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.
We’ll excuse you if you were too busy gobbling up turkey and Thanksgiving leftovers recently to check in at Retirement Town Hall. Here’s what you missed…
Pension funding good news, bad news
If you’re at all interested in the state of pensions today you know that many pensions are severely underfunded. Recently, we noted that the Wall Street Journal highlighted “The $440 billion pension gap” citing the weak stock market and falling interest rates as key causes. That’s the bad news, but the good news is that those interest rates that have been the cause of such pain for pension plan sponsors may have an upside. Tim Connor explained how in Why pay PBGC premiums?
Defining your contribution
In our weekly poll, Auto-enrollment by the numbers, we asked what percentage of your salary you would be comfortable with your employer automatically contributing to your 401(k) plan. Over 55% of you said you would prefer to be auto-enrolled at the maximum percentage the company will match. Interestingly, when we asked this question back in May only 32% of respondents chose this option. We’ll come back to this question again in the coming months and see if things change again. Also in defined contribution news, we highlighted a Workforce.com article, Target-date funds: Know the risk, that offers some of the key pitfalls to look out for when using TDFs.
And speaking of defined contribution plans, Craig Burma highlighted some of the technology advancements that are changing the way participants access retirement information in his post, Simplifying access to defined contribution information portals.
Chris Sill explained today’s Revolutionary risk management for pension plans, highlighting how to apply principles annuity providers have been using for years to pension plans. The result: plans capture, on average, 80% of the upside potential of equities with 25% of the downside exposure. Also, we noted the LifeHealthPro article on the hybridization trend in retirement planning in Annuity alchemy.
Finally, the Employee Benefit Research Group reminded plan sponsors to prepare to handle crucial Year-end compliance issues for single-employer retirement plans. Stay on top of this and other important retirement benefit news at Retirement Town Hall and by following us on Twitter @millimaneb.
In November we’ve been giving you some ideas for making your 2012 better than 2011. If you haven’t been checking in here’s what you’ve missed.
Setting the stage for 2012
First off this month, Penny Plante reminded us of the value of Outsourcing for mid-sized organizations. It’s a brief but insightful “must read” for anyone considering outsourcing in 2012. More recently Brandy Cross highlighted the importance of doing a Compensation checkup at year end to keep your 401(k) plan operating smoothly. Speaking of 401(k) plans, our latest poll asks what you are doing to generate interest from employees as open enrollment season approaches for many companies.
Pensions bounce back
Also this month, John Ehrhardt dissected the latest numbers from the Milliman 100 Pension Funding Index. For the first time in a while there’s good news, as Investment gains fuel pension-funded status improvement. Still, low interest rates continue to be the big story in pension funded status.
401(k) contributions leap forward
Last week’s poll noted how the IRS is giving Americans 500 more reasons to save for retirement by raising the 401(k) contribution limit, for most employees, by $500. We asked you how this news changed your contribution plans.
Be sure to check in regularly as we continue to add more news and notes for employee benefits professionals every week. Follow us on Twitter @millimaneb to stay up-to-date.
If you haven’t been to Retirement Town Hall in a while you’ve missed some breaking news in the retirement benefits world and some in-depth analysis.
Inside the DB preference
Mark Olleman gave us a behind-the-scenes look at the new report he co-authored with Ilana Boivie of the National Institute on Retirement Security in Public DB plans get some love.
Sponsors of cash balance plans and their advisors who missed it will be happy to see the headline: IRS delays deadline for “Market Rate of Return,” other rules. Following that up, the Employee Benefit Research Group also noted that Social Security announces 3.6 percent benefit increase for 2012 and news that COLAs increase retirement, Social Security, health benefit amounts. That week, we asked for your thoughts on Social Security’s 2012 makeover in our poll. More recently we asked you to look into A crystal ball for taxes and give us your prediction of how Washington will handle 2012 payroll taxes.
We’ve covered target-date funds before and there’s new analysis in the October edition of the Milliman Benefits Perspectives. Here, Jeff Marzinsky sums up the four key points in Target-date funds: Plan sponsor considerations.
Finally, don’t forget to check out the new publication we highlighted in Introducing DB Digest and the latest edition of Multiemployer Review.
Defined benefit (DB) pension plans have been in the spotlight here at Retirement Town Hall of late. With the exception of a notification of Interim guidance on electronic disclosure of retirement plan fees, the past couple of weeks have been all about DB plans. Whether you manage a DB plan or just take part in one, you’ll want to see what you’ve missed.
In everyone’s best interest?
We looked at how low interest rates are continuing to affect pension plans in Twisting in the wind. Want to see just how negative that affect was? Brace yourself, then read John Ehrhardt’s report on the Milliman Pension Funding Index in September: Declining interest rates fuel record growth in pension funding deficit.
The road ahead
Fans of the Rocky movie franchise will immediately associate the title of one post, Prediction? Pain, with the Italian Stallion’s Rocky III nemesis, Clubber Lang (played by Mr. T). Here we highlight one analyst’s colorful take on the economy and pensions.
So how do DB plan sponsors dig out? Pick any combination of the six remedies to high costs and market volatility laid out in the Milliman Insight article we previewed in Reducing pension cost and volatility. Also, we highlighted how one employer addressed such risks as underpaying, overpaying, or duplicating payment to participants in Taking defined benefit plan administration online.
Have your say
Finally, we want to know what you think is the most important problem pensions face. Vote in the Facing the DB challenge poll and check out the results to see if others are grappling with the same problem. Didn’t see an answer you liked? Comment on the poll with your thoughts on the biggest threat to pensions.