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Actuarial - funding of pensions

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New Jersey Credit Rating Cut for 11th Time Under Gov. Christie
"Persistent underfunding of the state's public pension system and weak budgetary position contributed to the rating cut." (Reuters)
Hospital Pension Plans Seek Relief in Supreme Court
"The oral arguments at the U.S. Supreme Court over the ability of religiously affiliated hospitals to treat their pension plans as 'church plans' amounted to a 60-minute catechism on statutory interpretation and legislative history ... Despite lurking questions of agency deference and church-state entanglement, the justices and attorneys on March 27 stuck closely to the question presented by the cases: Must a benefit plan be initially established by a church to qualify as a 'church plan' exempt from [ERISA]?" [Advocate Health v. Stapleton, Nos. 16-74, 16-86, 16-258 (consolidated cases argued Mar. 27, 2017)] (Bloomberg BNA)
Justices Seem Hesitant About Extending ERISA to Church-Affiliated Pension Plans
"By the end of the argument, several of the justices seemed to coalesce around a likely outcome, reflecting an unwillingness to extend ERISA to cover plans that have been treated as exempt by the [IRS] and other federal agencies for 30 years. As a textual matter, each party's position has an obvious weakness, and the justices explored those weaknesses when questioning the advocates." [Advocate Health v. Stapleton, Nos. 16-74, 16-86, 16-258 (consolidated cases argued Mar. 27, 2017)] (SCOTUSblog)
Transcript of Supreme Court Oral Argument in Consolidated 'Church Plan' Appeals (PDF)
74 pages. From opening statement by counsel for petitioners: "Pension plans for religious non-profits have been exempt from ERISA for over 30 years, whether or not a church established the plan. And the contrary holding of the three courts below should be reversed for three reasons. First, the text does not require a church to establish benefit plans for someone else's employees. Second, the government's consistent view, over three decades, has generated enormous reliance interest and warrants deference. And third, affirmance would resurrect the precise problems that everyone understood the 1980 amendment would fix." [Advocate Health v. Stapleton, Nos. 16-74, 16-86, 16-258 (consolidated cases argued Mar. 27, 2017)] (Supreme Court of the United States)
Religious Exemption Confounds High Court
"The justices of the Supreme Court struggled to divine meaning Monday from the omission of two words in a revised law that says religious groups need not face federal employee benefit regulations. Complicating the issue is that a church may be directly involved in the creation and maintenance of a plan, or -- in the case of a church-affiliated hospital, for example -- it may have nothing to do with it." [Advocate Health v. Stapleton, Nos. 16-74, 16-86, 16-258 (consolidated cases argued Mar. 27, 2017)] (Courthouse News Service)
Equity Exposure in Defined Benefit Plans
"Equity allocations among the largest defined benefit plans averaged 56.9% as of Sept. 30, up from 55.2% in 2015 a year earlier and in-line with Sept. 30, 2014, allocations. Looking at equity allocations in periods prior to years when equities decline in at least two consecutive quarters, DB plans have less exposure than they did in 2008 and 2011." (Pensions & Investments)
IRS Requests Input for May Webinar on Minimum Present Value Requirements for Defined Benefit Plans
"The presentation will be posted to the IRS Video Portal in May 2017. The webinar will cover: [1] Final Regulations on IRC Section 417(e) partial annuity distributions; [2] Proposed regulations on other IRC Section 417(e)(3) requirements; [3] Types of benefit payments subject to minimum present value requirements; [4] Application of mortality discounts; [5] Proposed clarification of existing IRC Section 417(e)(3) rules. Email IRS [at] by 5 p.m. ET on April 17, 2017, with any suggestions for this presentation." (Internal Revenue Service [IRS])
[Opinion] Pension Crisis Too Big for Markets to Ignore
"Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.... [In] 1952, the average public pension had 96 percent of its portfolio invested in bonds and cash equivalents. Assets matched future liabilities. But a loosening of state laws in the 1980s opened the door to riskier investments. In 1992, fixed income and cash had fallen to an average of 47 percent of holdings. By 2016, these safe investments had declined to 27 percent." (Bloomberg)
Illinois Governor Vetoes Bill to Help Improve Funding Ratio for Two Chicago Pension Plans
