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Actuarial - funding of pensions


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Text of Enrolled Actuaries Pension Examination EA-2, Segment L, May 2017 (PDF)
95 pages. Complete text of exam dated May 2, 2017, with answers, published online by IRS. (American Society of Pension Professionals & Actuaries [ASPPA]; Joint Board for the Enrollment of Actuaries [JBEA]; Society of Actuaries)
Treasury Department Gives Thumbs Up to Second Pension Rescue
"The Furniture Workers fund's proposal is the first under the MPRA to have its plan partition request get conditional approval from the federal Pension Benefit Guaranty Corporation, which guarantees a minimum benefit to plan participants. If the partition is approved as part of a vote by plan members, the plan would be divided into two plans -- the original plan and a successor plan -- with the PBGC providing financial assistance to the successor plan." (Bloomberg BNA)
[Opinion] California Is Still Facing a Pension Crisis Even with Good Stock Market Returns
"Californians need to temper the glowing statements and shrug off the efforts to keep us from looking too closely at the wreckage. Of course, impressive stock-market returns are a good thing that reduce the amount of taxpayer-backed pension obligations. But one good year doesn't fix a problem that has been two decades in the making. For perspective, CalPERS' returns for the previous two fiscal years were 0.6 percent and 2.4 percent respectively." (PensionTsunami)
Multiemployer Plans on the Rocks: Furniture Workers Pension Allowed to Cut Retiree Benefits
"[Most multiemployer plans (here, MEPs)] are greatly underfunded, not just the MPRA-applied plans.... [T]he percentage of the liability that's for active employees is very low for the MPRA plans compared to all the other MEPs. For all the other MEPs, almost 40% of the total liability was for active employees." (STUMP)
[Official Guidance] Text of Treasury Department Letter Approving United Furniture Workers 'Pension Fund A' Application to Reduce Benefits (PDF)
On July 20, 2017, the Board of Trustees of the United Furniture Workers Pension Fund A (Fund) was notified that its second application to reduce pension benefits under MPRA was approved by Treasury. As a result, the proposed benefit reductions will now be subject to a vote of participants and beneficiaries of the Fund. Ballots will be mailed to participants and beneficiaries on or around August 1, 2017. (U.S. Department of the Treasury)
[Discussion] Rescinding 5-Year Amortization
"I have a client who is rescinding their 5 year amortization base extension. After rescinding, can you re-elect the 5 year amortization extension? I can't find anything that says you can or you can't." (BenefitsLink Message Boards)
State and Local Pension Plans Funding Sputters in FY 2016
"The ratio of assets to liabilities for the 170 plans in the Public Plans Database decreased from 73 percent in 2015 to 72 percent in 2016, as measured by the traditional GASB standard; and from 73 percent to 68 percent, as measured by the new standard ... Payments as a percentage of payroll have increased to 18.6 percent; Plans in the PPD have continued to adjust their annual investment return assumptions downward to an average of 7.6 percent in FY 2016[.]" (Center for State & Local Government Excellence)
A New Strategy for Cash-Strapped Corporate Pensions
"Cash-driven investing involves building a portfolio so it can generate enough cash flows to meet expected liabilities, while also improving the stability of funding levels. The strategy helps declining pension plans better tolerate market downturns by mitigating the risk of having to sell assets at a bad time." (Institutional Investor)
Pension/OPEB 2017 Assumption and Disclosure Study (PDF)
23 pages. "The 2016 median discount rate for pension plans in the study decreased 20 basis points since 2015 and has decreased more than two full percentage since 2007 ... Median plan funding levels remained unchanged from 2015, with pension plan assets equal to approximately 82% of the projected benefit obligation (PBO) in 2016 and 2015.... The 2016 median discount rate for OPEB plans in the study decreased 25 basis points since 2015 and has decreased by more than two full percentage points since 2007 ... For OPEB plans that are funded, the median plan funding level has remained essentially unchanged, with OPEB plan assets equal to approximately 53% of the accumulated postretirement obligation (APBO) in 2016 compared with 54% in 2015." (PricewaterhouseCoopers)
[Opinion] The 'Pension Crisis' Is a Myth, Part Two
"[This article addresses] the question of unfunded liabilities in public pension plans and why pension critics typically misrepresent the truth about unfunded liabilities to promote their false pension crisis narrative. Pension critics also ignore the shocking unpreparedness of most Americans for retirement, which could be improved if more people were covered by pensions." (National Public Pension Coalition)
