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All News > Funding of DB Plans

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AT&T Sued Over 2023 Pension Risk Transfer
October Three Consulting Link to more items from this source
Mar. 18, 2024

"The lawsuit represents the first major challenge to a risk transfer of defined benefit plan obligations to a 'private equity-backed' insurer. It alleges that, in selecting Athene for this risk transfer, defendants breached their ERISA fiduciary duties of loyalty and prudence and, under [DOL] Interpretive Bulletin 95-1, their obligation to select the 'safest available annuity.' " [Piercy v. AT&T Inc., No. 24-10608 (D. Mass. complaint filed Mar. 11, 2024)]

Tags: Fiduciary Duties  •  Funding of DB Plans

Association of BellTel Retirees Points to Red Flags in Verizon PRT Deal
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 18, 2024

"In response to last week's announcement that Verizon Communications Inc. completed a $5.9 billion pension risk transfer to Prudential Insurance Co. and RGA Reinsurance Co., leaders of the Association of BellTel Retirees are calling for renewed protection of Verizon retirees' pension assets."

Tags: Fiduciary Duties  •  Funding of DB Plans

Competitive Pension Risk Transfer Costs Increase from 101.8% to 102.1% in February
Milliman Link to more items from this source
Mar. 18, 2024

"During February, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased from 101.8% of a plan's accounting liabilities (accumulated benefit obligation, or ABO) to 102.1% of those liabilities. That means the estimated retiree PRT cost is now 102.1% of a plan's ABO."

Tags: Funding of DB Plans

Editor's Pick AT&T and Lockheed Martin Face Class Actions Over Pension Risk Transfers to Athene
Thompson Hine Link to more items from this source
Mar. 15, 2024

"The lawsuits come at a time when plan sponsors, due to a range of factors including the relatively favorable interest rate environment, have an increased interest in de-risking activities ... [T]he industry awaits an overdue report from the [DOL] to Congress on existing guidance on fiduciary duties under [ERISA] when selecting an annuity provider that may preview changes to that guidance.... [T]he outcome of these cases and the report to Congress could have far-reaching implications for sponsors and plan fiduciaries engaging in PRTs." [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)]

Tags: Fiduciary Duties  •  Funding of DB Plans

Former Pension Plan Participants Sue Lockheed Over Athene Risk Transfer
planadviser Link to more items from this source
Mar. 15, 2024

"This is the second major lawsuit this week related to a plan sponsor's choice of Athene to conduct a PRT.... The lawsuit ... alleges that the choice of Athene was not compliant with the [DOL's] Interpretive Bulletin 95-1, which mandates that plan sponsors must 'take steps calculated to obtain the safest annuity available, unless under the circumstances it would be in the interest of participants and beneficiaries to do otherwise.' " [Konya et al. v. Lockheed Martin Corp., No. 24-0750 (D. Md. complaint filed Mar. 13, 2024)]

Tags: Fiduciary Duties  •  Funding of DB Plans

What Employers Sponsoring Defined Benefit Pension Plans Should Know About Class Actions Challenging Plan Assumptions
Jackson Lewis P.C. Link to more items from this source
Mar. 15, 2024

"The 'actuarial equivalence' cases allege that plan sponsors or fiduciaries violate ERISA by adopting unreasonable actuarial assumptions.... [P]lan sponsors have responded that ERISA does not prescribe any kind of reasonableness requirement when mandating that actuarial assumptions be used.... Courts are split on the issues."

Tags: Funding of DB Plans  •  Retirement Plan Administration  •  Retirement Plan Design

Annuity Purchase Update, March 2024
October Three Consulting Link to more items from this source
Mar. 15, 2024

"The outlook for plan sponsors appears promising for plan sponsors as interest rates, market activity, and pension funding improved this last month. Annuity purchase cost for retiree placements completed by October Three Annuity Services was on average 101.2% of the pension accounting value."

