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Actuarial - funding of pensions

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[Opinion] Should Failing Multiemployer Pension Funds Get a Federal Bailout?
"A core challenge is that the financially distressed multiemployer pension plans are in shriveling industries. For example, the United Mine Workers plan has 10 retirees for every active member.... Bailing out pension funds by offering them unpayable loans simply kicks the can down the road and increases future deficits in a non-transparent manner. Worse, this approach could easily spread to public sector retirement plans, allowing them to maintain unsustainable benefit formulas." (The Fiscal Times)
New Mortality Tables for 2018: The Wait for IRS Guidance Is Over
"The new mortality tables will increase liabilities from 3% to 5% for lump sum distributions. For calendar year plans, 2017 would be the last year to terminate a Plan and/or pay lump sums under the old, less expensive mortality tables." (Markley Actuarial)
Five Ideas for Fixing Unionized Workers' Pension Crisis
"[T]he Multiemployer Pension Reform Act was intended to fix the troubled pension system, but it hasn't quite done the job. Lawmakers, as well as major employers such as United Parcel Service, have thrown out proposals for fixing the pension system. Almost all of the proposals call for some sort of loan program for the plans." (Bloomberg BNA)
Latest SOA Analysis Shows Year Over Year Increase in Mortality
"Reflecting this change, SOA stated that 'most 2017 pension obligations calculated using Scale MP-2017 (with a discount rate of 4.0%) are anticipated to be approximately 0.7% to 1.0% lower than those calculated using Scale MP-2016.'... IRS said it intends to (more or less) annually review applicable mortality improvement assumptions as they are revised by the SOA. It seems unlikely -- notwithstanding that the new 2017 SOA scale has been published now (in 2017), before the IRS regulation's 2018 effective date -- that IRS will update its rules for 2018." (October Three Consulting)
Multiemployer Pension Plan Funding Nears Peak Since 2008 Crash
"The interim update by Milliman compared changes in estimated funding levels at U.S. multiemployer defined benefit (DB) plans from December 31, 2016, to June 30, 2017. The aggregate funded percentage for all plans is estimated to have improved to 81% as of June 30 from 77% at the end of 2016, with a multiemployer plan system shortfall reduced by $21 billion." (HR Daily Advisor)
Multiemployer Plan Pension Rescue Bill Proposed
"The bill creates a new agency within the Department of the Treasury called the Pension Rehabilitation Administration (PRA) to make loans to plans and to receive loan payments. The PRA would receive funding from government bonds.... A plan would receive the loan and be required to either purchase an annuity contract for benefits in pay status, or establish a bond portfolio that would match the anticipated payment stream for benefits in pay status. The plan would make interest payments on the loan until maturity." (Cheiron)
[Opinion] Don't Dismantle Public Pensions Because They Aren't 100 Percent Funded (PDF)
"In the last decade or so, state and local policymakers ... have been slowly dismantling public pensions. Why? Because, they argue, pension plans are underfunded and cannot be sustained.... Ability to pay depends on whether an entity can meet its cash flow needs and whether the total assets of the entity -- the public employer -- are a reasonable fraction of its total liabilities." (National Conference on Public Employee Retirement Systems [NCPERS])
PBGC Fiscal Year 2017 Annual Report: Multiemployer Program Deficit Widens; Single-Employer Program Continues to Improve
"[T]he deficit in [PBGC's] insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier. The increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade. PBGC's Single-Employer Insurance Program continued to improve as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities." (Pension Benefit Guaranty Corporation [PBGC])
Treasury Announces Voting Schedule for International Association of Machinists Motor City Pension Plan MPRA Benefit Reductions
"[T]he proposed benefit reductions will now be subject to a vote of participants and beneficiaries of the Plan. Ballots were mailed to participants and beneficiaries on November 16, 2017. The voting period opens November 16, 2017 ... and closes December 7, 2017[.]" (U.S. Department of the Treasury)
