“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.
Institutional assets tracked by Wilshire Trust Universe Comparison Service (Wilshire TUCS) posted an all-plan median return of 0.88% for second quarter.
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.
A partner at Ivins, Phillips & Barker discusses why defined benefit plan sponsors should consider accelerating their funding—and how to do so.
“The pattern of improvement paused last month owing to a dip in discount rates, but aggregate funded status remains near a four-year high as the long bull market continues to persist,” says Matt McDaniel, a partner in Mercer’s US Wealth business.
Although increasing pension contributions was not a primary consideration in the decision to lower the corporate tax rate in the Tax Cuts and Jobs Act, it is a positive unintended consequence.
The 6th Circuit noted that Firestone Tire & Rubber Co. v. Bruch, in which an arbitrary-and-capricious standard of review is required by the court if the plan “gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,” should have been used by the district court.
According to MetLife, the pension risk transfer (PRT) agreement involves pension obligations of $6 billion.
Corporate and health care plans fared the worst, with quarterly returns of -1.14% and -0.71%, respectively.
Firms that track defined benefit (DB) plan funded ratios also noted that slight gains in equity markets improved plans’ funded status during the month.