"The measure ... was intended to improve the pension plans' funding ratios to 90% each by 2057 through higher contributions for certain employees and increased city contributions. The bill required that Chicago begin making contributions on an actuarial basis to both pension funds in 2023.... The bill would also have raised payroll contributions for participants of both pension funds hired after Jan. 1, 2017, to 11.5% from 8.5% ... Illinois faces roughly $130 billion in combined unfunded pension liabilities across its five state retirement systems." (Pensions & Investments)
Retirement Assets Total $25.3 Trillion in Fourth Quarter 2016
"Total US retirement assets were $25.3 trillion as of December 31, 2016, up 1.4 percent from the end of September and up 6.1 percent for the year. Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of 2016." (Investment Company Institute [ICI])
[Guidance Overview] MPRA Benefit Suspension Applications: Notes from Meeting of Actuaries and Treasury, PBGC and DOL (PDF)
"The application for benefits suspensions under MPRA represent a significant time and expense for all parties involved. Thus, it is in the best interest of plan sponsors, actuaries, Treasury, and PBGC that there is a high success rate with respect to future MPRA applications. The discussion in this exchange was intended to provide plan sponsors and actuaries with insights about the MPRA application review process with a goal to help plan sponsors make decisions about applying and to increase the acceptance rate for those who do apply." [Editor's note: the meeting was held on Feb. 22, 2017.] (Multiemployer Plans Subcommittee, American Academy of Actuaries)
Western States Office & Professional Employees Pension Fund Seeks Cuts
"The fund's board has proposed a 29% decrease for all participants and beneficiaries, but no reduction below 110% of the PBGC guaranteed benefit for each affected participant. Under the plan, disability pensions are not reduced, and participants who are age 80 or older on Dec. 31, 2017, have no reduction.... The Western States Office & Professional Employees Pension Fund was first certified to be in critical status with the Treasury Department in 2009, and is projected to become insolvent in 2035 if no changes are made." (Chief Investment Officer [CIO])
[Official Guidance] Text of Treasury Department Notice of Multiemployer Pension Plan Application, Opening of Comment Period (PDF)
"The Board of Trustees of the Western States Office and Professional Employees Pension Fund (WSOPE Pension Fund) ... has submitted an application to Treasury to reduce benefits under the plan in accordance with [MPRA].... The purpose of this notice is to announce that the application submitted by the Board of Trustees of the WSOPE Pension Fund has been published ... and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the WSOPE Pension Fund." (U.S. Department of the Treasury)
Fed Rate Hike Isn't Big News for Pension Plans, Yet
"The Fed's .25 percent increase to the federal funds rate directly affects short term interest rates, but not the long-term, high quality corporate bond rates that pension plans are sensitive to. In fact, long-term rates have dropped from about 4.25 percent to around 4.1 percent since the Fed began raising short-term rates in December 2015.... Sponsors would be wise to construct models measuring the consequences to their plan's funding in anticipation of long-term rates rising by as much as 75 basis points[.]" (Bloomberg BNA)
Urban Institute Provides Online Public Pension Simulator
"Covering 14 million state and local government employees, public pension plans typically provide lifetime retirement benefits that are based on years of service and the salary earned near the end of a career.... The public pension simulator shows how much state and local government retirees would receive in pension benefits, how much governments will pay for those benefits, and how costs and benefits would change under various pension reforms. Calculations depend on various user-set assumptions." (Urban Institute)
CalPERS Forced to Declare Southern California Agency in Default of Pension Obligations
"The [CalPERS] Board of Administration [on March 15] declared the East San Gabriel Valley Human Services consortium in default and terminated its contract after it failed to pay more than $400,000 to fund its pension plan.... [P]ension benefits will be reduced by approximately 63 percent for 191 members and 24 percent for six members hired after pension reform went into effect in 2013, effective July 1, 2017, if the consortium fails to pay." (CalPERS)
Text of Application for Benefit Suspensions: Western States Office and Professional Employees Pension Fund
"The Western States Office and Professional Employees Pension Fund application proposing benefit suspensions can be found [on the linked page]. The application is organized by the items specified in Revenue Procedure 2016-27." (U.S. Department of the Treasury)
