While employees across all generations might share common goals
and challenges, priorities will vary depending on where they are in their lives
and careers. For example, research shows the goal of aligning employer and employee
values is particularly important to Millennials.
In today’s tight labor market, companies need to look beyond salary in order to attract and retain employees. Companies must also understand what employees really want from their jobs and be purposeful and creative with the benefits packages they offer. Designing such comprehensive, competitive benefits packages means looking beyond the old standards—health insurance, retirement, paid time off—and embracing forward-thinking options like non-traditional and voluntary benefits, and improvements to a company’s work environment and culture.
As with financial security, flexibility is also
an important goal for everyone. How that looks could vary significantly, from
telecommuting and remote work to phased retirement options. Employers who take
into account such differences in priorities are more likely to create an
inclusive benefits environment that meets the needs of all their employees.
Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. In August, the PFI monthly discount rate dropped by 42 basis points to 2.95%, the lowest ever recorded in the 19-year history of the index. Until August, the Milliman 100 PFI had never reported a discount rate below 3.00%.
As a result, the funded status deficit ballooned from $219 billion at the end of July to $306 billion as of August 31, an $87 billion funding decrease for these plans. The projected benefit obligation (PBO) increased by a whopping $104 billion, though it was partially offset by $17 billion in investment gains for the month. During August, the funded ratio of the Milliman 100 PFI fell from 87.7% to 83.8%.
Discount rates have fallen by 110 basis points over the past twelve months, slashing corporate pension funding and hitting an all-time low for the PFI. In fact, at this time last year the funded ratio for these plans was roughly ten percentage points higher, at 93.1%, than we’re seeing now. Looking forward, under an optimistic forecast with rising interest rates (reaching 3.15% by the end of 2019 and 3.75% by the end of 2020) and asset gains (10.6% annual returns), the funded ratio would climb to 88% by the end of 2019 and 103% by the end of 2020. Under a pessimistic forecast (2.75% discount rate at the end of 2019 and 2.15% by the end of 2020 and 2.6% annual returns), the funded ratio would decline to 82% by the end of 2019 and 75% by the end of 2020.
To view the complete Pension Funding Index, click here. To see the 2019 Milliman Pension Funding Study, click here.
To receive regular updates of Milliman’s pension funding analysis, contact us here.
A goal of many working Australians is to maintain their current lifestyle through retirement. However, there are some issues with the Australia’s superannuation system that may hamper their retirement goals. In this article, Milliman consultant Jeff Gebler explains why the gap between investment objectives and member outcomes needs to be addressed more effectively.
Equity markets had a modest performance in July as the US Federal Reserve lowered interest rates by 25 points for the first time in 11 years. Global equity markets had a mixed performance in July, with the biggest loser being the Emerging Market index, down by 1.2%. UK government bonds gained 2.2% as the global central banks set the tone for further monetary easing in the near future. UK corporate bonds performed better than their global counterparts as they returned 2.3%, compared to the 0.1% of the latter. The UK Consumer Prices Index (CPI) inflation remained unchanged at 2% in June, while the Retail Prices Index (RPI) saw a decrease pf 10 basis points to 2.9%. Volatility remained under 10% amongst the developed economies for most of July.
retirement-related regulatory news for plan sponsors, including links to
Modifications to 2020
Form 5500 Series proposed
The Pension Benefit Guaranty Corporation (PBGC) requested that the Office of Management and Budget (OMB) extend approval (with modifications) of its collection of information for annual reporting. PBGC is proposing modifications to the 2020 Schedule R (Retirement Plan Information) and its related instructions. The proposed modifications to Schedule R affect multiemployer defined benefit (DB) plans covered by Title IV of ERISA. PBGC is also proposing minor modifications to the Form 5500 Series to improve the accuracy of reported information.
IRS extends temporary
nondiscrimination relief for closed DB plans through 2020
The Internal Revenue Service (IRS) issued Notice 2019-49, which extends the temporary nondiscrimination relief for closed DB plans that is provided in Notice 2014-5, 2014-2 I.R.B. 276, by making that relief available for plan years beginning before 2021 if the conditions of Notice 2014-5 are satisfied.
The IRS and the Department of the Treasury expect that the final regulations making amendments to the § 401(a)(4) regulations will include a number of significant changes in response to comments received.
However, it is anticipated that the final regulations will not be published in time for plan sponsors to make plan design decisions based on the final regulations before expiration of the relief provided under Notice 2014-5 (as last extended by Notice 2018-69). Accordingly, the IRS and the Treasury have determined that it is appropriate to extend the relief provided under Notice 2014-5 for an additional year.
The Pension Benefit Guaranty Corporation (PBGC) recently released its projections report for fiscal year 2018. The report provides a review of the financial condition of the agency’s Multiemployer Insurance Program. Milliman’s latest Multiemployer Alert provide some key takeaways from the PBGC report.
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