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Actuarial - funding of pensions

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[Opinion] Public Pension Storm Warning
"Admittedly, public pension liabilities don't come out of nowhere the way hurricanes seem to -- we know exactly where they will strike. In many cases, we know approximately when they'll strike, too. Yet we still let our elected officials make impossible-to-fulfill promises on our behalf.... Worse, we let our government officials use predictions about future returns that are every bit as unrealistic as calling a 13-inch rain in Houston a 100-year event. And while some of us have called pension officials out, they just keep telling lies -- and probably will until we reach the breaking point." (Mauldin Economics)
Assessing Multiemployer Plans' Capacity for Self-Stabilization (PDF)
12 pages. "Three main options are available to prevent the exhaustion of the [PBGC's] guarantee fund : [1] empower plans to take stronger actions to avoid or delay insolvency; [2] reduce the level of the PBGC's benefit guarantee, and/or [3] increase the revenue flowing into the fund, either through premium increases or by securing additional revenue sources. [This paper focuses on Option One.]" (The Pension Analytics Group)
California Pension Reform: The San Jose Model
"[In] August 2015, the San Jose city council passed a compromise resolution that replaced Measure B with a scaled down reform; this was approved by voters in November 2016. The provisions of this new pension reform measure should be of keen interest to local reformers everywhere in California, because they survived relentless attacks in court.... San Jose's current unfunded pension liability now stands at just over $3.0 billion. These reforms are estimated to save $1.7 billion over the next ten years." (PensionTsunami)
[Discussion]Election to Apply Balances
"Does an election to apply the balances to the required minimum or quarterly need to specify the amount applied? Specifically, Plan year is 6/1 -- 5/31. 6/1/2016 Minimum is $700,000. Prefunding Balance as of 6/1/2017 is $150,000. Plan was frozen 6/1/2017. 6/1/2017 valuation is not complete yet, but minimum will surely be much less than $700,000 since there is no target normal cost. It will probably be about $300,000. Therefore, the 9/15/2017 quarterly will probably be about $67,500 (=$300,000 * 90% * 25%). Can the plan sponsor just elect to apply whatever is needed to cover the quarterly? Should he elect to apply the whole $150,000?" (BenefitsLink Message Boards)
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, October and Fourth Quarter 2017
"The fourth quarter 2017 interest assumptions under the allocation regulation will be 2.34 percent for the first 20 years following the valuation date and 2.63 percent thereafter.... The October 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." (Pension Benefit Guaranty Corporation [PBGC])
[Guidance Overview] Hardship and Loan Relief Extended to Hurricane Irma, Along with Relief for Single Employer DB Plans
"[E]mployers who sponsor 401(k), 403(b) and 457(b) plans may receive these requests [for hardship withdrawals] and can choose to provide this relief even though the employer and its plan are not located in one of the affected areas, because the relief is extended to employees and former employees who have lineal ascendants... who had a principal residence or place of employment in one of the designated counties. For a hardship distribution provided under this relief, the employer is not required to stop the employee receiving the hardship distribution from making elective deferrals for six months as is required for other hardship withdrawals." (Winstead PC)
[Official Guidance] Text of Treasury Department Letter Approving Benefit Reductions by New York State Teamsters Conference Pension and Retirement Fund (PDF)
"Because a majority or eligible voters did not vote to reject the benefit reduction, the benefit reduction may go into effect. Treasury, in consultation with DOL and PBGC, has issued a final authorization to reduce benefits under the Fund as described in the Application, effective October 1, 2017, subject to [certain] conditions[.]" (U.S. Department of the Treasury)
Using a Section 115 Trust to Help Manage Pension Obligations
"[An Internal Revenue Code section 115] trust is a vehicle for segregating agency funds from general assets for the purpose of funding essential governmental functions.... Funds placed in a 115 trust are irrevocably committed for the essential government function(s) specified in the applicable trust agreement (e.g., pension obligations). Therefore, the monies held in such trusts can be invested in accordance with the rules governing such special purpose accounts." (Chang Ruthenberg & Long PC)