Public Pension Assets Quarterly Update, Q4 2016
"As of the fourth quarter of 2016 (December 31), public pension assets were a record $3.86 trillion, up approximately 1.3 percent, from $3.81 trillion as reported for Q3 2016....The Federal Reserve reported in March that the combined value of defined benefit plan assets held by state and local governments as of Q4 2016 increased by 5.5 percent, to $3.86 trillion, from $3.66 trillion as of Q4 2015." (National Association of State Retirement Administrators [NASRA])
[Official Guidance] Text of PBGC Interest Rate Update for Valuation and Benefit Payments in Single-Employer Plans, April and Second Quarter, 2017
"The second quarter 2017 interest assumptions under the allocation regulation will be 2.15 percent for the first 20 years following the valuation date and 2.60 percent thereafter.... The April 2017 interest assumptions under the benefit payments regulation will be 1.00 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." (Pension Benefit Guaranty Corporation [PBGC])
Puerto Rico Oversight Board Approves Fiscal Plan with Pension Changes
"[Puerto Rico's Financial Oversight and Management Board] and the government will take 30 days to work out a specific plan to be finalized by June 30, 2017, based on funding existing pension obligations on a pay-as-you-go basis, liquidating assets and using general fund revenues; enrolling all active members and new hires in defined contribution accounts to pay for future benefits; and progressively reducing total pension benefit payments by 10%. The oversight board has projected that Puerto Rico's three main pension plans could run out of money by fiscal year 2018." (Pensions & Investments)
PBGC 2015 Data Book (PDF)
27 pages. This edition of the PBGC Data Book, updated for the PBGC's 2015 fiscal year, contains financial information about the PBGC and the single-employer and multiemployer pension plans for which it provides benefit guarantees, with charts comparing the data to prior years. PBGC is now releasing data in groups, as they become available. The first release includes data in the Summary Tables, Claims Tables and Multiemployer Graphical Supplement. A Multiemployer Supplement includes time series data on participants in plans by zone status (as defined by PPA '06) through 2014. (Pension Benefit Guaranty Corporation [PBGC])
[Official Guidance] Text of IRS Notice 2017-22: Update for Weighted Average Interest Rates, Yield Curves and Segment Rates, March 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) of the Internal Revenue Code.... [T]his 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])
[Opinion] ACOPA Letter to IRS on Proposed Update to Minimum Present Value Requirements for Defined Benefit Plan Distributions (PDF)
"Many plans, especially small plans, do not use a pre-retirement mortality assumption to determine present values.... An update to the Section 417(e) regulations should make it clear that a plan that provides for no pre-retirement mortality in determining minimum present values is considered to be using Section 417(e) applicable mortality rates for those determinations.... The proposal should be revised to make bifurcation available to [Social Security Level Income (SSLI)] options with rules similar to those available for partial lump sum payments under Section 1.417(e)-1(d)(7)." (ASPPA College of Pension Actuaries [ACOPA])
[Opinion] American Academy of Actuaries Requests Guidance from IRS for Valuation of Variable Annuity Plans (PDF)
"[The Academy of Actuaries is requesting] guidance from the [IRS] and Treasury to resolve uncertainties that exist under the current regulations as to how [variable annuity] plans should be valued for minimum funding and Internal Revenue Code Section 417(e) purposes. In particular, [they] request guidance confirming that actuaries can determine obligations for these plans for such purposes at the theoretically correct value, recognizing that future benefit adjustments and the corresponding changes in the underlying asset value offset one another. There have also been questions raised recently about how these plans satisfy various aspects of IRC Section 411[.]" (American Academy of Actuaries)
In Puerto Rico, Teachers' Pension Fund Works Like a Ponzi Scheme
"In Puerto Rico ... the pension funds are so short of cash that money contributed by working teachers basically flows straight out to retirees. None of Puerto Rico's current teachers can expect to get their money back, because the fund is due to run out of money in 2018, long before they retire.... [T]his structure is legal in Puerto Rico because of a complicated series of changes in the law brought about in recent years by the island's financial crisis." (The New York Times; subscription may be required)
The State of State Teachers' Pension Plans