The Pernicious Impact of Unreported Deaths on Old Age Mortality Estimates
"[E]ven small rates of failure to match respondents can lead to substantial bias in the measurement of mortality rates at older ages. This type of measurement error is consequential for three strands in the demographic literature: [1] the deceleration in mortality rates at old ages, [2] the black-white mortality crossover, and [3] the relatively low rate of old age mortality among Hispanics." (National Bureau of Economic Research [NBER])
Illinois Pension Payments to Eat Up Entire $5 Billion Tax Increase, and More
"Lawmakers overrode Gov. Bruce Rauner's veto of a $36 billion budget July 6, enacting it into law. Under the newly enacted budget, the state will spend around $7 billion for public sector pension funds. That means the entirety of the $5 billion income tax increase will go to pay for pensions, and nearly 20 cents of every dollar taxpayers send the state will go toward public sector pensions this year." (Illinois News Network)
CalPERS 2017 Investment Return Exceeds Expectations
"[CalPERS] rode a strong year in the stock market and private equity investments to earn a return rate of 11.2 percent for the fiscal year that ended June 30 ... That's about double what CalPERS expected to earn this year. It's also a marked improvement over the previous year, when CalPERS' investment return rate was 0.61 percent. In the budget year that ended in June 2015, CalPERS' investment return rate was 2.4 percent." (The Sacramento Bee)
Assessing Pension Plan Health: More Than One Right Number Tells the Whole Story (PDF)
10 pages. "The issues facing some retirement programs can be emotionally charged and involve allegations of misdeeds. But despite seemingly contradictory information, it may be that none of the parties involved lack financial literacy or are intentionally misleading with their statements. In fact, they may be viewing the same situation from different perspectives. Various actuarial 'numbers' exist, each of which conveys different useful information and can lead to different conclusions regarding the financial health of a pension plan." (American Academy of Actuaries)
Accelerate Pension Funding and De-risking Ahead of Tax Reform: A Less Taxing Exercise
"With the possibility of corporate tax reform on the horizon, plan sponsors may have a unique opportunity now to reduce PBGC expenses by accelerating funding and to deduct plan contributions at the current higher tax rate, resulting in a low risk, positive net present value (NPV) outcome. Further, by de-risking now, whether through enhanced LDI interest rate strategies or transferring risk, sponsors can avoid risk and potential costs associated with maintaining a plan." (Prudential)
[Official Guidance] Text of IRS Notice 2017-39: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for July 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, August 2017
"The August 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 July 2017, these assumptions represent a decrease of 0.25 percent in the immediate rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])
S&P 1500 Pension Funded Status Decreased by One Percent in June
"As of June 30, 2017, the estimated aggregate deficit of $416 billion represents an increase of $25 billion as compared to the deficit measured at the end of May 2017. The aggregate deficit is up $8 billion from the $408 billion measured at the end of 2016[.]" (Mercer)
[Opinion] Public Plans Data Takeaway: Bad Actuarial Assumptions
"Actuarial assumptions for public plans are selected with one goal in mind -- to generate the lowest contribution amounts possible. As those assumptions are not realized the funded levels drop despite the fact that these funding methods are supposed to develop contributions that consist of an annual cost to pay for benefits accruing during the year plus an amortization amount to pay off any past shortfall." (Burypensions)
Union Pension Plan Participation Can Create Massive Unexpected Liabilities
"Employers have the right to request an annual written estimate of withdrawal liability from any multiemployer pension plan in which they participate. The plan may charge a reasonable fee for the request and may take up to 180 days to comply with the request. An employer who participates in a multiemployer pension plan should request such an estimate on an annual basis so it is aware of the amount of any potential withdrawal liability." (Frost Brown Todd LLC)
New Jersey Approves Budget, Shifting State Lottery to Pension Fund
"The state's $2.51 billion contribution for fiscal 2018 to the New Jersey Pension Fund represents a 35% increase from the $1.86 billion for the 2017 fiscal year. By using lottery proceeds, the recently passed budget law means the contribution from general operating funds will be reduced to approximately $1.5 billion, assuming the lottery receipts meet projected totals." (Pensions & Investments)
IRS Delay in Implementing New Mortality Tables Affects Pension Liability Valuation