[Official Guidance] Text of IRS Notice 2017-50: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for September 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])
Pension Funding Index, September 2017 (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans decreased by $17 billion during August ... The funded status decline was only partially offset by a 0.85% investment gain and a $7 billion increase in pension assets. As of August 31, the funded ratio fell to 83.0%, down from 83.8% at the end of July. The funded ratio is now below the mark at the start of the year of 83.3%" (Milliman)
[Official Guidance] Text of IRS Notice 2017-49: Hurricane Harvey and Hurricane Irma Disaster Relief for Defined Benefit Plans (PDF)
10 pages. "The [IRS, EBSA and PBGC] are providing relief in connection with certain employee benefit plans because of damage caused by Hurricane Harvey and Hurricane Irma. The relief provided by this notice is in addition to any relief already provided by the IRS, EBSA, and PBGC to victims of Hurricanes Harvey and Irma.... [1] Relief for Single-employer Defined Benefit Plans.... [2] Relief for Multiemployer Defined Benefit Plans.... [3] Relief Related to Funding Waivers." [Additional description from PBGC website: "Among other things, this notice extends the contribution due date for affected defined benefit plans. As a result, contributions made more than 8-1/2 months after the end of the prior plan year may, in certain instances, be designated as being for the prior plan year. The relief in [IRS] Notice 2017-49 applies to PBGC requirements that key off the contribution due date (e.g., whether a contribution is timely, whether that contribution is included in market value of assets). This relief is in addition to PBGC-provided disaster relief related to waiving certain penalties and extending certain deadlines for affected plans."] (Internal Revenue Service [IRS])
[Discussion] Mortality Tables for 2018 Funding and Lump Sums?
"Has there been any news on which mortality tables will be used for funding and lump sums after 2017?" (BenefitsLink Message Boards)
S&P 1500 Pension Funded Status Decreased in August
"The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by one percent to 82% funded status in August 2017, as a result of a decrease in discount rates partially offset by mixed equity markets. As of August 31, 2017, the estimated aggregate deficit of $432 billion USD represents an increase of $28 billion as compared to the deficit measured at the end of July 2017." (Mercer)
Pension Index Declines by 1.6% in August
"August's capital market results adversely impacted the funded status of typical pension plans.... A decrease in long corporate bond yields reversed the index gains experienced in July." (Willis Towers Watson)
Pension Risk Transfer: A 2017 Survey of U.S. DB Plan Sponsors (PDF)
12 pages. "In 2016, there was nearly $14 billion of annuity buyout-related PRT activity, and nine in 10 plan sponsors (87%) believe the level of 2017 PRT activity will be at least as, or even more, robust than last year.... The top catalysts driving sponsors to consider transferring pension obligations to an insurer are [PBGC] actions (64%) ... 57% say they will use an annuity buyout, including 43% who plan to use a combination of a lump sum and annuity buyout." (MetLife)
Aggregate Funded Ratio for U.S. Corporate Pension Plans Decreased in August (PDF)
"The aggregate funded ratio for U.S. corporate pension plans decreased by 0.9 percentage points to end the month of August at 83.2 percent, up 7.3 percentage points over the trailing twelve months ... The monthly change in funding resulted from a 1.8% increase in liability values, which was partially offset by a 0.7% increase in asset values. The aggregate funded ratio remains relatively flat quarter-to-date and is up 1.3 percentage points year-to-date." (Wilshire Associates)
Ascension Health Grants $29.5M Backstop for Wheaton Pension
"Ascension Health will guarantee $29.5 million in benefit payments under Wheaton Franciscan Services Inc.'s pension plan, ending a lawsuit accusing Wheaton of wrongly treating the plan as a 'church plan' exempt from federal law ... The deal, announced in court papers filed Sept. 1, requires Ascension to guarantee payment of the first $29.5 million paid out under the Wheaton pension plan in the event the plan can't cover the payments itself. Ascension, which acquired part of Wheaton's health-care business in 2016, also agreed to provide plan participants with annual notices of the plan's funding levels." [In re Wheaton Franciscan ERISA Litig., No. 16-4232 (N.D. Ill. motion for preliminary settlement approval filed 9/1/17 ] (Bloomberg BNA)
Pension Finance Update, August 2017