Tags: Funding of DB Plans

AT&T Sued by Participants Over 2023 Pension Risk Transfer with Athene Annuity and Life
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 14, 2024

"After conducting an $8.05 billion pension risk transfer in May 2023 and offloading 96,000 of its plan participants and beneficiaries, AT&T Inc. was sued by four former participants ... The former participants ... claimed that AT&T's decision to conduct the PRT with Athene Annuity and Life Company placed its retirees in danger and that AT&T and its independent fiduciary, State Street Global Advisors Trust Co., stood to gain from the transfer. " [Piercy v. AT&T Inc., No. 24-10608 (D. Mass. complaint filed Mar. 11, 2024)]

Tags: Fiduciary Duties  •  Funding of DB Plans

Joint Board for Enrollment of Actuaries Proposes Eliminating Physical Presence Rule for CPE Programs
American Retirement Association [ARA] Link to more items from this source
[Guidance Overview]
Mar. 14, 2024

"The new proposed regulations would apply to CPE credits earned for programs held during the period from Jan. 1, 2023, through the date that is 30 days after the publication of the Treasury decision finalizing these proposed regulations. The extended -- a.k.a. permanent -- waiver of the 'physical presence' requirement would apply to active enrolled actuaries."

Tags: Funding of DB Plans  •  Health Plan Administration  •  Retirement Plan Administration

NEPC's Pension Monitor, February 2024
NEPC Link to more items from this source
Mar. 13, 2024

"In February, pension plan sponsors experienced higher liability discount rates amid a rise in interest rates.... NEPC's hypothetical total-return pension plan experienced an improvement of 3.8% in funded status compared to an increase of 1.9% for [the] LDI-focused plan."

Tags: Funding of DB Plans

Now Is the Time for Pension Plan Sponsors to Explore De-Risking Strategies
Segal Link to more items from this source
Mar. 13, 2024

"Since late 2022, interest rates have risen to levels not seen in more than 15 years. Over that period, most pension plans have become more demographically mature, which makes them more vulnerable to risk factors such as investment return volatility and changing interest rates. The current interest rate environment provides opportunities to reduce pension plan risk that may have been untenable when interest rates were lower"

Tags: Funding of DB Plans

Text of PBGC Interest Rate Assumptions for Valuing Benefits in Single-Employer Plans, Second Quarter 2024
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Mar. 12, 2024

"The second quarter 2024 interest assumptions will be 5.50 percent for the first 20 years following the valuation date and 4.83 percent thereafter. In comparison with the interest assumptions in effect for the first quarter of 2024, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), an increase of 0.05 percent in the select rate, and a decrease of 0.39 percent in the ultimate rate (the final rate)."

Tags: Funding of DB Plans

Pension Funding Index, March 2024
Milliman Link to more items from this source
Mar. 8, 2024

"The funded status of the 100 largest U.S. corporate defined benefit pension plans improved by $26 billion during February ... An increase in the benchmark corporate bond interest rates used to value pension liabilities caused these liabilities to drop $30 billion for the month. As of February 29, the funded ratio for the Milliman 100 plans rose to 104.9%, up from 102.8% at the end of January,"

Tags: Funding of DB Plans

PBGC Sues to Terminate New York City Non-Profit DB Plan
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 6, 2024

"The Sheltering Arms organization shut down in 2023, and the PBGC seeks to become its defined benefit plan's statutory trustee." [PBGC v. Sheltering Arms Children and Family Services, Inc., No. 24-1608 (E.D.N.Y. complaint filed Mar. 4, 2024)]

Tags: Funding of DB Plans  •  PBGC

Pension Finance Update, February 2024
October Three Consulting Link to more items from this source
Mar. 6, 2024

"After a quiet January, pensions enjoyed a strong month in February, as higher interest rates accompanied higher stock markets. Both model plans ... gained ground last month: traditional Plan A improved 5% and the more conservative Plan B gained more than 1% during February."

Tags: Funding of DB Plans

U.S. Corporate Pension Plans Funding Status, February 2024
Wilshire Associates Link to more items from this source
Mar. 6, 2024

"The aggregate funded ratio for U.S. corporate pension plans increased by an estimated 3.4 percentage points in February, ending the month at 109.4% ... This month's change in funded ratio can mostly be attributed to a 2.8 percentage point decrease in liability value and a 0.2 percentage point increase in asset value. The aggregate funded ratio is estimated to have increased by 4.4 and 8.3 percentage points year to date and over the trailing twelve months, respectively."

Tags: Funding of DB Plans

For Most Workers, the Value of Alaska's Defined Contribution Plan Surpasses That of a Traditional Pension
Reason Foundation Link to more items from this source
[Opinion]
Mar. 4, 2024

"Lawmakers in Alaska continue to evaluate a proposal to bring the state’s teachers, police, firefighters, and other public workers back into a defined benefit (DB) pension structure. Before this significant, and potentially very costly decision is made, policymakers should examine the differences in value to employees between the current defined contribution (DC) structure and the proposed defined benefit pension."

