Corporate pension funding rises by $15 billion in November

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. During November, the funded ratio for these plans rose slightly, from 86.1% to 86.8%, while the funded status deficit improved by $15 billion.

An investment gain of 0.93% helped boost the funded status of the Milliman PFI in November, with the market value of assets improving by $11 billion for these plans. This is the second month in a row investment returns for the PFI plans have exceeded expectations while discount rates have remained nearly flat. November’s one-basis point change in the monthly discount rate, from 3.08% at the end of October to 3.09% as of November 30, resulted in the PFI projected benefit obligation (PBO) decreasing by $4 billion. November’s discount rate continues to rank among the lowest rates ever recorded in the 19-year history of the Milliman PFI.

Market performance in 2019 has been better than expected for corporate pensions, helping counteract the effect of the low discount rate environment on funding. But let’s hope history doesn’t repeat itself this December, as a market correction like we saw in 2018 combined with low discount rates could be disastrous for corporate pensions.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.74% by the end of 2020 and 4.34% by the end of 2021) and asset gains (10.6% annual returns), the funded ratio would climb to 103% by the end of 2020 and 120% by the end of 2021.  Under a pessimistic forecast (2.44% discount rate at the end of 2020 and 1.84% by the end of 2021 and 2.6% annual returns), the funded ratio would decline to 80% by the end of 2020 and 73% by the end of 2021.

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.

To quote Section 409A: An NDCP by any other name is still an NDCP

The Section 409A rules cast a very wide net when it comes to the definition of what constitutes a nonqualified deferred compensation plan (NDCP). Accordingly, employers need to regularly inventory and review their various compensation and benefits agreements in order to determine if any existing or new arrangements are structured in a manner that creates a Section 409A NDCP. This article by Milliman’s Dominick Pizzano highlights points to consider when conducting a Section 409A “to be or not to be” determination process.

This article originally appeared in the Autumn 2019 edition of Benefits Law Journal.

2020 key administrative dates and deadlines for calendar-year DC retirement plans

Milliman’s 2020 key administrative dates and deadlines for calendar-year defined contribution (DC) retirement plans is now available. The annotated list includes relevant 2020 administrative dates encountered by most defined contribution plans (401[k], 403[b], profit sharing, etc.), with deadlines for quarterly benefit statements, participant disclosures, and safe harbor notices. The calendar also provides short descriptions of the actions required to meet each deadline.

To download the calendar, click here.

Required minimum distributions: IRS proposes updated tables

The Internal Revenue Service (IRS) has issued a proposed rule that would amend the life expectancy and distribution period tables used to calculate required minimum distributions (RMDs) from qualified retirement plans, profit-sharing and stock bonus plans, IRAs and annuities, 403(b) and 457 plans, and certain other tax-favored employer-provided retirement arrangements. The IRS proposes to apply the updated tables after it issues the rule in final form and no sooner than for distributions beginning on or after January 1, 2021. Therefore, RMDs for 2020 are generally not affected and cannot be calculated using the new proposed tables.

The proposed updated tables reflect longer life expectancies for males and females than under current tables, thereby resulting in smaller RMDs and longer payout periods.

For more perspective, read this Milliman Client Action Bulletin.

2020 key administrative dates and deadlines for calendar-year single-employer defined benefit retirement plans

Milliman’s 2020 key administrative dates and deadlines for calendar-year single-employer defined benefit retirement plans is now available. The calendar lists relevant 2020 administrative dates encountered by most single-employer defined benefit plans, including deadlines for quarterly contributions, determination letter applications, and funding notices. The calendar also provides a short description of the actions required to meet each deadline.

To download the calendar, click here.

DoL proposes new voluntary electronic disclosure rule for retirement plans

The U.S. Department of Labor (DoL) released a proposed rule that, if finalized, will provide an additional “safe harbor” for plan administrators to use electronic media to furnish retirement plan information to participants and beneficiaries. The proposed rule would allow for such disclosures via an internet posting for plan participants and beneficiaries with valid electronic addresses. However, participants and beneficiaries would to be able to request paper disclosures and entirely opt out of electronic delivery.

The proposed safe harbor does not apply to employee welfare benefit plans, such as disability or group health plans. The DoL intends to study the application of this new safe harbor to disclosures required for such plans. The proposed rule states that commenters should feel free to respond to the 21 questions contained in the proposed rule for both retirement and welfare benefit plans.

For more perspective, read this Milliman Client Action Bulletin.