"Pension funded status slipped in August, due to flat stock markets and remorselessly lower long-term interest rates. Both model plans ... saw modest declines last month -- traditional Plan A dropped more than 1% but is still up 1% for the year, while the more conservative Plan B lost less than 1% in August but also remains 1% ahead so far in 2017." (October Three Consulting)
[Opinion] Joint Letter to Office of Information and Regulatory Affairs on Proposed Update to Mortality Tables
16 pages. "A thorough economic analysis is needed, with a focus on at least these four major issues: [1] The need for an 18-month deferred effective date. [2] A review of the speculative assumption that mortality will improve on average 1% indefinitely. [3] The introduction of unprecedented volatility into the mortality tables. [4] The erroneous assumption that Treasury must rely on tables prepared by the Society of Actuaries given that an expanded reliance on other sources is statutorily permitted and very much warranted from a practical perspective. There is a need for an announcement immediately that the new mortality tables will not apply for plan years beginning in 2018." (American Benefits Council and Committee on Investment of Employee Benefit Assets [CIEBA])
FAS87 ASC715 Discount Rates and Moody's Rates, Updated August 2017
Includes an unofficial monthly report as of August 31, 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)
Single Premium Pension Buy-Out Sales Break 15-Year Record in the Q2 2017
"U.S. single premium pension buy-out product sales were $4.1 billion in the second quarter of 2017, more than three times higher than sales recorded in the second quarter 2016 ... This is the first time that second quarter buy-out sales have eclipsed $4 billion in the U.S. market, and is the highest second-quarter sales total on record since 2002[.]" (LIMRA)
[Opinion] New Math Hits Minnesota's Pensions?
"[W]hile Kentucky, Illinois, and New Jersey have well-known public pension problems, other states are also on the verge of seeing their pensions collapse, either because of years of neglect or more likely, because the new pension math (new GASB rules) is forcing them to use a much lower discount rate to determine their future liabilities.... [S]ince the duration of liabilities is a lot bigger than the duration of assets, then no matter how well investments do, pension deficits will keep widening as interest rates decline. This effectively is the death knell for chronically underfunded US public pension plans." (Pension Pulse)
[Guidance Overview] 2010 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits, May 5, 2010 (PDF)
28 pages; 43 questions and answers. Topics Include: Premiums; Title IV coverage; Standard terminations; Distress and involuntary terminations; PBGC reporting; Penalties; ERISA Sections 4062(E), 4063, and 4064; Minimum funding waivers; Missing participants program; and Litigation and general matters. (Joint Committee on Employee Benefits [JCEB], American Bar Association)
[Guidance Overview] 2011 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits, May 4, 2011 (PDF)
35 pages; 48 questions and answers. Topics Include: Premiums; Title IV coverage; PBGC governance; standard terminations; distress and involuntary terminations; PBGC reporting; penalties; ERISA Sections 4062(E), 4063, and 4064; minimum funding waivers; revocations of PRA elections; early warning program; missing participants program; hybrid plan issues; litigation and general matters. (Joint Committee on Employee Benefits [JCEB], American Bar Association)
[Official Guidance] Text of IRS Notice 2017-45: Extension of Temporary Nondiscrimination Relief for Closed Defined Benefit Plans (PDF)
"This notice extends the temporary nondiscrimination relief for closed defined benefit plans that is provided in Notice 2014-5 ... by making that relief available for plan years beginning before 2019 if the conditions of Notice 2014-5 are satisfied." (Internal Revenue Service [IRS])
[Opinion] ERIC Letter to OMB on Delaying Implementation of Mortality Tables for Determining Present Value Under DB Plans
"ERIC urges you to take at least the entire 90-day review period in order to conduct a thorough economic analysis of the benefits and costs of the regulatory action, including: (i) a quantification of its effects, (ii) an analysis of potentially effective and reasonably feasible alternatives, and (iii) meetings with stakeholders who will be impacted by the rule. The Proposed Treasury Rule would result in recalculation of individual company pension plan liabilities by billions of dollars, and collectively hundreds of billions of dollars to the larger economy." (The ERISA Industry Committee [ERIC])
Commonwealth of Kentucky Pension Performance and Best Practices Analysis: Recommended Options (PDF)