[Opinion] Senators Introduce Bills to Save Financially Troubled Multiemployer Plans and Protect Retirees
"These bills set up a new office in the Treasury Department called the Pension Rehabilitation Administration (PRA), which would receive proceeds from the issuance of Treasury bonds. This money would then be lent to financially-troubled plans as long as they meet certain criteria. The Pension Rights Center is particularly pleased that the loans would be used to fully pay the benefits of retirees and that the bill would require plans, which have already been approved to cut benefits under MPRA, to apply for these new loans and if approved, use that money to restore previously suspended benefits." (Pension Rights Center)
U.S. Single Premium Pension Buy-Out Sales Post Record-Breaking Results for Second Consecutive Quarter
"U.S. single premium pension buy-out product sales were $6.4 billion in the third quarter of 2017, a 7 percent increase compared with prior year. This is the tenth consecutive quarter of sales over $1 billion ... Year-to-date, single premium buy-out product sales were $11.9 billion, 47 percent higher than the same period in 2016." (LIMRA Secure Retirement Institute)
Cost-of-Living Adjustments in State and Local Government Pension Plans (PDF)
16 pages, Nov. 2017. "Cost-of-living adjustments (COLAs) in some form are provided on most state and local government pensions.... Considerable variation exists in the way COLAs are designed, and in many cases they are determined or affected by other factors, such as inflation or the condition of the plan.... This brief presents a discussion about the purpose of COLAs, the different types of COLAs offered by government retirement systems, and an overview of recent state changes to COLA provisions." (National Association of State Retirement Administrators [NASRA])
Capital Markets Alone Are Not Likely To Close Pension Funding Gaps
"Plan sponsors could consider funding pension plans now and purchase either long-duration fixed income, utilizing increased liability-driven investment (LDI) strategies, or eliminate their discontinued operations, either partially or entirely through a combination of lump sum programs and buy-outs.... It's possible that waiting to acquire corporate fixed income securities could increase the future cost of supporting pension obligations.... [B]orrowing to fund makes sense on its own merits.... A pension buy-out or other risk transfer transaction with an insurer could also be more beneficial today than in a post-tax reform world." (Prudential)
[Official Guidance] Text of IRS Notice 2017-69: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for November 2017 (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, December 2017
"The December 2017 interest assumptions under the benefit payments regulation will be 0.75 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 November 2017, these assumptions are unchanged." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] The 'Pension Crisis' Is a Myth, Part 6
"The National Institute on Retirement Security (NIRS) calculates that the national average is that for every dollar invested in a pension fund, $2.21 is generated. This money goes directly into local economies through the spending of retirees. Cities and states are actually getting back more money than they spend on public pensions.... The reality is that funding public pensions does not 'crowd out' spending in other areas." (National Public Pension Coalition)
GE and Other $20 Billion Club Members Are Making Some Serious Pension Contributions
"General Electric just announced one of the largest pension contributions on record -- a $6 billion, voluntary debt-funded contribution to be paid in 2018. GE's peers from the $20 billion club (... the 19 U.S. listed corporations with the largest pension liabilities) have been following a similar game plan in 2017." (Russell Investments)
Third Quarter Plan Sponsor Returns Stay Positive with Non-U.S. Equity Continuing to Lead the Way
"Public Plans reported the highest median return, climbing +3.55% for the BNY Mellon U.S. Master Trust Universe, which has a market value of more than $2.0 trillion and an average plan size of $5.4 billion. The BNY Mellon Master Trust Universe reported a one-year return of +11.82%, which surpassed its 3-year annualized return of +6.69% and 5-year annualized return of +8.26%." (BNY Mellon)
Corporate Pension Funded Status Improves by $7 Billion in October (PDF)
