If you’ve been out of town vacationing during the summer months and haven’t received your latest dose of retirement benefits news and views we have you covered. Check out our blog recap below.
Pension strategy is not the rule of thumb
Milliman’s John Ehrhardt spoke with Bloomberg BNA and provided his perspective regarding group annuities and lump sum payouts after GM’s and Ford’s pension settlements. The settlements come during a period of historically low interest rates, which means companies offering lump sum payouts or buying group annuities to resolve pension obligations will end up paying a high price for risk management.
Records were (unfortunately) made to be broken
The latest Pension Funding Index was released last week and July’s data shows that the nation’s largest 100 defined benefit pension plans sponsored by publicly traded corporations experienced a $120 billion decrease in funded status based on a $133 billion increase in the pension benefit obligation (PBO) and a $13 billion increase in asset value. The $120 billion decrease in funded status pushed the pension deficit to a record $533 billion, surpassing the previous record set on August 31, 2010.
Setting the discount rate for valuing pension liabilities
Milliman published the first of a two-part PERiScope series exploring recent trends and theories pertaining to the rate at which liabilities are discounted and the expected longevity of members who are receiving or are expected to receive benefits. Entitled “Setting the discount rate for valuing pension liabilities,” the first part discusses the fundamental approaches to discount rate setting, recent changes in such rates among public pension plans, and how these rates comply with Governmental Accounting Standards Board (GASB) regulations.
Pension interest rate stabilization, PBGC increases
Milliman also published a Client Action Bulletin examining new pension provisions and premium increases for Pension Benefit Guaranty Corporation (PBGC) insurance included in the “Moving Ahead for Progress in the 21st Century Act” (MAP-21).
News and views centered on defined benefit (DB) plans were the focus of our latest Retirement Town Hall discussions. If you weren’t able to read our posts as they were published, don’t fret, we have you covered.
Pension gains evaporate in May
June’s Pension Funding Index was released earlier this month, revealing that a $30 billion decline in assets and a $60 billion increase in liabilities in May combined to erase year-to-date gains in the pension funded status of the nation’s largest 100 defined benefit plans. Read the complete roundup of June’s pension funding index.
Milliman’s John Ehrhardt spoke to the Wall Street Journal and offered his perspective on GM’s decision to lock in high pension obligations. The company will make a lump sum payment option available to about 42,000 salaried retirees and enroll the remainder of salaried retirees into a group annuity purchased from Prudential Insurance Co.
Milliman Protection Strategy
We also featured a new video highlighting the Milliman Managed Risk Strategy, a sophisticated futures-based portfolio hedging strategy. The video showcases the type of risk management that saved insurers $40 billion during the 2008 economic crisis.
As we transitioned from winter to spring we’ve focused on moving from our winter of discontent toward a hopeful spring. If you haven’t been here in a while, we’ve got you covered with this Retirement Town Hall rewind.
Winter of our discontent
With the release of the 2012 Pension Funding Study, John Ehrhardt recently gave us his summary of the last year in pensions: Falling interest rates define 2011 for corporate pensions. In this post, Ehrhardt highlighted all of the major factors that led to 2011’s record funding deficit increase.
Tim Connor and Genny Sedgwick continued their series on What to Look for in 2012 with a look at Funded status and at-risk, in which they note that many plans will continue to be considered “at-risk” according to the Pension Protection Act’s definition in 2012. Further, Connor and Sedgwick anticipate that the debate over PBGC-related issues will continue through the year. Connor and Sedgwick also looked at plans De-risking in 2012 and offer several strategies plans can take to minimize and mitigate risk.
Hope springs eternal
More recently Ehrhardt’s look at the latest full month’s Pension Funding Index, Market rally and rising interest rates reduce corporate pension deficit in March, offered some hopeful news.
Enough about us…
The past few weeks have also included several opportunities for you to tell us how you see the future. First we asked How long is Social Security’s half-life? and found that a third of readers believe Social Security will make up 20%-39% of their retirement income.
Next, Julie Cannaday reminded us of The power of personal touch and asked who’s helping you plan for your retirement. This poll is still fresh so the votes are still coming in.
So now that you’re all caught up, why not share your thoughts and vote in this and other Retirement Town Hall polls right now?
If you haven’t checked out Retirement Town Hall recently, you’ve missed a look at the past, present, and future of retirement benefits. Don’t worry, we’ve wrapped it all up for you below.
