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Actuarial - funding of pensions

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How Multiemployer Pension Plans Can Extract More from Contributing Employers Than What They Bargained For
"The most significant extra-contractual obligation is withdrawal liability, a statutory exit fee imposed on employers that leave a plan that has unfunded vested benefits. However, even before a withdrawal, an employer's potential liability can also be affected by the plan rules adopted by the MEPP's trustees and other federal laws intended to encourage proper funding of the MEPPs[.]" [Bakery & Confectionary Union & Industry Int'l Pension Fund v. Just Born II, Inc., No. 17-1369 (4th Cir. Apr. 26, 2018)] (Jackson Lewis P.C.)
[Opinion] How to Avert a Public Pension Crisis
"Today's strong economy means policymakers are not under maximal pressure: They can see the problem, but they do not yet truly feel it. That time will come, however, and if public pensions are going to survive over the long term, funding and investment practices must improve, and benefits need to be modernized to flexibly meet the needs of today's public workforce. There won't be a better time to avert the next pension crisis. And there are a few key steps that every jurisdiction should be taking." (National Affairs)
State and Local Government Contributions to Statewide Pension Plans: FY 2017 (PDF)
"[On] a dollar-weighted basis, the percentage of required contributions that was paid by public employers increased for the fifth consecutive year, while pension costs continued to grow at a slower pace than previous years.... Pension spending levels, however, vary widely among states and are actuarially sufficient for some pension plans and insufficient for others." (National Association of State Retirement Administrators [NASRA])
Delta Pilots' Fight with PBGC Is Grounded by Supreme Court
"The U.S. Supreme Court on [June 17] declined to review an appellate court ruling in a case brought against the [PBGC] by Delta Air Lines Inc. pilots ... The plaintiffs ... are claiming the agency earned 'massive investment returns' off the recovered assets, instead of sharing some returns with participants, which they argue constitutes a fiduciary breach." [Lewis v. PBGC, No. 17-5068 (D.C. Cir. Dec. 21, 2018; cert. denied June 17, 2019)] (Pensions & Investments)
When a Pension Stabilization Trust Is 'Too Good to Be True'
"To prepare for and manage significantly increased CalPERS employer contribution rates in the coming years, California public agencies approved the establishment and funding of so-called 'pension rate stabilization trusts.' ... [M]any, if not most, agencies are setting aside funds on an 'irrevocable' basis ... exclusively for pension funding purposes, but with an 'understanding' that they can gain access to these monies for general agency purposes if needed later. Unfortunately, they can't -- and should not -- use these trusts in this way." (Best Best & Krieger LLP)
Actuarial Equivalence and DB Plans
"Philosophically, reflecting current mortality and interest in AE is a reasonable thing to do.... Litigating the issue from one side leaves sponsors trapped unfairly between a desire to bring their assumptions up to date, and anticutback regulations restricting their ability to do so.... Safe harbor regulations allowing for periodic AE updates without anticutback concerns would illuminate this admittedly obscure topic to the benefit of sponsors and participants alike." (The Principal Blog)
Pension Funding Index, June 2019
"In May, the funded status of the 100 largest corporate defined benefit pension plans decreased by $65 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit widened to $210 billion from $145 billion at the end of April due to a sharp decrease in the benchmark corporate bond interest rates used to value pension liabilities. As of May 31, the funded ratio fell to 87.9%, down from 91.4% at the end of April. This is the third largest monthly decline in dollars in the past five years." (Milliman)
[Official Guidance] Text of IRS Notice 2019-40: Weighted Average Interest Rates, Yield Curves, and Segment Rates for June 2019 (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 2019
"The July 2019 lump sum interest assumptions 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 June 2019, these assumptions represent a decrease of 0.25 percent in the immediate rate and are otherwise unchanged...The third quarter 2019 interest assumptions will be 2.92 percent for the first 25 years following the valuation date and 3.07 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2019, these interest assumptions represent an increase of five years in the select period, a decrease of 0.15 percent in the select rate, and an increase of 0.02 percent in the ultimate rate." (Pension Benefit Guaranty Corporation [PBGC])
Lawmakers Take Another Crack at Solving Multiemployer Pension Plan Problems