"Sponsors should expect to see their IRS funded status decline in 2018 to roughly the same amount as they saw their accounting funded status decline when RP-2014 was first used on their financial statements ... [P]lan sponsors can expect a 'double whammy' in 2018 as a result of variable-rate PBGC premiums. They will face both higher rates per $1,000 of underfunding from the previous legislation and new, greater levels of underfunding due to the IRS adopting the new mortality tables ... [T]he reality of increased longevity and longer-term retirements may lead some employees to work beyond a pension plan's 'normal retirement age,' offsetting somewhat the increased liabilities brought about by the latest mortality assumptions." (HRDailyAdvisor)
Pension Finance Update, June 2017
"Pension sponsors suffered modest declines in funded status last month, due to mixed stock markets and lower long-term interest rates, but both model plans ... have enjoyed modest improvement overall in the first half of 2017. Plan A lost close to 1% last month but is still ahead almost 2% for the year, while Plan B lost a fraction last month but is still up about a half percent during the first half of the year." (October Three Consulting)
FAS87 ASC715 Discount Rates and Moody's Rates
Includes an unofficial monthly report as of June 30, 2017 of 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)
[Discussion] Deductibility of One-Time Large Contribution to Fully Fund and Terminate DB Plan
"The business owners have been wanting to terminate their DB Plan for some time. They say if they make a one-time contribution of about $20 million, the DB will be fully funded and then can be terminated. The business owners ask, what is the tax deductibility of the $20 million contribution? Deductible in the current year?" (BenefitsLink Message Boards)
2015 PBGC Data Insurance Tables (PDF)
61 pages. "PBGC is now releasing data in groups, as they become available. This second release includes data in the Premium and Covered Plan Information Tables." (Pension Benefit Guaranty Corporation [PBGC])
The San Francisco Retirement System: Increasing Understanding and Adding Voter Oversight (PDF)
36 pages. "As of June 30, 2016, the City and County of San Francisco (City) owes its Retirement System $5.8 1 billion; this is more than half of the City's entire 2 016 budget ($ 8. 94 billion).... [T]he main underlying cause is the retroactive retirement benefit increases implemented by voter-approved propositions between 1996 and 2008. These retroactive increases were very expensive gifts to employees and retirees from taxpayers, paid for with money borrowed at a high interest rate from the Retirement System, and paid back over 20 years by taxpayers. The financial details of these retroactive increases were not disclosed to voters." (Civil Grand Jury, City and County of San Francisco)
Quarterly Survey of Public Pensions for 2017: First Quarter
"This report provides national summary data on the revenues, expenditures and composition of assets of the largest defined benefit public employee pension systems for state and local governments. This report produces three tables: [Table 1 and Table 3] include data on cash and security holdings and Table 2 provides data on earnings on investments, contributions and payments." (U.S. Census Bureau)
Chicago Mayor Bypasses State, Introduces Plan to Raise City Contributions for Two Pension Plans
"The ordinance calls for Chicago's pension contributions to be increased over the next five years, reaching actuarial required levels in budget year 2022, payable in 2023.... The city contribution changes ... formed part of a municipal and laborers' pension reform bill that was passed by the Illinois Legislature in April and is awaiting Gov. Bruce Rauner's signature.... While the city can increase its contributions without a state law change, it does not have the authority to adjust employee contributions or benefits." (Pensions & Investments)
Retirement Plan Problem: Delayed Departure
"[E]ven a brief retirement delay by an employee can prove costly. Someone who retires at 66 instead of 65, for example, costs his or her company an average of more than $34,000 ... If retirement is postponed to age 70, the cumulative incremental tab rises to $172,000. And if 100 people at a company fit that profile, it creates a hit of more than $17 million." (CFO)
Supreme Court's Church Plan Decision Restores Order (PDF)
"In a concise and clearly written opinion, Justice Elena Kagan restored order in the church plan universe -- and validated nearly 40 years of administrative decisions by the [IRS], the [DOL] and the [PBGC] -- by explicitly affirming that church-affiliated hospitals and other organizations can establish benefit plans that should be accorded the same treatment as plans actually established by a church. [The] decision completely shut down the primary line of argument pursued by plaintiffs in a series of class action lawsuits." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Arthur J. Gallagher & Co.)