113 pages. "In the aggregate, the Commonwealth of Kentucky's pension plans are among the worst funded in the nation. Without corrective action, the large and growing unfunded liabilities associated with these pension benefits not only threaten the retirement security of plan participants, but they are also eroding the fiscal stability of the state ... [This report presents] ideas and alternatives for improving the long-term security, reliability, and affordability of these benefit programs. These recommended options build on [an] analysis of factors that have led to the current conditions ... Actuarial assumptions; Benefit levels and risk exposure; Funding; Investment practices and approach." (pfm)
[Discussion] ATFAP and Normal Cost
"I have a plan that had a large prior year asset loss. It is a beginning-of-year valuation. Actuarial assets are less than 60% of FT. Does this mean, in the absence of additional contributions before October 1 to achieve a 60% FTAP, that there is no normal cost for the plan year due to the 436 accrual restriction?" (BenefitsLink Message Boards)
Diocese Failed to Make Contributions to Hospital Employees' Pension Fund for Years
"While records are incomplete, it is clear that between 2008 and time of the sale of the hospital in 2014, the Diocese repeatedly underfunded retirement payments or made no payment ... It is unclear how many years before 2008 the failure to make payments and partial payments goes back.... The bankruptcy of the pension fund impacts 2,800 and is the largest failure in Rhode Island history. The pension fund has a deficit of more than $160 million." (GoLocalProv)
Rhode Island Hospital Pension Seeks OK for 40 Percent Benefit Cuts
"St. Joseph Health Services of Rhode Island Retirement Plan on Aug. 18 asked a Rhode Island Superior Court judge for permission to enter receivership, which it says would allow for a 'long-term wind-down' of the plan. The plan -- which was 90 percent funded when the hospital was sold to California-based Prospect Medical Holdings Inc. in 2014 -- now has a deficit of more than $43 million and could become insolvent as early as 2026, according to the [123-page] receivership petition filed with the court.... The decision to seek receivership was driven in part by St. Joseph's belief that the pension plan would lose 'church plan' status on or before Dec. 31, 2018, the petition says." (Bloomberg BNA)
Synthetic Equity and Pension Plan De-risking (PDF)
"Pension plans typically de-risk by buying liability matching bonds and selling equities.... [This] results in a direct tradeoff between the desire to reduce funded status volatility versus maintaining higher expected returns. Derivatives, however, provide plan fiduciaries with additional flexibility versus simply allocating between these two asset types. A derivative strategy [the authors] call 'Synthetic Equity' can be used by pension plans to maintain expected returns and retain equity exposure, yet still reduce funding level volatility." (River and Mercantile Derivatives)
Participants Approve United Furniture Workers Pension Benefit Cuts
"The pension fund identified 9,595 participants and beneficiaries eligible to vote, and delivered ballots to 9,273 ... Of those, 21% voted to reject the suspension. While only 1,041 ballots were in favor of the reduction, the plan will take effect Sept. 1 because a majority of eligible voters receiving a ballot did not vote to reject it. It is the second MPRA approval and the first one to include a partition, which calls for the [PBGC] to provide financial assistance for a new successor pension plan to be overseen by the pension fund's trustees." (Pensions & Investments)
Puerto Rico Oversight Board Sues, Wants Governor to Enforce Pension Reforms
"Puerto Rico's Financial Oversight and Management Board filed a lawsuit [August 28] in U.S. District Court in San Juan to enforce parts of its fiscal plan calling for furloughs and pension reforms, following Gov. Ricardo Rossello's refusal to carry out those provisions. The complaint asks the court for an injunction prohibiting the governor from refusing to enforce or comply with the board's fiscal plan." (Pensions & Investments)
End of the Pension Funding Holiday Road
"Since rates were much higher in the 1990s, the stabilized rate delivered an immediate, significant boost to the funding rate. Funding liabilities for a typical DB plan were initially reduced 15 to 20 percent in 2012. But the potency of this relief is gradually wearing off[.]" (The Principal Blog)
Puerto Rico Governor Signs Pension Reform Law