"[The] House Education and Labor Committee approved H.R. 397 ... The 26-18 vote on June 11 was on party lines. If eventually approved, the measure would help those financially ailing plans with 30-year repayable federal loans to shore up their assets and value, at affordable interest rates. The loans would come from a trust fund in the Treasury Department and plans seeking aid would have to prove the money would keep them solvent and able to provide current benefits." (People's World)
Puerto Rico Pension Deal Scales Back on Planned Cuts to Retiree Benefits
"Government retirees who receive $1,200 a month or less in benefits would be shielded from any reduction under the settlement, up from a $600 threshold previously proposed by the board ... The deal keeps 102,000 pensioners, or 61% of the total number, safe from cuts, compared with 45,000 or 25% in the earlier proposal, according to the retiree committee." (The Wall Street Journal; subscription may be required)
Potential Untapped Value in California's Public Retirement System
"State, county and municipal plan sponsors parlay their own creditworthiness when they issue Pension Obligation Bonds (POBs). If they can issue bonds with an interest ('coupon') rate that is lower than their respective retirement system's assumed rate of investment return, they can immediately lower their expected retirement costs by transferring POB proceeds into the retirement system and paying down their unfunded liabilities. And, if the retirement system's investments return more than the coupon rate, the plan sponsor will have lowered its actual retirement costs with arbitrage profits." (Reed Smith LLP)
Multiemployer Pension Reform Bill Approved by House Education and Labor Committee
"Also known as the Butch Lewis Act, H.R. 397 would establish the Pension Rehabilitation Administration and a related trust fund within the Treasury Department to make loans to multiemployer plans in critical and declining status that are approved by Treasury to reduce benefits, or to plans that are already insolvent but not terminated." (Pensions & Investments)
Group Annuity Market Pulse, First Quarter 2019
"Sales of [$900 Million] of group annuities were placed during the first quarter of 2019. The first quarter of 2019 was active with 20 transactions completed, following a very active fourth quarter in 2018. Significant activity is expected throughout the year, with some large transactions expected in the second half of the year." (Willis Towers Watson)
House Education and Labor Committee Sets Vote on Multiemployer Reform Bill
"The bill, H.R. 397, also known as the Butch Lewis Act, would establish the Pension Rehabilitation Administration and a related trust fund within the Treasury Department to make loans to multiemployer plans in critical and declining status that are approved by Treasury to reduce benefits, or to plans that are already insolvent but not terminated. Treasury would issue bonds to finance the loan program." (Pensions & Investments)
San Diego Must Decide Whether to Continue Legal Fight Over 2012 Replacement of DB Plan with 401(k) Plan
"San Diego City Council members are expected to decide [on June 10] whether to continue fighting for 2012's controversial Proposition B pension cut measure, or give up and join labor unions seeking to invalidate the voter-approved initiative. State courts have ruled San Diego skipped key legal steps when placing the measure on the ballot, and that the city must financially compensate 4,000 employees who don't have pensions because of Proposition B." (The San Diego Union-Tribune)
$60M Settlement Reached in SSM Health Care Corp. Litigation Over 'Church Plan' Status
"The settlement requires SSM Health Care Corp. to fully fund its employee retirement plan for 10 years, deposit $15 million per year in the plan from 2019 to 2022, and make $115 payments to workers who received their retirement savings in a lump sum. The plan's funding status was a point of contention during the case's three years in court, with SSM Health workers saying the plan was underfunded by roughly $813 million due to its official classification as a church-affiliated plan[.]" (Cohen Milstein)
More Pension Lump Sum Cashout De-risking Activity Expected in 2019
"Pension plan sponsors looking for significant cash savings and de-risking opportunities have another favorable environment to pull the participants' lump sum cashout lever this year.... Employers that have previously offered a lump sum cashout to participants should be aware that this doesn't exclude them from pursuing a de-risking program again.... [P]lan sponsors will also want to consider ... [1] Potential increases to contribution requirements; [2] One-time accounting charges that could be triggered; [3] Potential increase to annuity purchase pricing upon plan termination." (Findley)
Defined Benefit Funding Rises Even as Returns Turn Negative (PDF)
