Year-end compliance issues for single-employer retirement plans

By year-end 2019, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with the statutory and regulatory requirements of ERISA and the tax code. This Client Action Bulletin looks at key areas – including administrative compliance issues – that defined benefit (DB) and/or defined contribution (DC) plan sponsors should address by Dec. 31, 2019.

Corporate pension funding rises by $11 billion in October

Milliman today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. During October, the funded ratio for these plans rose slightly, from 85.4% to 86.1%, while the funded status deficit improved by $11 billion.

An investment gain of 1.08% helped boost the funded status of the Milliman PFI in October, with the market value of assets improving by $13 billion for these plans. Liabilities for these plans increased by $2 billion as a result of a one basis point drop in the discount rate, from 3.09% at the end of September to 3.08% as of October 31. October’s month-end discount rate ranks as the second lowest discount rate recorded in the 19-year history of the Milliman 100 PFI.

Over the past twelve months the pension funded ratio has sharply fallen, thanks to the record low interest rate environment. However, low interest rates also make borrowing strategies viable if plan sponsors have access to cash. Plan sponsors may want to explore options that take advantage of low rates as one way to fund up their plans.

Looking forward, under an optimistic forecast with rising interest rates (reaching 3.18% by the end of 2019 and 3.78% 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 (2.98% discount rate at the end of 2019 and 2.38% by the end of 2020 and 2.6% annual returns), the funded ratio would decline to 85% by the end of 2019 and 78% 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.

Regulatory roundup

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

PBGC requests modified collection of information on payment of premiums regulation
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget (OMB) approve a modified collection of information under its regulation on payment of premiums. This notice informs the public of PBGC’s request and solicits public comment on the collection.

To learn more, click here.

2020 Draft W-2 Form issued
The Internal Revenue Service (IRS) has released a draft copy of the 2020 W-2 Form. The 2020 Form W-2 is due by February 1, 2021. Copy A of Form W-2 must be mailed or electronically filed with the Social Security Administration by February 1, 2021.

To download the draft copy, clock here.

The evolution of the discount rates for measuring employee benefit obligations under Indian and International Accounting Standards

In this briefing note, Milliman’s Heerak Basu and Patrika Bansal analyse the evolution of the discount rate for measuring employee benefit obligations under AS15(R), AS19 and IAS19. They consider the change in discount rates as well as the impact on the change in the value of obligations over the last 12 months.

Regulatory roundup

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

Maximum monthly guarantee tables revised
The Pension Benefit Guaranty Corporation (PBGC) has updated the maximum guarantee tables. The PBGC maximum guarantee for participants in single-employer plans is determined using a formula prescribed by federal law that calls for periodic increases tied to a Social Security index. The formula provides lower amounts for younger ages, reflecting the fact that younger people will receive more monthly pension checks over their expected lifetimes. Conversely, amounts are higher for older ages. The formula also calls for reducing the amount for retirees who choose a payment form that continues benefits to a beneficiary after the retiree’s death.

To learn more, click here.