"Puerto Rico has passed pension reforms that include making payments to the depleted defined benefit system from general revenues, and creating a defined contribution plan for active workers and new hires.... The changes are subject to approval by Puerto Rico's Financial Oversight and Management Board [PROMESA] ... [which] has its own plan for pension reform that calls for progressively reducing pension benefits by a total of 10% for most participants and enrolling all active members and new hires in defined contribution accounts." (Pensions & Investments)
[Guidance Overview] 2017 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits, May 10, 2017 (PDF)
13 pages. Topics include: [1] Regulatory review/reform developments: PBGC impact; [2] PBGC early warning program; [3] Multiemployer program update (including PBGC audits of plans terminating by mass withdrawal, and two-pool withdrawal liability method request for information); [4] PBGC informal assistance regarding merger and partitions; [5] Reportable events: recent PBGC experience; [6] Standard terminations: recent PBGC experience; [7] PBGC website project: Q&A presenting informal views; [8] PBGC premiums in the context of de-risking, and de-risking trends. (Joint Committee on Employee Benefits [JCEB], American Bar Association)
[Opinion] The 'Pension Crisis' Is a Myth, Part Three
"Illinois does face real challenges with its public pension systems, challenges that will take years to resolve.... Illinois' pension problems are the direct result of years of mismanagement and deliberate underfunding by governors and legislators of both parties. Resolving these problems will take the commitment of lawmakers from both parties to fully fund the state's pension obligations every year." (National Public Pension Coalition)
Public Pension Funded Ratio Continues to Improve Through Second Quarter, Now at 73.0% (PDF)
"The strong equity returns in Q2 led public plan asset growth to outpace the rise in pension liability, increasing the estimated funded status of the 100 largest U.S. public pension plans by $33 billion from the end of March 2017 through the end of June 2017 ... During the second quarter, the deficit dropped from $1.314 trillion to $1.281 trillion. As of June 30, the funded ratio stood at 73.0%, up from 72.0% at the end of March." (Milliman)
[Opinion] The 'Pension Crisis' Is a Myth, Part Four
"When a pension plan is closed ... it can no longer invest on an infinite time horizon. At a certain point in time, all of the participants in the plan will be retired and will be collecting benefits and no new employees will be paying into the plan. As the number of retired members in the plan continues to increase over time, with fewer and fewer active members contributing, the plan must shift to more conservative, lower-return investments in order to maintain the assets they already have. This makes it more difficult to pay down any unfunded liability already present in the plan." (National Public Pension Coalition)
Pension Fund for Hospital Nurses Placed in Receivership
"The [DB] plan for nurses at Our Lady of Fatima Hospital and the former St. Joseph's Hospital was placed in temporary receivership last week after fund actuaries said it faced insolvency just three years after the hospitals were sold to a California-based for-profit company. The plan is 'severely underfunded and requires additional capital of over $43 million to reach a 100-percent funding level,' St. Joseph Health Services of Rhode Island Inc. wrote in a petition asking the court to appoint a receiver and approve a 40-percent across the board reduction in benefits to pension recipients.... According to the receivership petition, the plan is expected to lose religious exemption and begin owing PBGC premium payments in 2018." (Providence Journal)
Retiree Carve-Outs: The Whats, Whys and Hows of Pension Plan Annuity Purchases
"Removing participants from the plan, along with the liabilities and assets associated with their benefits, shrinks the size of the plan and therefore the potential for volatility in funded status.... Cost reduction may be the most compelling reason for plan sponsors to purchase annuities for their retirees. Pension plan annuity purchases remove costs because they reduce one of the biggest expenses that plans deal with today: PBGC premiums.... Annuity purchases make the most sense for retirees whose benefits are small." (P-Solve LLC)
Abandoning the Pension Rat Race for Absolute Returns
"A pension fund does three things... It pays current benefits, grows assets for future benefit payments, and weathers markets to ensure the delivery of the first two. For each function -- liquidity, growth, and hedging -- the investment team modeled a dedicated portfolio, so the assets overall no longer needed to serve three functional masters." (Institutional Investor)
Public Pensions: Why Do 100% Required Contribution Payers Have Decreasing Fundedness?