"A higher average discount rate lowered liabilities for the 100 largest U.S. corporate defined benefit plans in 2018, but that funding advantage was mostly offset by negative returns for plans with a reporting date of Dec. 31 ... The average return on plan assets for the 100 largest plans plummeted to -3.53% from 12.27% one year earlier, while the average return for plans with a reporting date of Dec. 31 was -4.6%. The aggregate fair value of assets dropped 6.5%[.]" (Willis Towers Watson)
Growing Number of Lawsuits Claim 'Old' Mortality Tables Deprive Participants of Benefits
"Two plaintiffs' law firms ... have now filed seven lawsuits in federal courts ... against the pension plan sponsors -- MetLife, American Airlines, PepsiCo, U.S. Bancorp, Rockwell Automation, Anheuser-Busch, and, the latest, Huntington Ingalls -- as well as against the plans' fiduciaries. The lawsuits typically allege that the plans calculate the amounts of non-single life annuity forms of benefits (such as a joint-and-survivor, preretirement survivor or certain-and-life annuities) using mortality table assumptions that are not reasonable, resulting in lower benefits that what the plaintiffs are entitled to under ERISA." (Groom Law Group)
[Opinion] DB Plan Sponsors Beware: The End of Interest Rate Relief Is Coming
"Low interest rates and the sunsetting of favorable funding rules will create significant increases in contribution requirements in the next few years. Congressional action early this decade protected plan sponsors from feeling the full effect of the current low-interest-rate environment, but that protection is set to phase out starting in 2021. It is critical that defined benefit sponsors understand future expected cash contributions so they can make plans now and avoid unpleasant surprises later." (Pensions & Investments)
Pension Finance Update, May 2019
"Pension finances got clobbered in May, due to falling stock markets and lower interest rates, giving back gains enjoyed earlier in the year. Both model plans ... lost ground last month: Plan A lost 6% and is now down almost 2% for the year, while Plan B lost close to 2% and is now basically flat through the first five months of 2019." (October Three Consulting)
FAS87 ASC715 Discount Rates and Moody's Rates, Updated June 1, 2019
An unofficial monthly report as of March 29, 2019, 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)
America's Largest Musicians' Union Announces Pension Cuts
"Trustees of the American Federation of Musicians and Employers' Pension Fund (AFM-EPF) announced the evening of May 24 that they will apply to the U.S. Treasury for a reduction in member benefits, due to the AFM-EPF's 'critical and declining' status -- meaning the fund is projected to run out of money in 20 years.... Approximately 50,000 AFM members participate in the pension fund, and it's estimated that 20,000 of them will eventually see a reduction in their pension benefits." (National Public Radio [NPR])
[Opinion] Rep. Tim Ryan's Good Idea: Pay Pensions Before General Creditors in Bankruptcy
"On May 20, Rep. Tim Ryan (D-OH) introduced the Prioritizing Our Workers Act of 2019 ... [T]he bill would require that pension benefits owed to workers be honored before other creditors of a bankrupt company are paid back. Such a change to bankruptcy law faces formidable political obstacles and would have substantial effects on financial markets.... Ryan's proposal moves in the right direction from the standpoints of both economics and fairness[.]" (Charles Blahous, Manhattan Institute for Policy Research)
Legal Protections for State Pension and Retiree Health Benefits
"[S]tate laws vary significantly with respect to: [1] The source of protection for employee retirement benefits. [2] The aspects or features of pension benefits that are protected. [3] The participants who are entitled to such protection.... And in each state, these protections vary by source, be it the state constitution, statutes, or court decisions.... Understanding how retirement benefits are protected is crucial for policymakers as they explore options to manage their state's increasing pension costs." (The Pew Charitable Trusts)
Required Return: A Framework for Setting and Achieving Pension Objectives
"[T]he first step toward success in managing pension portfolios is to clearly identify the plan's ultimate objective (e.g., managing the plan in perpetuity, or partial or full termination) and to translate that objective into a measurable goal ... [This article describes] a required return and surplus volatility framework that can assist plan sponsors in shaping their asset allocations to help them achieve plan objectives." (J.P. Morgan Asset Management)
Musicians' Union Pension Fund Preparing MPRA Application to Reduce Benefits
"As of March 31, the pension fund had $1.8 billion in assets and about $3 billion in liabilities, with a funding shortfall of $1.2 billion and a funding ratio of 60%. The plan's actuaries advised the board of trustees in May that it had entered critical and declining status for the plan year that began April 1 and is projected to be insolvent within 20 years." (Pensions & Investments)
[Opinion] The Coming Public Pension Crisis
