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All News > Funding of DB Plans

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Terminating an Overfunded Pension Plan: Who Gets the Excess?
USI Consulting Group Link to more items from this source
Mar. 28, 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?"

Tags: Funding of DB Plans  •  Retirement Plan Administration

Athene-Linked Pension Cases Strike at Need for New DOL Guidance
Bloomberg Law Link to more items from this source
Mar. 27, 2024

"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."

Tags: Funding of DB Plans  •  Retirement Plan Investments

Aon Projects PRT Market Will Again Climb Above $40B in 2024
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 27, 2024

"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. "

Tags: Funding of DB Plans  •  Retirement Plan Investments

Minimum Funding 2024: Interest Rate Relief Is Over (for Now)
October Three Consulting Link to more items from this source
Mar. 27, 2024

"For more than a decade, 'interest rate relief' has cushioned the effect of declining interest rates on defined benefit plan liability valuations, by providing a floor on rates equal to the average of rates over the prior 25 years. Recent increases in interest rates have, however, brought them in line with the 25-year average ... [If] rates continue to rise, 25-year average funding 'relief' may in some cases actually limit a DB plan's ability to recognize that increase."

Tags: Funding of DB Plans

Taking Stock: The Current State of Corporate Pension Plans
NEPC Link to more items from this source
Mar. 27, 2024

"A gamut of factors -- higher discount rates, shrinking pension liabilities, a continued focus on liability hedging, a reduced reliance on public equities, and greater market capitalizations for plan sponsors -- have diminished the volatility that was often associated with corporate pension plans. As a result, ... plans are less likely to impact the balance sheets of corporate plan sponsors."

Tags: Funding of DB Plans

Schlichter Explores Pension Risk Transfer Lawsuit Against Alcoa
InvestmentNews; subscription may be required Link to more items from this source
Mar. 26, 2024

"The law firm that seems ready to make pension risk transfers its next big focus of class actions -- Schlichter Bogard -- last week posted an ad ... seeking Alcoa retirees and pension beneficiaries to join a case that so far has not been filed. Schlichter Bogard is behind the lawsuit against Lockheed as well as one of the two cases against AT&T."

Tags: Fiduciary Duties  •  Funding of DB Plans  •  Retirement Plan Investments

AT&T and Lockheed Suits Mark First Real Test for Pension Transfers
Bloomberg Law Link to more items from this source
Mar. 26, 2024

"Thole could pose a big problem for the plaintiffs ... because they'll have to show a material risk that they will lose all or part of their benefits.... That would require showing that the annuity provider is likely to default, and that the relevant state insurance guaranty associations charged with protecting policyholders wouldn't be able to step in and address the situation[.]" [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: Funding of DB Plans  •  Retirement Plan Investments

Public Pension Funding Index, March 2024
Milliman Link to more items from this source
Mar. 25, 2024

"Positive overall asset performance during February 2024 increased the estimated funded status of the 100 largest U.S. public pension plans from 77.7% as of January 31, 2024, to 78.6% as of February 29, 2024[.]"

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

Central States Pension Plan Negotiating $127M SFA Repayment
PLANSPONSOR; free registration may be required Link to more items from this source
Mar. 22, 2024

"[PBGC Director Gordon Hartogensis] emphasized that neither the PBGC nor the Central States plan have made any payments to the estates of deceased participants' ... He added that '[PBGC is] implementing a repayment mechanism for any SFA amounts that were paid based on inaccurate census data,' and that Central States is currently negotiating the terms of repayment with the Civil Division of the Department of Justice."

Tags: Funding of DB Plans  •  Multiemployer Plans

Editor's Pick Pension Risk Transfers and the Continuing Concern About Buying a Pig in a Poke
The Wagner Law Group Link to more items from this source
Mar. 21, 2024

"How [to] handle the novel types of relief requested in the complaints, especially in light of the fact that no participant has yet to suffer an unpaid pension benefit, may well be important issues that the courts will want to address. As the cases move through the courts, the [DOL] will presumably continue its consideration of changes to IB 95-1 as directed by Congress in SECURE 2.0.... Further, beyond its impact on any pending litigation, the [DOL's] future report to Congress as required by SECURE 2.0 may well impact future PRTs."

Tags: Funding of DB Plans  •  Retirement Plan Investments  •  Retirement Plan Policy

PBGC Has 'Turned Around' Potential Crisis, Director Says
American Retirement Association [ARA] Link to more items from this source
Mar. 21, 2024

"[PBGC] Director Gordon Hartogensis defended PBGC actions and said that it is 'providing crucial pension relief' in a March 20 appearance before the House Subcommittee on Health, Employment, Labor, and Pensions.... Much of the discussion concerned how the PBGC has been disbursing funds through the Special Financial Assistance (SFA) program."

Tags: Funding of DB Plans  •  Multiemployer Plans  •  PBGC

PBGC Interest Rate Updates, March 2024
Pension Benefit Guaranty Corporation [PBGC] Link to more items from this source
[Official Guidance]
Mar. 21, 2024

"Updated information is now available on PBGC's website regarding the following interest rates: [1] Variable-Rate Premiums ... [2] ERISA 4044 Annuities ... [3] Late Premium Payment Interest Charges ... [4] Late or Defaulted Withdrawal Liability."

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

Text of IRS Notice 2024-29: Weighted Average Interest Rates, Yield Curves, and Segment Rates for March 2024 (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Mar. 20, 2024

"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[.]"

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

Public Pension Plan Investment Return Assumptions (PDF)
National Association of State Retirement Administrators [NASRA] Link to more items from this source
Mar. 20, 2024

Updated March 2024. "As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated, and the investment of public pension assets within a challenging investment environment."

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

Pension Risk Transfers Trigger New ERISA Litigation
American Retirement Association [ARA] Link to more items from this source
Mar. 19, 2024

"The suits -- two now targeting AT&T, the other Lockheed Martin -- acknowledge that the process itself is perfectly legal, but question the prudence of the decision to 'offload' that pension responsibility to parties -- more specifically one party in particular -- deemed less financially viable to fulfill those obligations."

Tags: Funding of DB Plans

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

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