"[According to a May 2017 working paper from the Center for Retirement Research at Boston College,] 'The valuation (or measurement) of public pension liabilities and contribution requirements is highly sensitive to the choice of several actuarial assumptions, which should be considered when assessing the financial condition of public pension systems.' ... [T]he part that is significant: a sensitivity to valuation parameters, especially the discount rate used. And public pension plans get to choose that for themselves.... [T]he point is that the plans are often optimistic on parameter choice.... The discount rate is just the most obvious parameter choice. There are many others that go into the mix." (STUMP)
Multiemployer Plans Zone Status, Summer 2017 (PDF)
"[T]he survey finding that about two-thirds of calendar-year plans are in the green zone should not obscure the fact that just about half of all participants in the survey are in red-zone plans. Significantly, about one-quarter of the participants in the survey are in plans that are also in 'critical and declining' status." (Segal Consulting)
[Guidance Overview] Final Mortality Table Regs Sent to OMB (PDF)
"Although the actual impact of the new mortality table will vary from plan to plan ... it is generally expected to increase plan liabilities. Prior estimates have indicated an average increase of around 8%, but the associated mortality improvement scale could mitigate the increase with an estimated 1.5-2% reduction. In addition to minimum funding requirements, the regulation would also affect the calculation of PBGC variable rate premiums.... The period needed for the OMB review casts doubts on whether the regulation will become effective in 2018." (Groom Law Group)
Economic and Regulatory Environment May Spur Pension Risk Transfers (PDF)
"Among DB plan sponsors who have not yet purchased an annuity, nearly half said they have discussed the strategy with an outside provider or advisor, and one in five said they expect to purchase a group annuity in the next two years.... Fifty-five percent of survey respondents said that if Washington enacts tax reforms that lower corporate tax rates, their companies will very likely use the tax savings to increase funding of their defined benefit pension plan, and execute either a full or partial liability transfer via a group annuity." (Prudential)
CFOs Delighted with Pension Risk Transfers (PDF)
"Eighty-three percent of the survey respondents who've executed such a transaction said they are completely satisfied with all aspects of their group annuity purchase, and virtually the same number -- 81 percent -- agreed that plan beneficiaries affected by the transaction are content to receive their pension payments from an insurance company. Eighty-six percent said they believe the arrangement offers those participants greater retirement security in the long run." (Prudential)
Pension Plan Sponsors Would Reap Savings on Longevity Table Delay
"For plan sponsors, a delay could mean lower required plan contributions, reduced variable rate premiums owed to the [PBGC], and an expanded opportunity to offer cheaper lump-sum payouts to employees.... It's uncertain whether the tables will in fact be delayed from their original Jan 1, 2018, effective date. However, the odds that they will have increased after the federal Office of Management and Budget recently designated the IRS rule as 'economically significant.' " (Bloomberg BNA)
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, September 2017
"The September 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. In comparison with the interest assumptions in effect for August 2017, these assumptions represent an increase of 0.25 percent in the immediate rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])
[Official Guidance] Text of IRS Notice 2017-43: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for August 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])
Text of 2017 Enrolled Actuary Program Booklet: Basic (EA-1) Examination, Pension EA-2 (Segments L and F) Examinations (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 July 2017, for Nov. 2017 and May 2018 exams. Rev. July 27, 2017] (Joint Board for the Enrollment of Actuaries [JBEA]; American Society of Pension Professionals & Actuaries [ASPPA]; Society of Actuaries)
Risk Transfers: The Other Side of De-Risking
"LDI allows the employer to greatly mitigate this risk by investing plan assets in bonds that mirror the securities underlying the discount rate used to value plan liabilities.... Other types of de-risking strategies [include] purchase by the plan of annuities from an insurance company.... [or] payment of a lump sum to participants in lieu of providing the plan's monthly lifetime retirement benefit.... If anecdotal information of bad decisions persist, and with the prodding of participant advocacy groups, it is likely that the DOL or Congress could intervene to restrict the payment of lump sums." (Findley Davies | BPS&M)