"Some states like Kentucky are well past the point of no return. Illinois's public pensions are underfunded by $134 billion and some think it's far worse. Rhode Island's locally run pension plans have close to $2.5 billion in unfunded obligations. According to Pew, New Jersey's public pension system is so underfunded that it could run out of money in 12 years. Colorado could deplete its retirement fund assets by 2044 because the state lacks policies to manage volatile financial markets.... The discount rate US public pensions are using is still too high but states are reluctant to lower it for the simple reason that to do so would require increasing the contribution rate[.]" (Pension Pulse)
Public Pension Funding Index, First Quarter 2019
"The estimated funded status of the 100 largest U.S. public pension plans jumped from 67.2% at the end of December 2018 to 71% at the end of March 2019 ... The $185 billion increase in the funded status for the first quarter was the largest quarterly increase since the PPFI began in September 2016. The total pension liability continues to grow and stood at an estimated $5.205 trillion at the end of the first quarter 2019, up from $5.164 trillion at the end of the fourth quarter 2018." (Milliman)
Text of Exposure Draft: Pri-2012 Private Retirement Plans Mortality Tables (PDF)
"Most plan sponsors that update their mortality assumption from the RP-2006 tables to the Pri-2012 tables will experience only a small change in their pension liabilities, usually within plus or minus 1%.... [P]articipants in multiemployer plans did not exhibit significantly different mortality than participants in single employer plans.... When comparing the RP-2006 and Pri-2012 total dataset tables, the life expectancy as of 2019 for an age-65 female remained roughly constant at 87.4 years, while for an age-65 male, life expectancy declined slightly from 85.0 years to 84.7 years." (Society of Actuaries)
[Official Guidance] PBGC Regulatory Agenda, Spring 2019
Proposed Rules: [1] Valuation Assumptions and Methods: Interest and Mortality Assumptions for Asset Allocation in Single-Employer Plans and Mass Withdrawal Liability Determination in Multiemployer Plans; [2] Benefit Payments; [3] Miscellaneous Corrections, Clarifications, and Improvements; [4] Administrative Review; [5] Multiemployer Plan Guaranteed Benefits; [6] PBGC-Approved Arbitration Procedures -- Multiemployer Plans; [7] Release of Official Information and Testimony by PBGC Employees; [8] Benefits Payable in Terminated Single-Employer Plans: Assumptions for Determining Lump Sum Amounts; [9] Examination and Copying of Pension Benefit Guaranty Corporation Records; [10] Filing and Issuance Rules; and [11] Improvements to Rules on Recoupment of Benefit Overpayments. Final Rules: [1] Methods for Computing Withdrawal Liability, and [2] Adjustment of Civil Penalties. (Pension Benefit Guaranty Corporation [PBGC])
Multiemployer Pension Funded Status Falters in 2018 (PDF)
"The estimated investment return for our simplified portfolio for the 12 months ending December 31, 2018, was about -5%, resulting in double-digit losses compared to plans' investment return assumptions. The average investment return assumption dropped from 7.34% in our Fall 2018 study to 7.26%. The aggregate funded percentage for multiemployer plans is estimated to be 74% as of December 31, 2018, down from 81% as of June 30, 2018." (Milliman)
[Official Guidance] Text of OPM Notice: Federal Employees' Retirement System; Normal Cost Percentages
"With regard to the economic assumptions ... used in the actuarial valuations of FERS, the Board concluded that it would be appropriate to assume a rate of investment return of 4.50 percent, a reduction of 0.75 percent from the existing rate of 5.25 percent." (U.S. Office of Personnel Management [OPM])
DB Funding: Pay Now or Pay Later
"Trajectory of funding relief ... Shadow underfunding ... The significance of PBGC variable-rate premiums ... Outcomes under alternative funding strategies ... Varying the earnings rate ... [D]ifferent strategies work better under different versions of an unpredictable future." (October Three Consulting)
Annuity Purchase Update: May 2019 Interest Rates
"During 2018, the spread of annuity purchase prices above the GAAP projected benefit obligation (PBO) remained fairly stable ... From December 2018 to May 2019, as annuity purchase interest rates and yield curve interest rates changed rapidly, the spread narrowed ... [which] may represent an opportunity to complete an annuity purchase at a relatively cheaper price[.]" (October Three Consulting)
[Official Guidance] Text of IRS Notice 2019-35: Weighted Average Interest Rates, Yield Curves, and Segment Rates for May 2019 (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])
[Guidance Overview] PBGC Issues Final Regs on Terminated and Insolvent Plans