"The deficit fell to $266 billion primarily due to a robust investment gain of 1.19% during October.... As of October 31, the funded ratio increased to 84.7%, up from 84.3% at the end of September. Factoring in September's $25 billion gain, the funded status has improved by $32 billion since August 31." (Milliman)
[Guidance Overview] IRS Guidance on Pension Plan Mortality Tables and Funding Methods
"While plan sponsors are liable for accrued benefits without regard to the mortality assumptions, the new tables may result in accelerated contributions to meet minimum funding requirements and may have an adverse impact on plans that are close to the 80% or 60% threshold of the benefit restriction rules. The cost of lump sums also is expected to increase, which makes certain de-risking opportunities (e.g., lump sum windows) more costly. PBGC variable premiums also are expected to increase," (Trucker Huss)
[Guidance Overview] IRS Finally Answers Pension Plan Mortality Questions (PDF)
"While current tables are based on data through 1994, the enhanced tables incorporate data through 2009 and projection tables reflect data through 2013. In general, the tables defined in Notice 2017-60 anticipate that plan participants will live longer and receive benefits over a longer period of time. This will drive up costs for the majority of plan sponsors who can anticipate a 3% to 5% increase in liabilities as a result of the change." (Lockton)
PBGC, Sears Reach Agreement to Further Fund Pension Plans
"The Pension Benefit Guaranty Corporation and Sears Holdings Corporation have reached a new agreement that upon closing provides approximately $500 million in funding for Sears' two pension plans, including contributions already made by Sears since August 2017. The pension plans cover about 100,000 participants. Closing on this agreement should occur in about three months." (Pension Benefit Guaranty Corporation [PBGC])
Accounting for Pensions and Other Postretirement Benefits, 2017 (PDF)
28 pages. "At fiscal year-end 2016, the average discount rate used to calculate the present value of pension obligations decreased to 4.03%, compared with the 2015 rate of 4.33%.... The average projected benefit obligation (PBO) funded status (plan assets/PBO) was 81% at fiscal year-end 2016, a minor uptick from the 2015 level of 80%.... The fiscal year-end 2016 discount rate for other postretirement benefits ranges from 2.84% to 6.63% in the current survey, with an average of 4.04%. At fiscal year-end 2015, discount rates for companies included in this year's report ranged from 3.25% to 6.47%, with an average value of 4.28%." (Willis Towers Watson)
Pension Finance Watch, October 2017
"October's capital market results were beneficial for typical pension plans. The Willis Towers Watson Pension Index increased by 0.5% to 75.3 -- the highest level in over two years. Strong equity returns were the primary influence on this month's outcome." (Willis Towers Watson)
[Official Guidance] Text of Treasury Department Letter Approving Benefit Reductions by International Association of Machinists Motor City Pension Plan (PDF)
"In consultation with the Secretary of Labor and the Pension Benefit Guaranty Corporation, Treasury has determined that the Plan is eligible to reduce benefits under MPRA and that your application satisfies the requirements of subparagraphs (C), (D), (E), and (F) of section 432(e)(9) of the Internal Revenue Code, as added by MPRA." [Letter dated Nov. 6, 2017] (U.S. Department of the Treasury)
Oregon Task Force Identifies Measures to Reduce Unfunded Pension Liabilities by About $5 Billion
"An Oregon state task force is recommending a number of measures including harvesting some of the state's timberland, selling state-owned real estate and privatizing state universities that could result in a combined $4.2 billion to $6.4 billion to reduce the $74.9 billion Oregon Public Employees Retirement Fund's unfunded actuarial liability ... Another idea is to transfer surplus capital held by Oregon's hybrid workers' compensation system above what it needs to pay estimated claims to workers to the pension plan." (Pensions & Investments)
Colorado Governor Proposes Increase in Required Employee Contributions to State Pensions, Cap on COLAs
"[E]mployees would contribute an additional 2% of their salary, totaling 10% for most workers, starting in January 2019, and annual cost-of-living adjustments would be capped at 1.25%, from 2% now for most retirees ... Employer contribution levels would not change." (Pensions & Investments)
[Opinion] Beware of the U.S. Public Pension Ponzi?