"Teachers' pension plans have always rewarded long-serving veterans at the expense of short-termers. But now, as more and more plans develop shortfalls, states have been imposing cost-cutting measures, and recent research shows that the newest hires are bearing the brunt of the changes, raising questions of fairness." (The New York Times; subscription may be required)
Pension Finance Update, February 2017
"Pension sponsors enjoyed a second month of modest improvement in finances during February on the strength of strong stock markets. Both model pension plans ... gained ground again last month: Plan A improved 1% in February and is now up 2% this year, while Plan B added a fraction and is now up almost 1% total through the first two months of the year." (October Three Consulting)
[Opinion] Attention, South Carolina: Closing a Pension is Never a Good Idea
"South Carolina lawmakers unanimously voted to increase contributions to state pension plans -- a system that supports 1 out of every 9 South Carolinians ... However, ... a last-minute amendment added a stipulation that the plans be closed to new employees once full funding has been achieved.... South Carolina legislators need look no further than the states and cities that have closed their pension systems to learn of the costly ramifications that follow." (National Public Pension Coalition)
Most Employers Interested in Pension Risk Transfer
"8 in 10 employers with a traditional defined benefit pension plan are interested in pension risk transfer (PRT). Since 2014, there has been a significant shift in plan sponsors interest in PRT. Today, 4 in 10 plan sponsors are very interested in PRT, a 10 percentage-point increase from the results of a 2014 Institute study of DB plan sponsors." (LIMRA)
February's Pension Funded Status Declines After Discount Rate Plunges Below 4% (PDF)
"After five straight months of improvement, the funded status of the 100 largest corporate defined benefit pension plans worsened by $6 billion during February ... An 11 basis point drop in the benchmark corporate bond interest rates used to value pension liabilities rendered February's strong investment performance almost meaningless. As of February 28, the funded status deficit of these plans widened to $322 billion from $316 billion at the end of January. The funded ratio fell to 81.5% down from 81.6% during the same time period." (Milliman)
Indiana House Advances Bill for Offering 401(k)-Style Plan to New Teachers
"Under [the proposed] plan, teachers new to the system could choose the traditional hybrid plan or the 401(k)-style account. A teacher's employer would be required to contribute an amount equal to 3 percent of the teacher's salary to the new defined-contribution plan, and teachers could contribute up to 10 percent of their salary. The bill would also allow teachers to change their minds after three years and use the pension-style plan going forward." (Indianapolis Business Journal)
Retirement Plans Under ERISA: A 40-Plus Year Retrospective (PDF)
"Certainly, ERISA imposed significantly greater requirements on employers that sponsored any qualified retirement plan, particularly defined benefit plans.... In retrospect, we should have recognized that placing all of the risk on only one party is not sustainable.... The advent of requiring assumptions based on current conditions rather than long-term expectations introduced a counter-cyclical element in pension funding.... [C]hanges have been reactive rather than proactive. Congress responds to the current crisis rather than developing a long-term plan of attack." [Includes a descriptive historical list of legislation amending ERISA's qualified plan provisions.] (Bryan, Pendleton, Swats and McAllister, LLC)
Illinois Senate Passes Contribution Bill for Chicago Teachers Pension Plan
"The Illinois Senate on [Feb. 28] passed a bill approving additional state contributions to the $9.5 billion Chicago Public School Teachers' Pension & Retirement Fund, totaling $436 million for the next two fiscal years.... The passage of the current bill is dependent on the passage of 11 other bills affecting the state's fiscal 2018 budget. Four of those 11 bills were also passed by the Senate[.]" (Pensions & Investments)
PBGC Provides Financial Assistance to Road Carriers Local 707 Pension Fund
"The full benefit promised to current retirees and beneficiaries in the 707 Fund averages $1,313 per month, but the average guaranteed benefit is $570. Forty-two percent of the 707 Fund retirees and beneficiaries have benefit reductions of more than half, compared to the amount of their promised benefits. Only 7 percent of current retirees and beneficiaries will receive their full plan-promised benefit amount." (Pension Benefit Guaranty Corporation [PBGC])
[Opinion] America's Crumbling Pension Future?
