Pension plans have experienced unprecedented volatility in 2020. While the market volatility has caused the treasury rates to fall dramatically, the spread between treasury bonds and the bonds insurance companies invest in have widened. The widening of this spread would typically tell us that now would be a good time for pension plans to purchase annuities.
On June 1, 2020, the Supreme Court handed down its decision in Thole v. U.S. Bank. A divided (5-4) Court found for defendant defined benefit plan sponsor-fiduciaries, holding that plaintiff plan participants did not have standing to bring the lawsuit.
Rebounding stock markets gave pension finance a boost in May. Both model plans we track[1] gained ground last month, with Plan A improving 2% and plan B up almost 1%. For the year, Plan A is down 10% and Plan B is down 3% through the first five months of 2020.
Interest rate declines – as noted, around 50 basis points since the beginning of the year – and asset declines are going to trigger or increase the payment of variable-rate premiums (often significantly) for many sponsors in 2021.
On May 21, 2020, the Department of Labor released a final regulation amending current disclosure rules, providing a new “notice and access” safe harbor for the use of electronic communications to satisfy required participant disclosures in retirement plans. The new rule dramatically liberalizes DOL’s electronic communication rules, which (with certain exceptions) previously required that the… Read More
On May 15, in a nearly party-line vote, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). The bill now goes to the Senate. While Senate Majority Leader Mitch McConnell described the bill as “dead on arrival,” it likely gives direction on a potential bipartisan rescue of the… Read More
Pension plans have experienced much more volatility in Q1 2020 than any other quarter in recent history. While the market volatility has caused the treasury rates to fall dramatically, the spread between treasury bonds and the bonds insurance companies invest in have widened. The widening of this spread would typically tell us that now would be a good time for pension plans to purchase annuities.
On May 12, 2020, House Democrats introduced the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), in effect another round of Covid-19-related stimulus legislation. The bill includes a number of provisions related to retirement plans, most importantly, for single employer defined benefit plans, significant revisions to the ERISA minimum funding standards. In this… Read More
In February, we posted an article reviewing (generally) the economics of paying out a lump sum to a deferred vested participant in 2020, in which we analyze de-risking in terms of the cost/cost saving with respect to a terminated vested 50 year-old individual who is scheduled to receive an annual life annuity of $1,000 beginning at… Read More
Pensions gained marginally in April, as recovering stock markets offset the impact of falling corporate bond yields. Both model plans we track[1] managed gains of less than 1% for the month but remain substantially down for the year, with Plan A off 12% and Plan B almost 4% through the first four months of 2020: Assets… Read More
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