"[P]ublic pension funds essentially hide their true funding status by simply choosing artificially high discount rates for future liabilities thus making their present values appear lower than they actually are. It's a clever scam but one that can only persist until the Ponzi runs out of cash.... [T]he median expected return of the 100 largest public pension funds in the U.S. is somewhere around 5.9% based on the asset allocations of those funds.... [But] 83 of the top 100 funds used discount rates in excess of 7%." (Pension Pulse)
2017 Public Pension Funding Study (PDF)
"As of June 30, 2017, the aggregate funded ratio is estimated to be 70.7%, as assets experienced healthy growth. One-third of the plans reduced the interest rate assumptions they use for determining contribution amounts. The difference between the median sponsor-reported discount rate (7.50%) and [Milliman's] independently determined assumption (6.71%) continues to widen, indicating that further reductions in interest rate assumptions are likely." (Milliman)
Text of GAO Report on IRS Update of Mortality Tables for Determining Present Value Under Defined Benefit Pension Plans
"This final rule was published in the Federal Register on October 5, 2017. It was received October 4, 2017, and has a stated effective date of October 5, 2017. Therefore, the final rule does not have the required 60-day delay in its effective date. However, IRS stated that the final rule applies to plan calendar years starting on January 1, 2018, and later.... With the exception of the 60-day delay in effective date requirement, our review of the procedural steps taken indicates that IRS complied with the applicable requirements." [B-329474, Oct. 13, 2017] (U.S. Government Accountability Office [GAO])
Pension Finance Update, October 2017
"The big story for pension sponsors in 2017 so far is the remarkably steady increases in stocks, which have gained ground every month this year, overcoming interest rates that continue to flirt with historic lows. October saw a continuation of this pattern, improving the funded status for both model ... Traditional Plan A improved 1% last month and is now up more than 4% for the year, while the more conservative Plan B improved a fraction of 1% in October and is now ahead 1%-2% through the first ten months of 2017." (October Three Consulting)
FAS87 ASC715 Discount Rates and Moody's Rates, Updated October 2017
Includes an unofficial monthly report as of Oct. 31, 2017 of Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages, which are used as benchmarks by some corporate pension plans. (David Rigby, via BenefitsLink Message Boards)
CalPERS Identifies Income Sources of Public Employee Pensions
"The CalPERS Pension Buck illustrates the sources of income that fund public employee pensions. Based on data over the past 20 years ending June 30, 2017, for every dollar CalPERS pays in pensions, 61 cents comes from investment earnings, 26 cents from employer contributions, and 13 cents from employee contributions. In other words, 74 cents out of every public employee pension dollar is funded by CalPERS' own investment earnings and member contributions." (CalPERS)
[Guidance Overview] SOA Mortality Improvement Scale MP-2017 Released
"Since the updated scale reflects more recent experience, it is likely a better estimate of future improvement than scale MP-2016, and with it comes the added benefit of lower liabilities. Sponsors who finalized accounting results earlier in the year may receive requests from auditors to quantify the effect of the new scale." (Cowden Associates, Inc.)
[Opinion] Coping with the Public Employee Pension Albatross
"Only a few years ago, opponents of pension reform disparaged reformers by repeatedly asserting that pension costs only consumed 3% of total operating expenses. Now those costs have tripled and quadrupled, and there is no end in sight. What can local elected officials do? The short answer is not much. At least not yet." (PensionTsunami)
[Opinion] Pension Pursuit: How State and Local Governments Are Underfunding Pension Obligations
"Play the game of Pension Pursuit and see how state and local governments are underfunding pension obligations by trillions of dollars. This five-part animated video series is based on Hoover Institution Senior Fellow Josh Rauh's research on the vast underestimation of public pension liabilities and gives insight into the hidden debts the next generation will face." (Policyed)
Employer Withdrawal Liability: Something to Consider Before Signing a CBA
"The CBA will likely not refer to withdrawal liability and the union is under no legal obligation to disclose this potential liability to you prior to signing the CBA.... Does the CBA require contributions to be made to one or more defined benefit pension plan(s)? If so, what is the funding status of the pension plans for which you would be obligated to contribute to under the CBA? ... Does the plan provide for a free look period? ... Will the union provide any indemnification for withdrawal liability?" (Graydon)
