Milliman FRM Insight: November 2019 Market Commentary

The global equity market in October notched its second consecutive monthly return of more than 2% and its eighth positive monthly return for 2019. Since touching its 2018 low on December 24, the S&P Global 1200 Index has generated a total return of 26.3% through the end of October. That strong return notwithstanding, the index finished the month still just shy of the all-time it hit in January 2018. Milliman’s Joe Becker offers more perspective in this month’s market commentary. Download the full commentary at MRIC.com.

COLAs for retirement, Social Security, and health benefits for 2020

The IRS has announced the cost-of-living-adjusted figures for retirement plan benefits for 2020. The Social Security Administration announced its 2020 changes in October based on the Consumer Price Index for the quarter ended September 2019 from the Bureau of Labor Statistics. The 2020 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

2020 key administrative dates and deadlines for calendar-year multiemployer defined benefit plans

Milliman’s 2020 multiemployer defined benefit calendar with key administrative dates and deadlines is now available on our website. The calendar lists relevant 2020 administrative dates encountered by most multiemployer defined benefit plans, including deadlines for governmental filings and participant disclosures. The calendar also provides short descriptions of the actions required to meet each deadline.

To download the calendar, click here.

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.