"Current regulations require multiemployer plans to send 'notices of insolvency' stating the plan year that the plan is, or is expected to be, insolvent to participants, beneficiaries, the PBGC and certain other interested parties, generally within 30 days after determining that the plan will become insolvent in the current, next following or, in some cases, next 5 plan years. The final regulations modify this rule by providing that multiemployer plans must send the notices of insolvency by the later of [1] 90 days before the beginning of the plan year of insolvency, or [2] 30 days after the date the insolvency determination is made." (Slevin & Hart, P.C.)
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, June 2019
"The June 2019 lump sum interest assumptions will be 1.00 percent for the period during which a benefit is (or is assumed to be) 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 May 2019, these assumptions represent no change in the immediate rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])
[Official Guidance] Text of PBGC Submission to OMB, Request for Comments: Reporting of Contributions Made Under Section 4062(e)(4)(A) Following Substantial Cessation of Operations
"PBGC is proposing a new form series ... An employer or a plan administrator would file Form 4062(e)-01 to notify PBGC of the occurrence of a substantial cessation of operations and request a determination of the employer's liability. An employer would file Form 4062(e)-02 to notify PBGC that it made the elections to pay annual additional contributions to a plan. An employer would file Form 4062(e)-03 to notify PBGC that it paid an annual additional contribution, received a funding waiver from the [IRS], or is no longer obligated to pay additional annual contributions.... [An] employer would file Form 4062(e)-04 to notify PBGC that it failed to pay an additional annual contribution to the plan." (Pension Benefit Guaranty Corporation [PBGC])
Market Volatility Shows Importance of Pension Plan Termination Planning
"The plan termination process itself requires many steps, but there are also steps that a plan sponsor can take prior to beginning a plan termination to be better prepared. Whether plan termination is 1, 5, or 10 years away, planning is critical." (Findley)
California Governor Boosts School Pension Cost Relief Plan
"In addition to using non-Proposition 98 state money to pay part of school rates, the governor's plan would spend $2.3 billion over four years to pay down the school district share of CalSTRS debt, saving more than $7 billion over three decades. With state aid to get over the hump of the last two years of rising CalSTRS rates, struggling school districts would then face rates, under current projections, that drop slightly and remain stable for more than two decades." (Calpensions)
Financial Statement Issues May Make Plan Terminations Problematic Even for Some Overfunded DB Plans
"When a sponsor terminates an overfunded DB plan and buys annuities to settle plan liabilities ... [1] Plan liabilities may have to be written up, reducing net worth. [2] That write-up typically will have to be run through the income statement, generating a (non-recurring) expense and reducing net income. [3] Unrecognized losses may also have to be run through the income statement.... [4] Any 'pension income' generated by the plan surplus will disappear -- reducing future net income. These financial hits -- particularly for earnings sensitive companies -- may make the cost of terminating an overfunded plan prohibitive." (October Three Consulting)
St. Joseph Pension Receiver Seeks ERISA Coverage and PBGC Protection
"In an interim report to Rhode Island Superior Court Judge Brian Stern ..., receiver Stephen Del Sesto said that he asked the [DOL] to have the plan covered retroactively to July 2017, before he became the receiver, and tendered an initial premium payment to the PBGC.... The receiver is also overseeing several lawsuits against the plan sponsors and the Diocese of Providence in federal and state courts." (Pensions & Investments)
De-Risking Pitfalls: Annuity Contracts, Plan Terminations and the Excise Tax on Surplus Assets (PDF)
"Various factors -- the timing between the funding of the annuity purchase and the purchase itself ... the quality of plan data ... or the discovery of additional liabilities or plan assets -- can influence the annuity contract purchase price. To the extent assets remain in a plan following the purchase of an annuity, recovering those amounts can be costly -- and may not even be possible -- unless the sponsor can show the amounts were contributed due to an erroneous actuarial computation or mistake of fact." (Groom Law Group, via Bloomberg Tax Management Compensation Planning Journal)
[Official Guidance] Treasury Department Approval of Western Pennsylvania Teamsters and Employers Pension Fund Application for Reduction of Benefits (PDF)
"In consultation with the [DOL] and the [PBGC], Treasury has determined that the Fund 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.... [No] reduction of benefits can take effect before a vote of the participants and beneficiaries of the Fund with respect to the proposed reduction." (U.S. Department of the Treasury)
Is Your Defined Benefit Plan Ready to Terminate?