"[T]he biggest problem with all these multiemployer pension plans is they never had proper governance, were raked on fees by Wall Street, and were poorly managed for decades.... And now that the chickens have come home to roost ... retirees seeing their pension benefits being slashed by half or more are rightfully asking for the government to help them." (Pension Pulse)
U.S. Single Premium Pension Buy-out Sales Top $13.7 Billion in 2016
"In the fourth quarter, single premium pension buy-out sales were $5.8 billion, which is level with 2015 sales. This marks the seventh consecutive quarter to exceed $1 billion in sales, a trend never seen since the Institute began tracking sales in the 1980s." (LIMRA)
When Multiemployer Pensions Fail: Teamsters Local 707
"The Teamsters Local 707 pension has gone bust, and it's been taken over by the 'insurer' of last resort: the PBGC.... [In] 1999, Local 707 was 100% funded. The tech bubble -- followed by 9/11 -- ruined that. The trust lost 30% of its assets.... When the 2008 crash came, Yellow Roadway Carrier couldn't make its payments.... Yellow Roadway was allowed to skip its pension contributions for 18 months. When the company started paying again, it was at 25% of the previous rate. The fund began to topple, with roughly 700 workers paying into a fund supporting more than 4,000 retirees. Local 707's fund pays out $48 million a year -- and takes in $7.5 million in contributions[.]" (STUMP)
The Impact of Rising Interest Rates on Defined Benefit Plans: The Return to the Overfunded Plan (PDF)
"[F]or every 100 basis points increase in interest rates, plan liabilities are reduced by 12-14%, while Target Normal Cost (TNC), the cost of providing a year's worth of new benefits, is reduced by 14-16%. For a plan with $10M in liabilities and a TNC of $500K, rates moving from 5.5% to 6.5% will reduce liabilities by $1.2-1.4M and TNC will decrease by $70-80K. Amortizing the liability reduction over 7 years will reduce the employer's Minimum Required Contribution by $190-220K." (Pentegra Retirement Services)
[Opinion] ERIC Comments to IRS on Update to Minimum Present Value Requirements for Defined Benefit Plan Distributions
"We ask the IRS to also keep in mind that changes it may view as relatively minor or clarifying come with substantial costs to plan sponsors and their service providers. Administrative systems and benefit calculation programs need to be updated, plan documents need to be reviewed and potentially modified (largely without the possibility of the assurances of a favorable determination letter), and employee communications need to be prepared. Additional funding requirements and increased PBGC premiums also need to be considered." (The ERISA Industry Committee [ERIC])
In Puerto Rico, Pensions' Decline Pits Retirees Against Lenders
"As Puerto Rico attempts to sort out its tangled financial web, retirees may face bigger cuts than those in past U.S. municipal insolvencies ... Public pensions ... owe $45 billion in benefits ... [T]he pensions have almost no cash and a nearly 100 percent funding shortfall that is thought to be the largest ever for comparably-sized U.S. public pensions. Paying pension benefits out of the island's general fund, on a pay-as-you-go basis, could cost Puerto Rico $1.5 billion a year." (The New York Times; subscription may be required)
American Academy of Actuaries Response to PBGC Request for Information on Alternative Two-Pool Withdrawal Liability Methods (PDF)
10 pages. "The primary risk to participants is that the two-pool arrangement will result in the plan being less well-funded over time than it would have been if some other course of action had been followed within a typical arrangement.... The risks to new pool employers are primarily the result of possible uncertainty regarding certain aspects of the two-pool arrangements, particularly as it relates to the extent to which the pools receive separate treatment and in regard to the extent to which a two-pool arrangement can include favorable provisions that apply in the event of a future mass withdrawal." (Multiemployer Pension Plans Subcommittee, American Academy of Actuaries)
Detroit Mayor Proposes Trust Fund to Cover Future Pension Payments
"Under the plan, fund deposits and interest earnings would total $377 million by the end of fiscal 2023 ... Detroit, which exited the biggest-ever municipal bankruptcy in December 2014, has already set aside $70 million for the higher pension payments. The court-approved bankruptcy exit plan had projected city pension payments to spike to $111 million beginning in fiscal 2024 after years of minimal or no payments by the city. But a subsequent actuarial analysis pegged the payment spike at $200 million or more." (U.S. News & World Report)
[Opinion] American Benefits Council Comment Letter to IRS on IRS Notice 2016-67, Rules for Implicit Interest Pension Equity Plans