2017 Global Survey of Accounting Assumptions for Defined Benefit Plans
"During 2016, investment returns on plan assets (both bond and stock returns) showed a mild performance in major markets and, in most cases, this performance was countered by declining interest rates, which left companies with minor changes in average projected benefit security ratio from prior year levels.... The majority of surveyed countries imply life expectancies between 20 and 30 years." (Willis Towers Watson)
Corporate Pension Funded Status Improves in July (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans increased by $4 billion during July ... The funded status deficit declined to $282 billion from $286 billion at the end of June due to strong July investment gains.... As of July 31, the funded ratio rose to 83.7%, up from 83.5% at the end of June. The funded ratio has been teetering between 83% and 84% over the first seven months of the year." (Milliman)
The Multiemployer Pension System: Simulations of the Status Quo (PDF)
"This paper presents simulations of the multiemployer pension system under various sets of assumptions, so as to assess the range of possible outcomes should the basic features of the multiemployer system remain unchanged. Metrics presented include the number of plans projected to become insolvent, the number of participants in these plans, and the projected year of insolvency of the PBGC's multiemployer guarantee fund. The simulations were performed using the Multiemployer Pension Simulation Model (MEPSIM) ... [which] simulates almost all of the 1,300 plans in the multiemployer universe, excluding only those plans that lack sufficiently complete 5500 data." (The Pension Analytics Group)
Pension Plan Funded Status Decreases (PDF)
"During the second quarter of 2017 (Q2 2017), the funded status of the model pension plan ... fell by 2 percentage points, to 82 percent, due to a 5 percent liability increase offsetting a 3 percent rise in asset value." (Sibson Consulting and Segal Marco Advisors)
New York's Soaring Pension Bills
"The latest Empire Center for Public Policy report on New York's soaring pension costs focuses on six-figure retiree payouts, which have now crossed the 3,000 mark. It's a telling sign of how public employees continue to collect benefits far greater than most private-sector workers -- at a huge cost to the taxpayers.... Many of the latest additions are Long Island police and firefighters (whose salaries are also well above the national and even state average)." (Manhattan Institute for Policy Research)
Statement by PBGC on Avaya's Pension Plans and the Company's New Plan to Emerge from Bankruptcy
"Under Avaya's new plan of reorganization, the company will keep its hourly pension plan but seek bankruptcy court approval to terminate and transfer its plan for salaried employees to PBGC. The new plan of reorganization is subject to approval by the bankruptcy court. Included in the company's new reorganization plan is an agreement between Avaya, its first lien secured creditors and PBGC. The agreement specifies the recovery amounts that PBGC would receive on its claims against Avaya if the company's application to terminate the pension plan for salaried employees is approved. At this time, the Avaya pension plans remain ongoing and under the responsibility of Avaya." (Pension Benefit Guaranty Corporation [PBGC])
University of California Leads on Pension Loans, Are 401(k) Plans Next?
"The University of California began internal borrowing to pay pension costs six years ago ... 35 percent of the 6,411 eligible UC new hires chose a 401(k)-style individual investment plan, instead of a pension, during the first 10 months of the new program that began last year ... A new pension funding plan approved by UC Regents last month -- increasing the total loans to $6.4 billion and raising employer rates from 14 percent of pay to 15 percent -- only assumes 20 percent of new hires will choose the 401(k)-style plan." (Calpensions)
First Circuit Opinion: Jurisdiction Exists for Multiemployer Plan Post-Judgment Action to Impose Withdrawal Liability on Successor Employer (PDF)
21 pages. "[It is uncontroverted in the First Circuit] that a plaintiff may seek to impose ERISA liability on an alter ego of the employer that formally bears the obligations imposed by the statute. The dispute here concerns the Fund's attempt to do so in a new action brought subsequent to a judgment against the signatory employer.... Here, the Fund maintains that N&D was -- at the pertinent times -- the same company as D&N and, as such, bore the same obligation under ERISA for the payment of that liability.... The Fund's claim against N&D was thus anchored in ERISA and premised on N&D's de facto status as an ERISA employer, and not ... on alleged wrongful conduct outside the scope of the federal statute." [New England Teamsters and Trucking Industry Pension Fund v.N&D Transportation Co., No. 15-2553 (1st Cir. Aug. 2, 2017)] (U.S. Court of Appeals for the First Circuit)

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