Markets 2020: settling DB plan liabilities

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

April 2020 Pension Finance Update

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

Regulatory update April 2020

In this update we briefly review two issues presented by the layoff or furlough of employees in the current Coronavirus crisis – treatment of outstanding plan loans and possible partial termination – and IRS’s extension to July 15, 2020 of certain filing deadlines. Layoffs/furloughs – plan loans and partial termination rules Generally, we use “layoff”… Read More

Annuity Purchase Update: April 2020 Interest Rates

April 2020 Duration: 7 Years 15 Years   7 Years 15 Years Range Rate: 1.25% – 2.41% 1.92% – 2.90% Average Rate: 1.95% 2.49% As mentioned in our March 2020 Pension Finance Update, pension plans lost ground last month. COVID-19 has had a profound impact on the world, and as a result of the pandemic,… Read More

Implementing a Coronavirus distribution program in your DB plan

Most of the focus on the new CARES Act 2020 retirement plan liquidity provisions – liberalized withdrawal rules, waiver of the 10% early withdrawal tax, and 3-year income tax recognition/rollover – has been on 401(k) plans. But the temporary relief also applies to defined benefit plans, and DB plans may serve as an indispensable resource… Read More

Markets 2020 – effect on DC plan participants

As we discussed in our article Interest rates 2019 – the effect of recent declines on DC plans, if we assume (as is generally the case) that the purpose of 401(k) savings is to provide income in retirement, then both gains/losses on the participant’s account balance and increases/declines in interest rates will affect the “funded status” of the… Read More

March 2020 Pension Finance Update

Tumbling stock markets dealt another blow to pension sponsors in March. Both model plans we track[1] lost ground: Plan A lost 3% in March, ending the quarter 13% lower than at the end of 2019, while Plan B slipped more than 1% and is now down more than 4% for the year: Assets Falling stock markets… Read More

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