Tag: DB plans
Some disclosure requirements are removed from Subtopic 715-20, Compensation—Retirement Benefits—Defined Benefit Plans—General, and some requirements are added.
The PBGC is proposing in a renewal request that all reportable events filings include controlled group information, company financial statements, and the plan’s actuarial valuation report.
If interest rates continue to rise, this may have a negative impact on equity valuations; consequently, according to Goldman Sachs research, the present period may represent a limited window for optimal pension risk transfer actions.
A table on the PBGC’s website shows that the flat-rate premium for single-employer plans has grown from $31 in 2007 to $80 in 2019, and the variable-rate premium has grown from $9 to $43.
Some firms that track pension funded status point out that plan sponsors should prepare for changes in the future as a market correction is expected and funding relief fades and higher plan sponsor contributions will be required.
Corporate plans have significantly increased their U.S. fixed income allocation, while public plans have used the funds from U.S. equity and placed them into alternatives, Investment Metrics finds.
“While PRT can be a highly effective tactic for plan sponsors to reduce risk and shift liabilities off their books,” MassMutual says, “it’s possible to increase pension costs and risks if a PRT is not executed with long-term goals in mind.”
The aggregate funded ratio is up 6.1 percentage points year to date, according to Wilshire Consulting.
Among other things, a federal appellate court rejected a district court’s decision that the PBGC standards for establishing successor liability are outlined in the Multiemployer Pension Plan Amendment Act of 1980 (MPPAA) and do not apply to single-employer plans.
“Tax reform has allowed plan sponsors to take advantage of a higher deduction. Doing so may mitigate the need for higher contributions in the future,” says Alexa Nerdrum, managing director, retirement at Willis Towers Watson.
Vanguard research explains how CITs and mutual funds are just as beneficial.
DB plan funded status reached a five-year high in July.
Corporate DB plans have experience funded status improvement, and LDI strategies help plan sponsors preserve this; however, investment committees are looking for new asset classes that can provide greater returns at a reasonable level of risk.
As more marketable obligations—such as those for in-pay retirees—are transferred to insurers, residual DB plans will have unusual and idiosyncratic features that make them more difficult to manage, which will drive pension investing to a “hibernation” focus for many, Mercer says.
However, firms that track DB funded status report 2% gains for the quarter and up to 6% for the year.
A newly filed challenge to St. Joseph Health Services of Rhode Island’s retirement plan claims the plan at some point failed to be a church plan, and entities administering or associated with the plan hid this to keep from adhering to funding rules as defined by ERISA.
The complaint alleges that at a certain point, the plan lost its church plan status as defined by ERISA and was required to adhere to ERISA funding rules.