"We see no basis under the law for treating the assumption for pre-retirement mortality as part of the interest crediting rate subject to the market rate rules.... If implicit interest is not made subject to the market rate rules: [1] We urge the IRS to issue prospective guidance confirming this, so that the uncertainty is resolved. [2] In this guidance, we ask the IRS to approve any reduction based on the contrary interpretation for all purposes (including qualification, funding, and benefit restrictions), provided that the reduction is voided prospectively within a reasonable specified period after the issuance of the guidance (such as six months). [3] There would need to be anti-cutback relief to permit any prior reduction to be voided. Because a market rate can in many instances be lower than a non-market rate, we would need this anti-cutback relief. [4] The guidance should state that the voiding of the prior reduction would not require a 204(h) notice." (American Benefits Council)
Large Cash Flows Change the Dynamics of a Pension Plan
"One feature of the maturation of the pension sector is that benefit payments have become a bigger consideration for many plans. Not only is there the administrative effort of ensuring cash is on hand each month to make the payments, but there's also a change in the dynamics of the plan itself." (Russell Investments)
Investment Return Volatility and the Los Angeles Fire and Police Pension Plan (PDF)
51 pages. "[This report examines] the potential implications of investment return volatility for the Los Angeles Fire and Police Pension Plan (LAFPP) ... one of five plans [selected] to analyze in detail.... [If] LAFPP's investment-return assumption is approximately correct over the long run, the plan has very little risk of becoming severely underfunded in the next thirty years, even if investment returns vary significantly from year to year.... Under plausible alternative investment-return assumptions, the risks of severe underfunding remain small but the city's contribution risks are greater." (Rockefeller Institute of Government)
PBGC Adds Credit Deterioration, Cash Flow Decline to Early Warning Factors It Monitors
"The federal pension insurance agency has for more than 20 years monitored corporate transactions and events through its Early Warning Program (EWP). In December 2016, the PBGC updated the program's overview on its website and added 'credit deterioration' and a 'downward trend in cash flow or other financial factors' to its watch list.... The new additions may lead to a PBGC inquiry, even if none of the other corporate transaction warning signs listed is present." (
Public Pension Plan Investment Return Assumptions (PDF)
"This brief discusses how investment return assumptions are established and evaluated, [and] compares these assumptions with public funds' actual investment experience ... [A] 25 basis point reduction in the return assumption, such as from 8.0 percent to 7.75 percent, will increase the cost of a plan that has a COLA, by three percent of pay (such as from 10 percent to 13 percent), and a plan that does not have a COLA, by two percent of pay." (National Association of State Retirement Administrators [NASRA])
Multiemployer Retirement Plan Landscape: A Ten-Year Look (2005-2014)
Infographic summary of the report. "The [full] report covers both defined benefit (DB) and defined contribution (DC) plans using data from Form 5500 Annual Reports filed with the [DOL], with 2014 being the most recent information currently available. The report analyzes key trends in demographics, cash flows, and investments for defined benefit and defined contribution plans over the ten-year period from 2005 through 2014, and will help trustees, consultants and policy makers gain a better understanding of these plans and their environment." (International Foundation of Employee Benefit Plans [IFEBP])
Credit Easing, Regulation Put Plans on Critical List
"U.S. corporate defined benefit plans have been closing and freezing benefit accruals for decades, with a number of industry experts pointing to the very regulations meant to protect them as a top contributing factor. But the flood of cheap money unleashed by central banks' quantitative easing efforts to combat the global financial crisis has only added to the pressures that corporate, as well as public, plan sponsors face[.]" (Pensions & Investments)
CalPERS Passes Risk Mitigation Plan to Further Lower Assumed Rate of Return in the Future
"The new plan puts focus on reducing the investment portfolio's vulnerability to a market downturn but won't go into effect until the fiscal year that starts July 1, 2020. Its implementation will follow the completion of staggered decreases over the next three fiscal years ending June 30, 2020, that will take CalPERS' rate of return to 7% from the current 7.5%." (Pensions & Investments)
Pension Finance Update, January 2017
"Pension sponsors enjoyed a modest boost in January on the strength of higher stock markets and steady interest rates during the month. Both model pension plans ... were up ... Plan A gained a bit more than 1%, while Plan B gained less than 1% ... Discount rates were basically unchanged last month. We expect most pension sponsors will use effective discount rates in the 3.8% - 4.4% range to measure pension liabilities right now." (October Three Consulting)