Power Up Your Defined Benefit Plan (PDF)
"Low investment returns will likely pose a challenge to many pension plans in the years to com ... [I]nvestors may need to consider adjustments to their asset allocation strategy in an effort to drive expected returns closer to objectives over the coming market cycle.... This paper discusses ... ideas for potentially maximizing investment outcomes for liability-driven and total-return investors. [The authors] also address incremental changes that can be made for additional savings and to enhance returns." (NEPC)
OPM Finalizes Long-Desired Change to Postal Worker Pensions
"The U.S. Postal Service will finally see its payments into the federal employee pension account calculated using assumptions from its workforce specifically, rather than the federal workforce as a whole.... A 2017 USPS IG report estimated USPS' FERS liability has been overestimated by $4.1 billion due to a growing gap between the salary of the average postal worker and the salaries of other federal employees, among other factors." (Government Executive)
Sun Capital Redux: Private Equity Fund Seeks Declaratory Judgment on Controlled Group Liability for Portfolio Company's Pension Liabilities
"A complaint filed by Trilantic Capital Partners ... shows that multiemployer pension funds and the PBGC are continuing to pursue a strategy of asserting controlled group liability claims against private investment funds, and previews some of the facts that private investment funds may try to use to rebut those arguments. The complaint seeks a declaratory judgment holding that Trilantic is not in the 'controlled group' of one of its portfolio companies[.]" [Trilantic Capital Partners IV, LP v. United Food & Comm'l Workers Int'l Union-Ind. Pension Fund; New England Teamsters & Trucking Ind. Pension Fund; Nat'l Retirement Fund; and PBGC, No. 17-7485 (S.D.N.Y., complaint filed Sept. 29, 2017)] (Proskauer Rose LLP)
[Guidance Overview] IRS Mandates Use of New Mortality Tables for 2018 -- Unless You Don't Want To!
"[In] an altruistic maneuver by the IRS (two words not often read in the same sentence) an option to defer adoption until 2019 was added to the final regulations. The stated reason for this was lack of lead time, though the proposed change has been communicated extensively since the Society of Actuaries released their latest mortality report in 2014." (The Principal Blog)
Mortality Improvement Scale MP-2017
"The Retirement Plans Experience Committee of the Society of Actuaries (RPEC) is pleased to present this annual update to the RPEC_2014 model and its corresponding mortality improvement scales. This new version of the model reflects historical U.S. population mortality experience through 2015. For clarity, the updated mortality improvement scale based on this 2017 version of the model is called Scale MP-2017.... Also [included] is a new version of the RPEC_2014 model, entitled RPEC_2014_v2017. This Excel-based implementation tool can be used to generate alternate improvement scales using the RPEC_2014 methodology." (Society of Actuaries)
[Guidance Overview] IRS Finalizes Mortality Table Guidance for 2018
"The regulations generally track IRS's December 2016 proposal, but they do include some important transition rules not in the proposal.... Also new in the final regulations: [1] Special rules for multiple employer plans. [2] The ability to determine credibility of experience (to qualify a substitute mortality table) based combined data for both genders (from which gender-specific tables would then be constructed). [3] Special rules for continued approval (under the new rules) of substitute tables approved under the old rules." (October Three Consulting)
[Official Guidance] Text of OPM Final Regs: Federal Employees' Retirement System; Government Costs
"The Office of Personnel Management amends this rule to clarify the manner OPM uses for determining a supplemental liability under the Federal Employees' Retirement System (FERS), and to clarify the process by which the U.S. Postal Service (USPS) and the U.S. Department of the Treasury may request reconsideration of OPM's valuation of the supplemental liability. The rule also clarifies the employee categories OPM uses to compute the FERS normal cost percentages. The rule also amends the definitions of actuary, present value factor, and actuarial present value to ensure these definitions are uniform and appropriate." (Office of Personnel Management)
Funded Status Improves for Defined Benefit Plans
"The most notable survey finding this year is the increase in over-funded plans, with nearly one in five (19%) respondents reporting a funded status of more than 101%. This is a 10% increase from 2016, making it the highest funded status since the survey's inaugural year in 2011. Of these plans, 65% invest in alternatives and 55% use liability-driven investment strategies, with a majority of users implementing with derivatives." (NEPC)