"If your plan has a Projected Benefit Obligation (PBO) calculated yearly and the assumptions are conservative and up-to-date, chances are that the plan is financially ready (or nearly ready) when it is funded in a range of 105% to 120% of PBO.... Operational readiness ... means you: Know where to find participants (with high accuracy); Can demonstrate (on an individual level) how each participant's benefit was calculated -- for those not-in-pay status; Have complete beneficiary information; Have identified all potential alternate payees under the plan.... Plan design changes, such as closing the plan to new hires or freezing benefit accruals, are one step in the path-to-termination.... Clean data is key ... Not being able to complete the plan termination process in a timely manner can be costly." (Milliman)
PBGC's Single-Employer Guarantee Outcomes (PDF)
30 pages. "[1] A substantial majority (84 percent) of participants received 100 percent of the vested benefits they had earned under their plans. [2] 16 percent of vested participants had benefits reduced by one or more of the limitations considered in the current study.... 89 percent of reductions in the value of plan benefits were concentrated in just 10 plans. [3] 59 percent of the plans in this study had at least one participant whose benefits were reduced by one or more primary limitation provisions." (Pension Benefit Guaranty Corporation [PBGC])
Pension Finance Update, April 2019
"Pension finances bounced back in April due to higher stock prices and higher interest rates. Both model plans we track gained ground last month: Plan A added more than 2% and is now up almost 5% for the year, while Plan B gained close to 1% and is now up 2% through the first four months of 2019." (October Three Consulting)
Notes from Meeting of Actuaries 'Intersector Group' with IRS, March 7, 2019 (PDF)
6 pages. Topics include: [1] Revenue Procedures 2017-56 and 2017-57; [2] Final Form 5500 Filings; [3] Substitute Mortality Tables (SMTs); [4] Market Rate of Return (ROR) Plans; [5] Multiemployer Technical Correction; [6] Adjusted Funding Target Attainment Percentages (AFTAPs) and Annuity Purchases; [7] Life Expectancy Tables; [8] Retiree Lump Sum Payments; [9] 'New Form 5500'; [10] Plan Factors; and [11] Guidance Plan. (American Academy of Actuaries, Conference of Consulting Actuaries, Society of Actuaries, and ASPPA College of Pension Actuaries [ACOPA])
FAS87 ASC715 Discount Rates and Moody's Rates, Updated May 1, 2019
An unofficial monthly report as of March 29, 2019, 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)
[Official Guidance] Text of PBGC Final Regs: Terminated and Insolvent Multiemployer Plans and Duties of Plan Sponsors
"The Pension Benefit Guaranty Corporation is amending its multiemployer reporting, disclosure, and valuation regulations to reduce the number of actuarial valuations required for smaller plans terminated by mass withdrawal, add a valuation filing requirement and a withdrawal liability reporting requirement for certain terminated plans and insolvent plans, remove certain insolvency notice and update requirements, and reflect the repeal of the multiemployer plan reorganization rules.... This rule is effective July 1, 2019." (Pension Benefit Guaranty Corporation [PBGC])
Report on Funded Status of Rhode Island Locally Administered Pension Plans (PDF)
50 pages. "The funded statuses for 29 of the 35 plans have increased since FY 2012.... Most municipalities met or exceeded their full ARC payments over the most recently reported 4 years. 14 plans have assumed rates of return at or below 7.0% ... [S]ignificant challenges remain: [1] The 35 local plans reviewed carry a combined unfunded liability of approximately $2.5 billion, a slight increase from last year. [2] Twenty-one of the plans are less than 60% funded ... [3] The funded statuses for 5 plans have decreased since FY 2012[.]" (Rhode Island Advisory Council on Locally Administrated Pension Plans)
Increase Expected Return on Pension Assets at the Same (or Lower) Level of Funded Status Risk
