding shortfall of 2008 would be amortized over seven years as part of the annual funding requirement.... The 2012 credit base that has reduced contributions for many through 2018 will drop out of the 2019 calculation, resulting in a higher contribution requirement even if the funding shortfall doesn't increase next year." (The Principal Blog)
Assessing the Risk of Fiscal Distress for Public Pensions: A Stress Test Analysis of 10 State Funds (PDF)
147 pages. "This paper summarizes the results of a stress test simulation analysis on the largest government pension plans in 10 states under different economic scenarios and assumptions for policymaker behavior.... [S]tates with well-funded pension systems have achieved this result through a combination of fiscal discipline and adherence to policies specifically designed to manage the impact of market volatility in low-return scenarios." (The Pew Charitable Trusts)
[Official Guidance] Text of PBGC FY 2017 Projections Report (PDF)
54 pages. "This year's projections for PBGC's Multiemployer Program show a very high likelihood of insolvency during FY 2025 and near certainty of insolvency by the end of FY 2026. Compared to last year's projections, the risk of insolvency decreases slightly prior to fiscal year 2024 but increases significantly starting in fiscal year 2025. These changes are primarily the result of the largest troubled plan transitioning to a 100% fixed-income portfolio, which eliminates most of the uncertainty of the timing of its projected insolvency date and thus eliminates most of the uncertainty about when the plan will require PBGC financial assistance....

"New results for PBGC's Single-Employer Program are generally consistent with findings of the prior year's report but the financial status of the program is likely to improve faster and reach a higher net surplus position compared to the projections from last year. Recent increases in asset returns and decreases in expected future claims increase the likelihood that the program will reach net surplus a few years earlier than previously projected." (Pension Benefit Guaranty Corporation [PBGC])

State and Local Government Pension Funding: Moving in the Right Direction
"There are over 6,000 public retirement plans in the U.S. with about $3.7 trillion in assets supporting 10.3 million retirees.... Many states and local issuers have implemented some form of change to their pension plans to help improve future funding levels ... Investors should not expect funding levels to return to pre-recession levels in the near-term as most pension funds manage to a 20- or 30-year investment horizon." (BMO Retirement Services)
Pension Deal Removes Potential $180 Million Hurdle in Tops Bankruptcy
"The agreement means Tops no longer would be liable to pay as much as $183 million over 20 years to meet funding obligations to the Teamsters pension fund. Instead, Tops, C&S and the Teamsters pension fund will contribute a total of $15 million that will help replace -- at least in part -- the pension benefits that the warehouse workers would have accumulated since the end of 2013. Those payments likely would be made into a type of retirement account." (Buffalo News)
Private Equity Seeks Second Chance on ERISA Liability Ruling
"Trilantic sued in federal court asking for a ruling that it wasn't an employer in the same controlled group as Angelica Corporation. It claimed the fund was merely a passive investor that acted consistently with that role as a shareholder ... The Trilantic case is pending in a different jurisdiction than the Sun Capital case ... The ultimate issue then comes down to a matter of degree how much control, involvement, or economic benefit does it take to become a trade or business as opposed to a passive investor." (Kaufman & Canoles, P.C.)
[Guidance Overview] Pension and OPEB Underfunded Status of Michigan Local Government Plans under the 'Protecting Local Government Retirement and Benefits Act' (PDF)
"[U]ntil the state treasurer publishes the first set of annual assumptions, considerable uncertainty remains as to what the impact will be on each plan's liability. In fact, it is possible that a particular plan might be considered fully funded under the current actuarial assumptions that are being used for determining contributions to the plan or for satisfying financial reporting requirements, yet be considered underfunded based on new mandated assumptions. This paper aims to help stakeholders of Michigan's many local government pension and other post-employment benefit (OPEB) programs develop informed expectations, based on the range of outcomes that could result from the state treasurer's decisions." (Milliman)
PBGC Director Says Failed Multiemployer Plan Members May Receive Only Fraction of PBGC Minimum
"When asked if the PBGC would be able provide the minimum guaranteed benefit to failed plan members without congressional action, [PBGC Director Thomas Reeder] said 'no,' adding that the PBGC would have to cut it to about one-eighth the minimum benefit, or less.... Reeder said that without help from Congress, propping up the PBGC could cost taxpayers $16 billion over 10 years, and that would only keep the organization going for another 20 years." (Chief Investment Officer [CIO])
Should Fixed Income Derivatives Play a Role in Liability Hedging for Pension Plans?
"Since fixed income derivatives are more capital efficient and flexible than physical bonds, they can play a key role in liability hedging for many corporate and other single-employer pension plans. Derivatives can help plan sponsors hedge interest rate risk more effectively and with fewer assets than a portfolio composed of bonds, freeing up capital to pursue growth investments. At the same time, derivatives can significantly sharpen the precision of the liability hedge, protecting well-funded plans from overall movements in interest rates and from any steepening, flattening, or kinking of the yield curve." (Cambridge Associates)
States Turn to New Tool to Sustain Pension System Funding
"Called stress test reporting, this new practice can show policymakers how adverse economic scenarios could affect retirement system investments and state budgets.... The stress testing model ... also allows states to account for the condition of their economy and tax collections, offering a broad look at the impact of pensions on their overall fiscal health." (The Pew Charitable Trusts)
U.S. Corporate Pension Buyouts Exceed $1 Billion for 12th Straight Quarter
"It is the 12th consecutive quarter of sales exceeding $1 billion and the third year in a row that first-quarter buyout sales exceeded that amount, although it was slightly less than the $1.42 billion in sales during the first quarter of 2017.... The majority of pension buyout sales traditionally take place in the third and fourth quarters." (Pensions & Investments)
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