Funded percentage of multiemployer pension plans rebounds to 82% in first half of 2019

Milliman today released the results of its Fall 2019 Multiemployer Pension Funding Study (MPFS), which analyzes the funded status of all multiemployer pension plans in the United States. Between January 1, 2019 and June 30, 2019, the aggregate funded ratio of multiemployer plans rose from 74% to 82% thanks to stellar asset gains for many of these plans. In fact, the estimated investment return for the MPFS was about 13.4% for the first six months of 2019, nearly double many plans’ annual investment return assumptions.

Over the first six months of 2019, the number of multiemployer plans that are 90% funded or better, climbed from 383 to 635 – a 66% increase. However for troubled plans, such as those in critical or critical and declining status, the rebound in funded status is not as pronounced despite the positive investment returns. This is primarily due to their maturity and negative cash flow position.

The majority of multiemployer pensions had a great start to 2019, with many reaching pre-2008 funding levels. Troubled plans, however, have struggled to rebound fully, and may need to depend on legislation making its way through Congress to help fund their members’ pensions.

To view the complete study, click here.

To receive regular updates of Milliman’s pension funding analysis, contact us here.

Dependable data and analysis helps pension sponsors make decisions in today’s low interest rate environment

The low interest rate environment presents defined benefit plan sponsors with considerable challenges they must address. Because every pension plan’s situation is unique, sponsors need plan-specific data in order to make informed decisions. One of the only things that’s true across the board is that better decisions are made when sponsors have reliable and updated financial data.

In this article, Milliman’s consultants William Strange and Arthur Rains-McNally offer their perspectives on the challenges of the current interest rate environment. They also discuss how technological advances enable actuaries to generate and deliver realistic estimates of actuarial valuation results, funded status, expected investment returns, and other key factors in real-time to support critical business decisions.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Social Security announces 1.6 percent COLA increase for 2020

The Social Security Administration announced a 1.6% cost-of-living adjustment for benefits payable starting in 2020. For 2020, the Social Security taxable wage base will increase to $137,700 up from $132,900 in 2019. The Social Security Old-Age, Survivors, and Disability Insurance (OASDI) tax rate will remain at 6.2% on wages up to the $137,700 wage base.

For more information, click here.

PBGC releases 2018 Actuarial Report

The Pension Benefit Guaranty Corporation (PBGC) published the 2018 Annual Report containing a summary of the results of the September 30, 2018 actuarial valuation. The agency calculated and validated the present value of future benefits for both the single-employer and multiemployer programs and of non-recoverable future financial assistance under the multiemployer program.

To read the entire report, click here.

PBGC announces the 2020 premium rates

The PBGC has determined the premium rates for single-employer and multiemployer plans applicable for 2020 plan years in accordance with the indexing rules provided in section 4006 of ERISA.

To see the updated premium rates, click here.

PBGC posts 2017 pension insurance data tables

The PBGC published the first installment of the 2017 Data Tables, which include statistics for PBGC’s single-employer and multiemployer programs and for the private defined benefit pension system. This installment provides detailed information about PBGC’s single-employer program, including claims activity, financial position, premium revenue, benefit payments, and administrative expenses.

To see the pension insurance data, click here.

Proposed rule on contribution limits applicable to ABLE accounts issued

The Internal Revenue Service (IRS) issued a proposed rule related to section 529A of the Internal Revenue Code, which allows a State (or its agency or instrumentality) to establish and maintain a tax-advantaged savings program under which contributions may be made to an ABLE account for the purpose of paying for the qualified disability expenses of the designated beneficiary of the account.

Section 529A was amended by the Tax Cuts and Jobs Act, signed into law on December 22, 2017. The 2017 Act allows certain designated beneficiaries to contribute a limited amount of compensation income to their own ABLE accounts.

To read the entire proposed rule, click here.

A closer look at volatility control funds and their place in the financial market ecosystem

Market observers have posited in recent years that Volatility Control (VC) funds represent a focal point of instability for financial markets. Their contention is that VC funds create a market feedback loop by selling equities when volatility is high, which in turn pushes volatility higher, triggering more selling. The implication is that VC funds will eventually be the source of the next 1987-style selloff. At first glance, the idea seems feasible; in practice, however, it fails to consider a number of important factors. Milliman’s Joe Becker providers more perspective in this report.

Segal Blend method still in question for withdrawal liability

Determining appropriate assumptions for calculating withdrawal liability is an important issue for multiemployer pension plans. Many plans use the Segal Blend method to select the discount rate to determine withdrawal liabilities. The pension community has been closely following a number of appeals about the use of the method. A court ruling that deemed its use by the New York Times case as improper was recently upheld. But other courts have ruled that the Segal Blend is an appropriate method. The difference in opinions of various courts keeps the door open for future challenges. Milliman’s Abby Kendig provides more perspective in this Multiemployer Alert.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Revenue Procedure providing remedial amendment periods for correcting form defects in 403(b) plans released

The Internal Revenue Service (IRS) released Revenue Procedure 2019-39 which sets forth a system of recurring remedial amendment periods for correcting form defects in a § 403(b) plan first occurring after March 31, 2020—the ending date for the initial remedial amendment period under Rev. Proc. 2013-22, 2013-18 I.R.B. 985.

To learn more, click here.

PBGC issues proposed rule on administrative review of decisions

The Pension Benefit Guaranty Corporation (PBGC) is amending its regulation on rules for administrative review of agency decisions. The PBGC’s proposed rule would clarify and make changes to the review process for certain agency determinations and the procedures for requesting administrative review.

To learn more, click here.