American Academy of Actuaries Issue Brief: Overview of Multiemployer Issues (PDF)
9 pages. "Of the more than 10 million people who participate in multiemployer pension plans, approximately 1 million are in 100 plans that are projected to be unable to pay the full benefits that have been promised.... Tackling the multiemployer pension plan issue will require solutions that focus on securing 'legacy' pensions and also assuring a secure retirement system in the future. There are only two ways to remedy the situation -- infuse more money into the plans or reduce benefits." (American Academy of Actuaries)
When Will California Supreme Court Rule on Constitutionality of Reductions or Freezes in Future Pension Accruals?
"An early Supreme Court decision upholding the appellate rulings might allow time for reformers to consider putting an initiative on the state ballot next year. A favorable ruling also might prompt local action or labor bargaining to curb budget-squeezing pension costs. The four county suits and the state firefighters suit all challenge minor parts of Gov. Brown's pension reform that apply to employees hired before the reform took effect on Jan. 1, 2013." (Calpensions)
[Opinion] Will Public Pensions Sink Illinois?
"[W]hat Illinois and other states that suffer from similar pension woes need is to amalgamate all these public pensions at the state level, introduce better governance, adopt a shared-risk model, and get real on investment returns even if this means higher contributions from employees and the state government (these plans need be jointly sponsored). But none of these reforms are being discussed. Instead, lawmakers want quick fixes which will make things worse for everyone, including Illinois taxpayers." (Pension Pulse)
69 Percent Funding Ratio Reported for State-Sponsored DB Systems (PDF)
"The funding ratio of state pension plans dropped four percentage points to 69 percent in fiscal year 2016 ... [For] the 103 state retirement systems that reported actuarial data for 2016, pension assets shrank by 1.8 percent ... in 2016 while liabilities grew 5.4 percent ... [A]ggregate shortfall, or net pension liability, [increased] $222.4 billion over fiscal 2016 from $963.2 billion to $1,185.6 billion." (Wilshire Associates)
Time to Reduce Your Pension Plan Risk?
"With the impending change in corporate tax policy, it is important to consider how funding up the pension plan now, under the current tax structure, may be financially advantageous to your organization. Additional funding may then put you in a good position to take action with one or more of [these] 'de-risking' options ... Allow lump sum payments from the pension plan when individuals terminate employment ... Use a Liability Driven Investment (LDI) asset management approach ... Transfer longevity risk via use of insurance company products ... Plan termination." (Watkins Ross)
[Opinion] Public Pensions: Why It's Important to Keep Watching
"It takes a long time for these problems to come to fruition. Much longer than it takes a company to run into trouble ... Part of the reason is the 'taxpayer put' ... there's a limit to how much governments can soak taxpayers, but they can increase the taxes over time until more and more people leave ... Another part of the reason is the 'bondholder put', which is exercised less frequently, and does a lot more damage when it's exercised by politicians. The biggest part of the reason is no oversight." (STUMP)
Getting Back On Track: Financial Wellness in the Public Sector
"Between 2009 and 2013, to improve their pension positions, virtually every state applied some combination of lower benefit accruals and higher employer contributions made possible with the federal government's help. Higher employee contributions became commonplace, too.... Now public employers are searching for opportunities to provide workers with services that may compensate for benefit changes and better prepare them for financial security in retirement." (Prudential)
The $4 Trillion Pension Problem
"Earlier this month, the $20.2 billion Los Angeles Fire and Police Pension System lowered its assumed rate of return by a quarter of a percentage point to 7.25 percent. This seems like a fairly minor and obvious move.... But the fund's relatively minor adjustment will probably cost taxpayers $27 million in additional contributions to help make up the shortfall in fiscal year 2018 alone." (Bloomberg)
U.S. Public Pension Plan Contribution Indices, 2006-2014 (PDF)
"In every year studied, most of the 160 plans with enough data to complete analysis for the year received insufficient employer contributions to maintain their unfunded liabilities ... For 2014, 3% of plans showed a funding surplus and 20% of plans received enough employer contributions to fund their shortfall within 30 years without it growing through negative amortization in the meantime. Employer contributions for the same 130 plans increased 76%, from about $48 billion in 2006 to roughly $85 billion in 2014. Employee contributions increased 30% during this period, from $28 billion to $37 billion, while payroll and prices both increased 17%." (Society of Actuaries)
State and Local Government Contributions to Statewide Pension Plans, FY 2015 (PDF)