Loans by Federal Government to Multiemployer Plans Could Cost $7 Billion
"Advocates for multiemployer plans are putting the finishing touches on various federal proposals that would offer low-interest financing for struggling plans.... 55 pension funds designated as critical and declining with a combined $28 billion in net assets at the end of 2015 would be eligible for credit assistance. Under one proposal, the gross loan disbursement would be $23.3 billion payable over five years, with the favorable loan terms costing taxpayers $7.2 billion, without factoring in default risk, the researchers said; a one-third default rate on those loans would cost $10.9 billion." (Pensions & Investments)
[Opinion] American Academy of Actuaries Letter to Missouri State Retirement Board on Terminated-Vested Member Buyout Program (PDF)
"We appreciate the need to manage the cost of [Missouri State Employees' Retirement System (MOSERS)], and recognize that offering members lump sums that are lower than the present value of their annuity benefits has the potential to benefit both the system and the members. We are concerned, however, that MOSERS members may not understand that the methodology used under the buyout program results in lump sums that are substantially lower than would be needed to purchase the forsaken annuity benefits in the private market." (American Academy of Actuaries)
[Guidance Overview] IRS Issues Final Rule on Mortality Tables for Defined Benefit Plans
"The updated mortality tables reflect improvements in mortality since the last issuance of the tables in 2008 and, thus, may increase minimum funding obligations for sponsors of defined benefit plans. Increased longevity built into the updated tables would also boost lump sum payouts for most defined benefits plans, causing larger cash outflows from the plans. The final rule is generally applicable for plan years beginning on or after January 1, 2018. However, in certain circumstances the final rule provides a limited one-year transition period until January 1, 2019." (Nixon Peabody LLP)
Teamsters Pension Plan Warns Thousands of Beneficiaries That the Checks May Get Smaller
"The Western Pennsylvania Teamsters fund -- which has about 48 cents for every $1 in benefits it owes to retirees and workers -- notified participants in April that it is considering cutting benefits in order to insure that the fund doesn't become insolvent. The plan is expected to pay out nearly $129 million in benefits this year but will collect only about $54 million in contributions. If the current level of benefits is maintained, the fund is projected to run out of money in 2028." (Pittsburgh Post-Gazette)
Supreme Court Broadly Interprets Scope of ERISA's Church Plan Exemption (PDF)
"As the Court itself noted, the decision does not address other issues raised by the employees, such as whether the hospitals even 'have the needed [degree of] association with a church' to invoke application of the exemption at all. Instead, technically, the decision only resolves the question of whether those hospitals can rely on the exemption regardless of who established their pension plans in the first place." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 5, 2017)] (The Wagner Law Group, via Plan Consultant)
How Have Municipal Bond Markets Reacted to Pension Reform? (PDF)
14 pages. "This brief ... finds that for both state and local governments, higher unfunded pension liabilities as a percentage of government plan sponsor revenues, has a statistically valid relationship to increased municipal bond borrowing rates, relative to Treasuries. This analysis also finds that previous pre-recession findings remain the same. This work ... highlights the need for state and local officials and other stakeholders to continue to analyze both short and long-term costs, holistically, as the decisions and financial management in one priority area can clearly impact the costs in another." (Center for State & Local Government Excellence)
Managing an Overfunded Defined Benefit or Cash Balance Plan
"[One] option for a small, closely held family company, is to add more family members as participants in the plan. Since the plan is already overfunded, additional funding isn't needed, and the money goes back to the family as benefits instead of to the government as taxes.... A profitable option could be to sell the company with the significantly overfunded plan to a company that has an underfunded pension plan. Following acquisition, the pension plans can be merged so the overfunding of one plan compensates for the underfunding of the other. Companies approaching bankruptcy, but with overfunded pension plans have applied this method successfully." (QBI)
Multiemployer Pension Funded Status Improved in First Six Months of 2017 (PDF)