What’s past is prelude
First, Bart Pushaw took a look back at some of his recent Pension accounting conjectures to see how close he got to the truth. Next Mike Mikhitarian showed us how a Pension Performance Dashboard can keep plan sponsors up to speed on fluctuations and changes to the plan. If you’ve been keeping track of a pension plan recently you’ve likely seen “Historically low interest rates driving historically high employer contribution requirements”. You’ve probably also noticed how, as John Ehrhardt pointed out, Pension plans continue modest 2012 improvement.
No time like the present
We keep you up to the minute on important days on the retirement benefits calendar at Retirement Town Hall. If you haven’t already, now is the time to download the Multiemployer plans: Key dates and deadlines for 2012 from our website.
Back to the future
This month, Tim Connor and Genny Sedgwick began a series of posts about Retirement plans: What to look for in 2012. The first two posts in this series looked at Discount rates and Financial statements expectations for defined benefits plans. Look for more in this series in the near future. Also, Vanessa Vaag showed us just how foreseeable the future can be with FutureCost: Keeping track of retirement plan risks and trends, featuring a video on the interactive model that provides short- and long-term projections of key financial metrics.
And while you’re in a forward-looking mood, why not answer two forward-looking poll questions about your own retirement plans:
If you’ve been too busy this month planning some special event for your sweetheart for Valentine’s Day (or a party for that big Abe Lincoln/George Washington fan in your life) here’s what you’ve missed on Retirement Town Hall.
An early start
When’s the best time to start on your nest egg? As soon as you’re out of the nest. That’s why we highlighted the keys to Retirement planning for Millennials in a recent post. We began wondering if those in the retirement benefits world practiced what we preached. So we followed the Millennials post with a poll question asking you about Getting started in your own retirement planning.
Recently we asked readers to tell us how long they would be Delaying gratification before starting to claim Social Security. Speaking of waiting it out, Zorast Wadia noted that the wait was over for pension contributions to start reaching record levels and why he is Looking ahead to $90+ billion in contributions.
Better late than never
Of course the big news of the month so far has been John Ehrhardt’s report that Pension plans begin 2012 by narrowing a record deficit. Ehrhardt stayed busy and participated in a Pension funding discussion on CNBC.
Right on time
Is now the time to move to liability-driven investing (LDI)? A lot of people think so. Do they know what to expect in the process? Not always. That’s why Will Clark-Shim recounted his experience with the twists and turns of Liability-driven investing: Putting it into practice followed by his Two longs make it right? post.
Finally, we always keep you up to speed on the latest in notices and requirements in the retirement benefits world as they happen. Here are some key announcements to consider from the past few weeks:
To stay up to speed on other important dates on the benefits practitioner’s calendar, be sure to follow us on Twitter @millimaneb.
Earlier this month we took a look back at The most important retirement stories of 2011 and what they could mean for 2012. In the meantime, we have been amassing quite a collection of stories in 2012 so it’s time we rewind the young year and catch you up on what you might have missed.
Echoes of 2011
First off, it’s no secret that 2011 battered many a pension. John Ehrhardt noted this in his Bad year for pensions ends badly, recapping December’s Pension Funding Index numbers. We also excerpted some of Ehrhardt’s comments in Pensions & Investments in What to look for from pensions in 2012.
So what happened? Volatility played a big role in last year’s problems and we kicked off the new year by looking at A new approach to pension risk. Meanwhile Jeff Marzinsky offered his Pension plan investment returns: Some thoughts and observations and Stuart Kliternick showed the direct effect of 2011’s Historic low for discount rates on pension plan funding.
What does it all mean looking forward? We’ll have to see how things play out, but it seems clear we should Get ready for record pension contributions. We are continuing to update this blog entry as large employers announce their pension contributions.
In regulatory news, Tim Connor pointed out that there are New FASB rules on multiemployer plan disclosures and the importance of gathering your information early this year.
Your vote counts
We started the year with our Allocation nation poll and found that over 76% of voters didn’t change their 401(k) asset allocations for 2012. Have you? Recently, our poll on employee communications, The medium for your benefits message, asked benefits practitioners how they talk to their employees. You might be surprised by how people are using social media to talk retirement benefits based on the early returns.
That’s the latest from Retirement Town Hall, but be sure to follow us on Twitter @millimaneb to stay up to date on blog posts and important dates on the benefits practitioner’s calendar.