Boost employee engagement during periods of layoffs

Employment research repeatedly shows that employee engagement typically decreases as unemployment increases. Greater demands on a reduced workforce can sap morale and adversely affect production.

Employers must approach layoffs in ways that mitigate risks to employee engagement and performance. In a recent Forbes article entitled, “The Paradox of Layoffs: Engagement drops when you need it most,” Milliman’s Radhika Philip highlighted five ideas that can help organizations.

Reviewing executive compensation and 409A compliance

The passage of the CARES Act as well as general liquidity and business continuity concerns resulting from the financial effects of COVID-19 have created circumstances calling for reductions in executive compensation. However, employers and employees must carefully consider how any reductions are implemented to remain compliant with Internal Revenue Code Section 409A.

In this article, Milliman’s Dominick Pizzano and White & Case’s Henrik Patel and Kenneth Barr review executive compensation issues that should be examined during these turbulent times.

Estimated cost of retiree pension risk transfer rises from 103.9% to 104.6% in June

Milliman today announced the latest results of its Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. The MPBI uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from insurers, to estimate the average cost of a PRT annuity de-risking strategy.

During June, the estimated cost to transfer retiree pension risk to an insurer rose 70 basis points, from 103.9% of a plan’s total liabilities to 104.6% of those liabilities. This means the estimated retiree PRT cost for the month is now 4.6% more than those plans’ retiree accumulated benefit obligation (ABO). Discount rates in June dropped 11 basis points compared to an 18 basis point drop for annuity purchase rates, resulting in an increase in the relative cost of annuities.

Since April, accounting discount rates have dropped approximately 30%. As insurers track the current fixed income market, annuity purchase rates have followed this trend, resulting in a historically low interest rate environment for PRT transactions.

Plan sponsors should note that the MPBI is an average cost estimate, and individual plan annuity buyouts can vary based on plan size, complexity, and competitive landscape. Furthermore, specific characteristics in plan design or participant population can affect the cost of a pension risk transfer.

To view the complete Milliman Pension Buyout Index, click here.  

What are the benefits of retirement planning tools?

There are some key benefits to using a retirement planning tool. They can offer direction on savings goals. Some can provide a gauge of your retirement readiness compared to peers’ readiness. Many can calculate a probability of success to measure your ability to cover retirement expenses or how much your income and portfolio withdrawals are expected to be.

There are factors, though, that are not in your control. Some of these include retirement plan changes, developments in the real estate market, interest rates, unplanned early retirement, inflation, longevity, debt, and retirement behavior.

In this article, Milliman’s Una Bearden and Alicia Favila discuss in more detail some considerations, benefits, and possible pitfalls of online retirement planning tools.

Benefit suspension consideration for multiemployer plan sponsors

Financial market volatility resulting from the coronavirus pandemic has caused more strain on multiemployer pension plans which may increase the number of plans eligible for benefit suspensions. Proposed legislation aiming to eliminate benefit suspensions and solvency issues surrounding the Pension Benefit Guaranty Corporation further complicate an already difficult decision-making process.

In this Multiemployer Review, actuaries Casey Baldwin and John Rowland provide an overview of the benefit suspension process under the Multiemployer Pension Reform Act of 2014. They also pose some questions that trustees and plan professionals must consider and share lessons learned from previous applications.

How can public pension plans provide sustainable levels of benefits despite rising costs?

When forced with rising pension costs, many public pension plan sponsors are pressured to freeze plan benefits. However, a look into five key pension plan provisions that are the biggest drivers of pension costs can help sponsors set a sustainable level of benefits. This Dear Actuary column provides perspective.