"The median actuarially determined contribution [ADC] received in FY 15 was 100 percent, and ranged from 12 percent to 528 percent.... On a dollar-weighted basis, the average ADC received was 91 percent, up from 87 percent in FY '14 and marking the highest aggregate annual contribution effort since FY '02.... The aggregate rate of increase in required contributions from FY '14 to FY '15 was 4.5 percent, which is the lowest rate of increase during the measurement period." (National Association of State Retirement Administrators [NASRA])
Pension Crisis Won't Be Reversed by High Returns, Moody's Says
"A 'best case' scenario of a cumulative 25% investment return during the 2017-2019 period will not offer a respite for chronically underfunded U.S. public pension plans ... The growing gap between how much state and local governments are projected to pay employees and how much funds they actually have set aside has risen to over $4 trillion nationwide. New Jersey sports the widest funding gap, followed closely by Kentucky and Illinois." (Bloomberg)
How New York City's Pension Costs Threaten Its Future (PDF)
12 pages. "Today, pension contributions stand at a near-record 11% of the city's total budget -- and 36% of payroll alone. They consume 17% of city tax revenues, double the average proportion of the 1990s and early 2000s.... New York's annual pension contributions will soon displace social services as the second-largest spending category in the city budget, behind only education, consuming more than 80 cents of every dollar raised by the city's personal income tax." (Manhattan Institute for Policy Research)
Text of CBO Answers to Questions from Senate Budget Committee on Funding Estimates for Federal Employee Pensions (PDF)
"Relative to cash estimates over a 10-year projection period ... an accrual measure would give policymakers a more accurate sense of whether proposed changes to deferred compensation would increase or decrease the deficit. That is particularly important when considering modifications to defined benefit pension plans because such plans involve commitments over long periods.... [But cost estimates] can vary substantially depending on the discount rate used for the accrual measure, which may make them less transparent than a cash-based measure. Accrual accounting also depends on decades of projections for future wages and inflation -- which are highly uncertain." (Congressional Budget Office [CBO])
[Official Guidance] PBGC Monthly Interest Rate Summary, June 2017
Listed and described are rates that change each month (lump sum interest rates under ERISA section 4022 and the spot segment rates used to determine variable-rate premiums), and rates that change each calendar quarter (for annuity valuation under ERISA section 4044, late premium payments and late withdrawal liability payments). (Pension Benefit Guaranty Corporation [PBGC])
Most State Pension Plans Paper Over Unfunded Liabilities
"State officials can adopt open-ended amortization to reduce the amount the state must contribute to the pension system each year or to improve the appearance, but not the reality, of the state's current funding effort. Regardless of the reason, open-ended amortization exacerbates funding shortfalls, compounding the risk that the state will have insufficient funds to pay its pension obligations to retired state employees." (Phys.org)
IRS' Delay in Implementing Mortality Tables Affects Pension Decisions
"Premiums due to the PBGC may rise dramatically for certain plans, because a lower funded status also means higher PBGC premiums. Lump-sum distributions may become key topics of discussion and decision-making. Paying out benefits while the plan is underfunded results in a lower funded status in percentage terms ... [P]ension plan sponsors whose IRS funded status is just above the key threshold levels of 80% or 60% should examine whether the mortality table implementation would cause a violation of these levels, resulting in additional restrictions on the plan." (Chief Investment Officer [CIO])
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, July and Third Quarter 2017
"The third quarter 2017 interest assumptions under the allocation regulation will be 2.44 percent for the first 20 years following the valuation date and 2.74 percent thereafter.... The July 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])
[Opinion] Pennsylvania Pension Reform, Part 1
"For a system that will likely run out of money by 2034 the thrust of this 'reform' is to reduce those onerous employer contributions while keeping employee contributions at similar, if not higher, levels in part by confusing those new participants impacted." (Burypensions)
Means and Markets Have Aligned: Why You Should Consider De-Risking Now (PDF)
12 pages. "Building a strong defense now may position companies, particularly those in cyclical industries, to better endure the next downturn, allowing them to pursue growth initiatives at a time when their competitors may be cutting back. This environment could be fleeting, however, and [the authors] believe now is the time to prepare for a lower-risk future." (Prudential)
[Opinion] The Disturbing Trend That Will End in a Full-Fledged Pension Crisis