"It is possible for pension plan sponsors to increase expected returns on assets by 100 to 300 basis points (1-3%) per year for the same or lower funded status risk.... Step 1: Hedge uncompensated interest rate risk ... Step 2: Replace that same funded status risk with return-seeking synthetic equity ... Step 3: Consider shaping the potential outcomes of the return-seeking assets to reduce funded status volatility." (River and Mercantile Solutions)
[Official Guidance] Treasury Department Notice of Multiemployer Pension Plan Application to Reduce Benefits: Sheet Metal Workers Local Pension Fund
"The Board of Trustees of the Sheet Metal Workers Local Pension Fund ... has submitted an application to reduce benefits under the plan in accordance with [MPRA]. The purpose of this notice is to announce that the application ... has been published on the website of the Department of the Treasury, and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Sheet Metal Workers Local Pension Fund." (U.S. Department of the Treasury)
Withdrawal Liability Assessments: How to Identify Possible Default Defendants
"On preliminary motions, the Judge permitted a trial on a withdrawal liability default claim that a company alleged not to be party to a collective bargaining agreement mandating fund contributions nonetheless is jointly and severally liable on a controlled group basis, or on an alter ego, single employer or joint employer relationship basis. This occurred even though the company had different owners, filed separate tax returns, maintained separate bank accounts and kept separate financial records, and even though the court cited no evidence of an intent to avoid withdrawal liability." [Trustees of the National Retirement Fund v. Fireservice Management LLC, No. 17-4003 (S.D.N.Y. Apr. 17, 2019)] (Seyfarth Shaw LLP)
A Stress Test of Philadelphia's Retirement System
"As of 2017, ... the [Philadelphia] retirement system was 43 percent funded.... [This] brief assesses whether recent reforms will allow the city's pension promises to be kept in a fiscally sustainable way, whether the plan will more effectively manage the risk of market volatility and underperformance as a result, and how future retirement system costs will affect Philadelphia's budget. To illustrate the range of outcomes that cities face ... the brief also presents summary data for [Baltimore, Chicago, Houston, and Pittsburgh]." (The Pew Charitable Trusts)
Quarterly Survey of Public Pensions: Summary for 2018 Q4 (PDF)
"For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $3,640.1 billion in the fourth quarter of 2018, decreasing by 6.1 percent from the 2018 third quarter level of $3,877.9 billion. Compared to the same quarter in 2017, assets for these major public-pension systems decreased 4.4 percent from $3,806.1 billion." (U.S. Census Bureau)
2019 American Bar Association Midwinter Meeting Report on Issues Unique to Jointly Administered Plans (PDF)
11-page report of 2018 regulatory and litigation developments. Topics include: [1] Legislation and regulation of jointly administered plans; [2] Substantive requirements of Section 302(c)(5) of the Taft-Hartley Act; [3] Criminal liability under Section 302 of the Taft-Hartley Act; [4] Actions to enforce the contribution obligation; [5] Funding rules for multiemployer plans; [6] Multiemployer Pension Plan Amendments Act -- plan termination insurance; [7] Coal Industry Retiree Health Benefit Act of 1992. (Employee Benefits Committee [EBC], American Bar Association)
How One Small Pension Fund Added $1 Billion in Value
"In 2006, the San Bernardino County Employees' Retirement Association made a decision that it credits with adding nearly $1 billion to its portfolio over time. The fund did not hire a particularly talented manager or bet big on a hot new asset, but rather improved its investment process -- specifically, how its nearly $10 billion portfolio gets rebalanced." (Institutional Investor)
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