"Multiemployer plan funding as of June 30, 2017, is nearing its best position since the market collapse of 2008. The aggregate funded percentage for multiemployer plans is estimated to have improved to 81% as of June 30, 2017, compared with 77% as of December 31, 2016, reducing the system's shortfall by $21 billion. The estimated investment return for our simplified portfolio for the first six months of 2017 was about 7.6%, far outpacing plans' investment return assumptions. The gap between the funded percentages of critical versus noncritical plans continues to widen." (Milliman)
Alaska Ironworkers Pension Trust Withdraws Application fo MPRA Benefit Suspension (PDF)
"[T]he Plan hereby withdraws its Application filed on March 30, 2017 for approval of benefit suspension under [MPRA]. The Plan fully intends to file with the Treasury Department a new application for approval of suspension of benefits under the MPRA on or before December 29, 2017." (U.S. Department of the Treasury)
New IRS Mortality Tables for 2018 Bring Host of Concerns for DB Plan Sponsors
"Plans with primarily white-collar populations with longer average longevity may understate their liabilities ... while medium and small plans that have generally lower life expectancy among participants may be locked in to rates that, on average, overstate their plan liabilities.... In order to delay use of the new tables for 1 year, a plan sponsor must conclude that for 2018 use of the new tables would be administratively impracticable or would result in an adverse business impact that is 'greater than de minimis,' and it must notify the plan's actuary of its intent to use the prior mortality tables." (HR Daily Advisor)
Kentucky Pension Crisis: Governor's Proposal Would Move Workers to 401(k) Plans
"The plan protects the benefits of current retirees ... But it cuts benefits of current employees and teachers in some ways. And many leaders of employee and retiree groups raised the prospect that if the changes become law they would be challenged in court -- particularly over a plan that would move current teachers and most public employees into 401(k)-type plans after 27 years of service." (The Courier-Journal)
[Official Guidance] Text of PBGC Premium Rates for 2018
"The per-participant flat premium rate for plan years beginning in 2018 is $74 for single-employer plans (up from a 2017 rate of $69) and $28 for multiemployer plans (no change from 2017). The increase in the single-employer rate was provided in The Bipartisan Budget Act of 2015.... For plan years beginning in 2018, the variable-rate premium (VRP) for single-employer plans is $38 per $1,000 of unfunded vested benefits (UVBs), up from a 2017 rate of $34. This $4 increase was provided in The Bipartisan Budget Act of 2015 (BBA 2015). Although the VRP rate is subject to indexing in addition to the BBA 2015 increase, indexing had no effect for 2018. For 2018, the VRP is capped at $523 times the number of participants (up from a 2017 cap of $517). Plans sponsored by small employers (generally fewer than 25 employees) may be subject to a lower cap." (Pension Benefit Guaranty Corporation [PBGC])
[Guidance Overview] IRS Publishes New Mortality Tables, Affecting DB Plan Benefits
"The new mortality table will increase the amount of lump-sum distributions payable by a private sector plan ... by 3% to 5%, depending on the age of the participant, when compared to the lump sum using the table for 2017.... For a retirement age of 65 and a 5.5% interest rate, the lump-sum equivalent of the maximum dollar limit of $215,000 will increase by approximately 3.5% (about a $90,000 increase)." (Cheiron)
2016 Funding Status Update for Multiemployer Plans Seeking MPRA Benefit Suspensions
"Now that 5500 filing season is over and most of the 2016 forms are searchable on the DOL website [this article provides] the status of union plans that have applied for benefit suspensions under MPRA with links to their latest 5500 filing and a focus on the worst funded plan with a reported funded ratio of 2.99% (yes that is the funded ratio and not the RPA interest rate)." (Burypensions)
Participants Seek Final Approval of $98.3 Million Settlement of 'Church Plan' Case with Bon Secours Health System
"Thousands of class members affected by seven Bon Secours Health System Inc. pension plans ... asked a Maryland federal court [on Oct. 13] to give final approval to a settlement that would require the health care organization to provide $98.3 million to bolster funding. The settlement agreement calls for the hospital to contribute $14 million a year for the next seven years to the seven plans at issue ... In addition, the settlement calls for the hospital to pay another $300,000 to benefit about 500 people who have unique circumstances under one of the plans." [Hodges v. Bon Secours Health System, Inc., No. 16-1079 (D. Md., proposed settlement submitted Oct. 13, 2017)] (Cohen Milstein)

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