Tags: Funding of DB Plans  •  Retirement Plan Design  •  State and Local Government Plans

Central States Pension Fund Letter Requesting DOL, Treasury Guidance on Voluntary Repayment of SFA Payments for Deceased Participants (PDF)
Central States, Southeast and Southwest Areas Pension Fund Link to more items from this source
Mar. 1, 2024

"Although PBGC's regulations provide the agency authority to reclaim SFA payments in certain circumstances, PBGC has stated that it lacks the authority to recoup the $127 million at issue. Consequently, the Fund has considered whether it can voluntarily return a portion of the SFA but has concerns that doing so could potentially have severe consequences, including personal liability for the Fund's fiduciaries and the loss of the Fund's tax-exempt status. Therefore, we request formal guidance answering two key questions. [1] Would the Fund violate the exclusive benefit rule under ERISA Section 403 and Code Section 401(a)(2) by returning a portion of the SFA?.... [2] Would the fiduciaries of the Fund violate their duties of prudence and loyalty under ERISA Section 404 by returning a portion of the SFA?"

Tags: Funding of DB Plans  •  Multiemployer Plans  •  PBGC

FAS87 ASC715 Discount Rates and Moody's Rates, February 29, 2024
BenefitsLink Message Boards Link to more items from this source
Mar. 1, 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).

Tags: Funding of DB Plans

Public Pension Funded Ratio Dips to 77.7% After Flat January Returns
Milliman Link to more items from this source
Feb. 28, 2024

"During January, the ... funded ratio declined slightly, from 78.2% at the end of December to 77.7% as of January 31, 2024.... [T]he plans returned an estimated 0.0% in aggregate for January ... [The] plans lost $11 billion in market value in January, on top of a net negative cash flow of approximately $9 billion, and the gap between assets and liabilities widened $33 billion to $1.389 trillion as of January 31."

Tags: Funding of DB Plans  •  State and Local Government Plans

Reducing PBGC Premiums in 2024 (and 2023): The Standard/Alternative Method Election
October Three Consulting Link to more items from this source
Feb. 26, 2024

"For 2024, the spread between the amount of premiums paid under the standard method vs. the alternative method is only about one-third as large, but this can still translate to millions of dollars for some plans. And, some sponsors who did not (or were unable to) elect the standard method for 2023 may still be able to reduce their 2023 PBGC variable-rate premium in certain circumstances."

Tags: Funding of DB Plans  •  PBGC

IRS Issues Final Regs on Minimum Present Values
Mercer Link to more items from this source
[Guidance Overview]
Feb. 22, 2024

"[T]he final rules include new and welcome flexibility for DB plan sponsors to change Section 417(e) rates used for other purposes. The changes are generally optional and unlikely to have a significant effect on participant benefits. Accordingly, many plan sponsors may simply decide to leave plan administration unchanged. However, certain contributory plans and plans that haven't been treating Social Security level-income options (SSLIOs) as subject to Section 417(e) may need to change procedures."

Tags: Funding of DB Plans

New IRS Mortality Tables: What Should Plan Sponsors Do Now?
Bolton Link to more items from this source
[Guidance Overview]
Feb. 22, 2024

"[E]xpected lifetimes under the IRS mortality tables for 2024 are generally shorter than those under the IRS mortality tables for 2023. Depending on the plan's demographics, this will roughly translate to a decrease in the funding target liability of about 1.0% to 2.5% and a decrease in the target normal cost of about 0.5% to 2.5%. However, plans with younger demographics could see increases in the liability and normal cost when changing from a static table to the generational mortality table."

Tags: Funding of DB Plans

Multiemployer Pension Funding at 89% in Aggregate at Year-End 2023
Milliman Link to more items from this source
Feb. 22, 2024

"The rise in aggregate funding is largely the result of investment gains ... plus continued special financial assistance (SFA) under the American Rescue Plan Act. As of year-end 2023, 69 plans in total have received nearly $54 billion in SFA funding, including $45 billion paid during 2023. Without the SFA program, the aggregate funded percentage ... would be approximately 83%."

Tags: Funding of DB Plans  •  Multiemployer Plans

IRS Updates Final Rules on Minimum Present Value Calculations for Defined Benefit Plans
Buck Link to more items from this source
[Guidance Overview]
Feb. 21, 2024

"The changes, which must be applied to annuity starting dates in October 2024 or later, finalize PPA changes to the interest rates and mortality tables used to value lump sums and certain other accelerated distributions, and address the treatment of preretirement mortality discounts and social security level income (SSLI) options."

Tags: Funding of DB Plans

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