U.S. Insurers See Opportunity in Unwanted Pension Plans
"U.S. insurers are buying corporate pension plans at a record clip as rising interest rates and all-time high stock-market values give companies the perfect excuse to offload them. Calculating they can make more money from selling companies an annuity to cover the cost of the pension plans and then invest the proceeds in bonds and other securities, insurers are competing to persuade corporate America to sell them their pension risk." (Reuters)
Pension Indicator, January 2017
"Asset prices increased in January as interest rate levels remained essentially unchanged. This caused pension plan assets to generally grow while pension liability levels were essentially unchanged." (Findley Davies; Hartland)
[Opinion] Public Pensions: Actuarial Assumptions and Professional Ethics
"The essential question is this: is there any set of actuarial assumptions for valuing public pension liabilities that would be so bad no ethical actuary could take that assignment? ... [A]lmost always those assumptions are given to the actuaries, when it's a public pension. Sure, the actuaries can make recommendations, and sometimes the real decision-makers will go along with it (or the actuaries give assumptions that the clients want to hear). But the actuaries act, essentially, as really expensive calculators when it comes to public pensions. It seems that the profession has no interest in trying to change that role." (STUMP)
[Official Guidance] Text of IRS Notice 2017-18: Update for Weighted Average Interest Rates, Yield Curves and Segment Rates, February 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) of the Internal Revenue Code. 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])
Jacksonville Police, Fire Unions Reach Tentative Pension Deal
"Police and firefighter union leaders came to a tentative agreement ... with Mayor Lenny Curry that paves the way for Jacksonville to become the first major city in America that offers only 401(k)-style plans to all future employees, and moves closer toward a plan that seeks to pay off the city's staggering $2.85 billion pension debt." (
2017 Starts Optimistically with a Funded Status Improvement (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans improved by $9 billion during January ... The funded status deficit narrowed to $316 billion from $325 billion at the end of December 2016 due to investment gains and relatively flat benchmark corporate bond interest rates used to value pension liabilities. As of January 31, the funded ratio rose to 81.6%, up from 81.1% at the end of December." (Milliman)
Retiree Benefits: A Tale of Two Cities (States)
"Many states' combined costs -- pensions, other post-employment benefits (OPEBs) such as health insurance, and payments on all government bonds -- appear manageable. More worrisome are the eight states with the highest combined costs: Illinois, New Jersey, Connecticut, Hawaii, Kentucky, Massachusetts, Rhode Island, and Delaware. [States with high pension burdens also tend to have high costs for retiree health benefits].... [T]he picture overall [for cities] is a mix of a handful of deeply troubled jurisdictions and many where the costs appear manageable. The eight major cities with the highest total cost burdens range from the predictable -- Chicago and Detroit -- to surprises such as Wichita, Kansas, and Portland, Oregon." (Squared Away Blog, by the Center for Retirement Research at Boston College)
[Opinion] The Pension Monster that Devoured Education
"The retirement fund for teachers, CalSTRS, last week lowered the rate it expects to receive on investments. Gov. Brown's budget calls for $153 million more to offset the rate change.... CalPERS, which covers non-teacher [state] employees, also projects greater funding concerns because of promised pension and healthcare costs. According to [one] report, what school districts must contribute to CalPERS could double in just six years. On top of the troubles for local school districts, last month the University of California Regents agreed to a 2.5% tuition increase, in part, to cover pension costs." (Fox&Hounds)
Text of 2017 Enrolled Actuary Program Booklet: Basic (EA-1) Examination; Pension EA-2 (Segment L) Examination; and Pension EA-2 (Segment F) Examination (PDF)
35 pages. "The EA-1 examination ... covers the mathematics of compound interest and practical financial analysis and the mathematics of life contingencies and practical demographic analysis. The pension (EA-2) examination consists of two segments: The EA-2 (Segment L) law examination ... covers relevant pension laws ... as they affect pension actuarial practice.... The EA-2 (Segment F) examination ... covers the selection of actuarial assumptions and calculation of minimum required and maximum tax-deductible contributions under current pension law, along with the related actuarial mathematics." [Issued Jan. 2017, for May and November, 2017, exams; rev. Feb. 2, 2017] (Joint Board for the Enrollment of Actuaries [JBEA]; American Society of Pension Professionals & Actuaries [ASPPA]; Society of Actuaries)

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