News

"Strong equity returns in March and throughout the first quarter of the year contributed to pension surpluses. Strategists are recommending corporate pension sponsors consider making liability-matching allocations to maintain funding levels when anticipated rate cuts materialize later this year."

"The average annuity purchase interest rates in April have remained consistent with the ongoing trend, with the average duration 7 rate at 4.80% and the average duration 15 rate at 4.74%, making it an opportune time to purchase annuities."

"[PBGC] has approved the application submitted by the United Food and Commercial Workers Union Local 152 Retail Meat Pension Plan. The plan, based in Mount Laurel, New Jersey, covers 10,252 participants in the service industry.... The plan was projected to become insolvent and run out of money in 2029."

"[PBGC] has approved the application submitted ... by the Teamsters Union Local No. 73 Pension Plan. The plan, based in Valley View, Ohio, covers 529 participants in the transportation industry.... The plan was projected to become insolvent and run out of money in 2038."

"The arbitrator and the district court [held] that by remitting contributions for the hauling work, the employer by its conduct effectively amended the CBA to require contributions for the hauling work, and therefore, those contributions were properly included in calculating the employer's withdrawal liability. The Seventh Circuit reversed, explaining that ... 29 U.S.C. Section 1145 requires that any changes regarding the obligation to contribute to an ERISA plan must be in writing." [Bulk Transp. Corp. v. Teamsters Union No. 142 Pension Fund, No. 23-1563 (7th Cir. Mar. 22, 2024)]

"A 'surplus' management strategy may include contribution adjustments, risk reduction strategies, and benefit enhancements, which are intended to preserve the current plan 'surplus' and/or reduce the risk of future funded status and contribution volatility."

"Wilshire estimates that the aggregate funded ratio was 74.8% at FYE 2023, which represents an 0.4% decrease from FYE 2022. Wilshire's estimate of the aggregate funded ratio as of March 31, 2024 (i.e., the most recent quarter-end as of this publication) is 83.2%. The 8.4% increase from our FYE 2023 measurement stems primarily from strong performance across most asset classes. This rise was notably driven by the FT Wilshire 5000 Index, which saw its best quarterly return in the fourth quarter of 2023 since the fourth quarter of 2020."

"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates ... and the 24-month average segment rates ... [as well as] the interest rate on 30-year Treasury securities ... as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate[.]"

"In a matter of first impression for federal courts, the Northern District of Illinois found that a pension fund cannot use post-2014 contribution rate increases made pursuant to a rehabilitation plan to calculate an employer’s withdrawal liability payment amount. This decision represents a major victory for employers faced with inflated withdrawal liability demands." [Central States, Southeast and Southwest Areas Pension Fund v. Event Media, Inc., No. 22-6133 (N.D. Ill. Mar. 29, 2024)]

"[1] [DOL] Interpretive Bulletin 95-1.... [2] Private equity's role in pension risk transfers.... [3] Reinsurance.... [4] Hibernation remains a viable alternative.... [5] IBM reopens pension plan.... [6] Lockheed Martin and AT&T lawsuits."

"Pension finances enjoyed incremental improvement in March, rounding out another solid quarter. Higher stock markets outpaced higher liabilities, producing improvement in funded status of less than 1% for both model plans ... During the first quarter, Plan A improved 6% while the more conservative Plan B was up close to 2%."

"The Central States, Southeast and Southwest Areas Pension Plan (Central States) has entered into a civil settlement agreement pursuant to which it has agreed to repay more than $126.5 million in excess funds that it received from the [PBGC] in connection with the PBGC's Special Financial Assistance Program.... The resolution obtained in this matter was the result of a coordinated effort between the Justice Department's Civil Division, Commercial Litigation Branch, PBGC-OIG and PBGC Office of General Counsel, along with the [DOL] and Department of Treasury."