"Though the challenges are well known by now, many believe that public-sector pension funds will be maintained and the gaps filled by strong investment returns, increasing employee contributions, raising taxes, or some combination of the three. They hope with these measures and ongoing strong asset returns, liabilities can be reduced and pensions salvaged. Unfortunately, this is wishful thinking at best." (Olivier Garret, via Forbes)
[Official Guidance] Text of IRS Notice 2017-34: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for June 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])
Funded Status Drops in May by $22 Billion (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans decreased by $22 billion during May ... The deficit grew to $279 billion from $257 billion at the end of April due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities.... As of May 31, the funded ratio fell to 83.8%, down from 84.9% at the end of April. The funded status deficit and ratio at the end of May is almost spot-on to the level on December 31, 2016 even though the discount rate has declined 23 basis points." (Milliman)
Church-Affiliated Hospitals Fall Within ERISA's Church Plan Exemption
"Justice Sonia Sotomayor wrote a separate concurring opinion to express her concern over the possibility that the Court's decision could cause many employees who work for organizations that act and operate like secular businesses to be denied ERISA's protections. She invited Congress to correct the result because these 'organizations bear little resemblance' to those Congress considered when enacting the amendment." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Eversheds Sutherland)
Pension Plan De-risking Initiatives
"De-risking techniques can take two approaches: [1] Transfer the liability and risk to a third party, which could be the individual plan participant or an insurance company. [2] Retain the liability as part of the pension plan and apply de-risking techniques to manage overall risk.... With either or both approaches, pension plan de-risking strategies must align with the plan sponsor's long-term objectives, such as helping their plan participants prepare for a financially secure retirement. Most employers, however, manage toward a series of short-term objectives." (Findley Davies | BPS&M)
The Multiemployer Plan Financial Crisis: Effect on Single Employer Plans
"[It] seems likely that any ultimate solution (if there is one) will involve some sort of federal bailout. That bailout could possibly involve single employer plans in some way. For instance, Senator Sanders's KOPPA proposal would fund multiemployer plan benefits by: [1] transferring assets from the PBGC single employer program; and [2] capping contributions to defined contribution plans, to generate tax revenues to pay for direct federal Treasury funding." (October Three Consulting)
Supreme Court Finds 'Church Plans' Need Not Be Established by Churches (PDF)
"The Supreme Court's decision unquestionably is a significant victory for religiously-affiliated non-profits and their pension plans. The Court resolved the threshold statutory interpretation question in their favor, holding that their plans can qualify as church plans exempt from ERISA's requirements. The Court's opinion, however, leaves several issues concerning the church plan definition unresolved." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Groom Law Group)
Supreme Court: 'Church Plans' Include Those Established by Church-Affiliated Organizations
"The Supreme Court decision averts what would have potentially been a cataclysmic result to many faith-based hospitals, nursing homes and schools that were counting on being exempt from having their retirement plans subject to the requirements of ERISA. However, some questions remain, because the court did not address the question of the scope of the definition of a 'church-affiliated organization' (or the technical term used in the statute), which could also have an impact on which organizations may operate an ERISA-exempt church plan.... Congress may still ultimately have the last word." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (McDonald Hopkins)
Unanimous Supreme Court Decision in Favor of 'Church Plan' Defendants But Is More Litigation Coming?
"Although this decision is positive news for church plans, it may not be the end of the church plan litigation. Numerous, large settlements have occurred before and since the Supreme Court took up the consolidated cases ... [S]ome will still settle, albeit likely for lower numbers. In addition, Plaintiffs could still push forward with the cases on the grounds that the entities maintaining the church plans are not 'principal-purpose organizations' controlled by 'a church.' " [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Jackson Lewis P.C.)
Church-Affiliated Employers Get Win As SCOTUS Clarifies ERISA Exemption
"The opinion also analyzes the difference between the terms 'establish' and 'maintain' in the context of ERISA plans, concluding that the terms are often used interchangeably. In terms of compliance with ERISA's regulatory scheme, the Court said, it is of more significance which entity maintains a plan than who originally established the plan." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Fisher Phillips)

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