Actuarial solution results in larger opportunities

Milliman was recently retained by a multinational company to provide actuarial services for its retirement programs in six countries. This article by Danny Quant highlights how Milliman’s solution turned the initial valuation contract into broader consulting opportunities.

2017 starts with corporate funded status improvement of $9 billion

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. The year 2017 opened optimistically with the funded status for these pension plans improving by $9 billion due to January’s investment gain of 0.87% as well as a small rise in corporate bond rates used to value pension liabilities. As a result, the funded ratio for these plans climbed 0.5% to 81.6% from 81.1% in December 2016.

January marks the fifth straight month of funded status improvement with discount rates once again returning to 4.0% – albeit barely. And with investment returns coming in above expectations, 2017 seems like it’s off to a positive start for pensions.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.55% by the end of 2017 and 5.15% by the end of 2018) and asset gains (11.2% annual returns), the funded ratio would climb to 92% by the end of 2017 and 105% by the end of 2018. Under a pessimistic forecast (3.45% discount rate at the end of 2017 and 2.85% by the end of 2018 and 3.2% annual returns), the funded ratio would decline to 75% by the end of 2017 and 69% by the end of 2018.

Iowa Sheet Metal Workers Local Union No. 263 taps Milliman for its defined contribution services

Milliman today announced it has added the Iowa Sheet Metal Workers Local Union No. 263 as a defined contribution client. The plan covers collectively bargained members in the state of Iowa, with approximately 450 participants and $20 million in plan assets.

Milliman is providing recordkeeping and communication services for the union’s retirement savings plan. DiMeo Schneider provides investment consulting services and Benefits Management Group, Inc. provides administration for the plan. Both assisted with the search.

Milliman is committed to the Taft-Hartley community, and everything about our business model revolves around strong client service. We believe this has a lot of appeal to plan trustees. Our value proposition is more than a commodity service, and the trustees clearly appreciated our client support team.

Public pension funding status inches back down in Q4 as asset returns fall short of benchmark

Milliman today released the fourth quarter results of its Public Pension Funding Index (PPFI), which consists of the nation’s 100 largest public defined benefit pension plans. By December 31st 2016, the funded ratio of these plans had fallen to 70.1%, down from 71.0% at the end of September. The funded status declined by $54 billion, the result of modest investment returns for the fourth quarter that fell short of their quarterly benchmark.

The robust market performance seen post-election helped moderate the losses suffered in October, with Q4 investment returns of about 0.45% in aggregate for the quarter. If the recent surge in the equity market holds up and interest rates remain stable, the returns in 2017 Q1 should be much more promising.

The Milliman 100 PPFI total pension liability (TPL) increased from $4.620 trillion at the end of Q3 to an estimated $4.659 trillion at the end of Q4. The TPL is expected to grow modestly over time as interest on the TPL and the accrual of new benefits outpaces the benefits paid to retirees.

To view the Milliman 100 Public Pension Funding Index, click here. To receive regular updates of Milliman’s pension funding analysis, email us.

Preparing a pension plan termination

The process of terminating a defined benefit (DB) plan is lengthy, time-consuming, and costly. An actuary, trust custodian, attorney, trustee, and investment advisor can assist with many of the duties. In this DB Digest article, Milliman’s Stephanie Sorenson discusses the multiple tasks that plan administrators must accomplish in preparation for a plan termination.

Here’s an excerpt:

Data
It is important to review and validate the participant data. Quality data is critical to the termination process. Insurer quotes will reflect the accuracy, actual or perceived, of the data provided to them.

Also the Pension Benefit Guaranty Corporation (PBGC) requires that the plan sponsor maintain the participant and plan data for six years after plan termination (the date on which PBGC Form 501 is filed). The data should be gathered during the plan termination process and remain accessible during the six-year period.

Does the data have valid identification numbers for all participants? Does the data contain valid dates of birth, hire, participation, and termination? If not, review employment records and update.

Does the data include addresses for all participants and beneficiaries? Are the addresses valid? Do any participants reside outside the United States? Many notices are required to be sent during the termination process. An address and death search for all inactive participants may be prudent.
Verifying addresses prior to termination can save time and frustration.

Have all of the accrued benefits been calculated and certified? If yes, does the data include the information that was used to calculate the stored accrued benefit? During the termination process, a Notice of Plan Benefits will need to be supplied to all participants. This notice is required to provide the personal data used to calculate the participant’s accrued benefit along with a statement requesting that the participant correct any information they believe to be incorrect. If the plan has frozen accrued benefits but the calculation data is not available, the best available data must be provided to the participant on the Notice of Plan Benefits along with a statement giving the participant the opportunity to provide the missing data.

If benefits are not calculated and certified, does the data contain all of the information necessary to calculate the benefits? Final benefits will need to be calculated, not estimated, for all participants.

Data is fluid and constantly changes. Participants move, die, quit, get married/divorced, and retire during the termination process. Ensuring and maintaining accurate data is key to preparing for a plan termination.

Retirement plans: Key dates and deadlines for 2017

Milliman has published 2017 retirement plan calendars for single-employer defined benefit (DB) plans, multiemployer DB plans, and defined contribution (DC) plans. Each calendar provides key administrative dates and deadlines.

2017 single-employer DB calendar
2017 multiemployer DB calendar
2017 DC plans calendar

Along with downloading each calendar, be sure to follow us at Twitter.com/millimaneb where we tweet upcoming dates and deadlines for plan sponsors.