Speakers on a PGIM Fixed Income webcast offered practical steps pension plan sponsors can take today and over time to protect funding levels; they suggested liability-driven investing is a smart way to “get off the funded-status rollercoaster.”
Tag: DB plans
A new EBRI research report compares the outcomes of participants in automatic enrollment 401(k) plans versus defined benefit (DB) plans; when reducing the rate of return assumptions and utilizing current annuity purchase prices, results show that in many cases the automatic enrollment 401(k) plans lose their comparative advantage to the stylized, final-average DB plans.
Stronger equity markets pushed pension funding up 2% to 3%, according to firms that monitor defined benefit plan funded status, but plan sponsors should continue to watch market volatility.
“Equity exposure weighed on plan performance in the fourth quarter,” says Jason Schwarz, president, Wilshire Analytics and Wilshire Funds Management.
“Fixed income was something of a safe harbor in the fourth quarter, and Corporate ERISA plans benefited from larger allocations to bonds,” says Bill Frieske, with Northern Trust.
The Pension Benefit Guaranty Corporation has added fiduciary breach cases to the categories of disputes covered by the mediation program.
According to a report from the National Institute of Retirement Security, “Retirees with DB pensions know they are receiving a steady check despite economic conditions. In contrast, retirees may be reluctant to spend out of their 401(k)-type accounts if their savings are negatively impacted by market downturns.”
Consultants say market losses for U.S. pension plans in December were the worst in a decade.
While the pension deficit for the Fortune 1000 plans Willis Towers Watson tracks is projected to be only slightly lower than the deficit at the end of 2017, pension plan assets declined sharply at the end of 2018.
Mercer recommends 10 areas of focus for defined benefit plans in 2019.
Cases have been filed against MetLife, Pepsi and American Airlines saying the use of outdated mortality tables in determining annuity payments causes retirees to lose part of their vested retirement benefits.
The new instructions include an expanded list of common filing errors.
A new table will be used for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2019.
Firms that monitor defined benefit (DB) plan funded status reported slight gains for the month.
Willis Towers Watson offers 10 investment actions for DB plans in 2019.
ASOP 51 requires actuaries performing valuations for defined benefit plans to identify risks that, in the actuary’s professional judgment, may reasonably be anticipated to significantly affect the plan’s future financial condition, and Eric Keener, with Aon, says this may help plan sponsors avoid adverse actions.
Entities that monitor defined benefit (DB) plan funded status noted that the decline could have been worse had interest rates not increased and pushed down plans’ liabilities.
An article by Brian Donohue, partner at October Three Consulting, discusses how a funding surplus can pose a challenge to DB plan sponsors’ risk transfer or plan termination actions and what they can do to mitigate this problem.