"Judge Nelson S. Roman ... [wrote that] the IBM Personal Pension Plan 'statute of limitations is enforceable' ... The lawsuit had argued IBM and the plan administrator committee violated provisions of ERISA when using outdated mortality assumptions when calculating joint and survivor benefits for participants." [Knight v. International Business Machines Corp., No. 22-4592 (S.D.N.Y. Apr. 4, 2024)]

"In their letter, the lawmakers ask the Solicitor of Labor 'what advice and legal interpretations' she and her office provided to the PBGC 'regarding its legal authority to recapture these overpayments from both before and after DOL's (guidance).' The lawmakers also wrote that they're 'interested in how (the office of the solicitor) helps to guide PBGC in providing information to the committee and other interested parties.' "

"The funded status surplus improved to $73 billion from $68 billion at the end of February 2024, due to strong investment returns that offset rises in plan liabilities incurred during March. Plan liabilities increased due to a decline in the benchmark corporate bond interest rates used to value pension liabilities. As of March 31, the funded ratio rose to 105.6%, from 105.3% at the end of February."

"In April 2023, AT&T offloaded over $8 billion of its Plan pension liabilities through a pension risk transfer by purchasing group annuity contracts ... The suit alleges that the transfer allowed AT&T to profit by more than $363 million and that State Street, an independent fiduciary of the plan, was paid to assess, recommend, and bless the transaction, and profited from the transfer.... There are now three recent suits in different district courts regarding a breach of fiduciary duty for pension risk transfers[.]" [Piercy v. AT&T Inc., No. 24-10608 (D. Mass. complaint filed Mar. 11, 2024)]

"The aggregate funded ratio for U.S. corporate pension plans increased by an estimated 1.0 percentage points in March, ending the month at 110.1% ... This month's change in funded ratio resulted from a 1.7 percentage point increase in asset value partially offset by a 0.8 percentage point increase in liability value."

"Long-term pension solvency demands funding discipline and proper methods. Local governments in Missouri need to wean themselves off fines and fees to cover pension costs and instead pay for their pension promises out of general appropriations. Claims that a failure to rededicate fine and fee revenue to pensions will force those pension systems to insolvency are simply false:"

"If these cases move past a motion to dismiss, there is a high risk that similar cases will follow, particularly if the annuity provider is not a traditional insurer. The Courts of Appeals, or even the Supreme Court, may need to weigh in before Article III standing in these new pension risk transfer transaction cases is resolved. If the lower courts rule that allegations of an annuity provider being 'too risky' or 'non-traditional' are enough to satisfy Article III standing, it is likely that additional annuity providers will be targeted, and additional large pension risk transfer transactions will be challenged in class actions."

"[T]he Court upheld the ACERA Board's fiduciary authority and discretion to maintain its longstanding Percentage of Payroll methodology for funding the retirement system. The Court also affirmed the Board's right not to continue to study how much its participating employers might have paid to ACERA in the past, or may pay to it in the future, using a different funding methodology that the Board has not adopted." [Alameda Health System v. Alameda County Employees' Retirement Ass'n, No. A165587 (Calif. First DCA, Div. 2 Mar. 27, 2024)]

An unofficial monthly report 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).

"AT&T and Lockheed Martin both used the same insurance provider for their PRTs which plaintiffs characterized as a 'risky new insurance company' and not 'the safest annuity available' as [Interpretive Bulletin 95-1] would require. It is not clear whether similar concerns would be voiced with other insurance providers or if these cases are outliers based on a particular provider." [Piercy v. AT&T Inc., No. 24-10608 (D. Mass. complaint filed Mar. 11, 2024); Konya et al. v. Lockheed Martin Corp., No. 24-0750 (D. Md. complaint filed Mar. 13, 2024)]

"To determine how excess plan funds can be exhausted, which may include a reversion to the plan sponsor, there are seven possibilities to consider. As always, the place to start with any retirement plan issue is to answer the question: what does the plan say?"

"The lawsuits manifest an ongoing [DOL] project to revisit the nearly 30-year-old guidance that instructs plans to choose the 'safest available annuity' when shedding pension risks. Insurance lobbyists believe the rules should remain unchanged, while consumer activists want to protect savers from recent industry developments like private equity buy-outs and off-shore re-insurance investments.... Until regulators weigh in, the emerging trend of private-sector corporate litigation will grow."

"Aon attributed the growing interest in PRT to three factors: funded status improvement, rising interest rates and increasing [PBGC] premiums.... However, newer entrants to the PRT market, backed by parent companies associated with private equity, have caused some stakeholders to ask for a closer review of the [DOL's] Interpretative Bulletin 95-1, which gives guidance on selecting the 'safest available' insurer for a PRT. "