Markets 2020 – effect on PBGC variable-rate premiums and strategies to reduce them

Many plan sponsors’ funding policy – and the response to current interest rate and asset declines – is likely to be framed with a view to reducing so far as possible PBGC variable-rate premiums.

For most plans, 2021 PBGC variable-rate premiums are going up significantly – for a $100 million plan, next year’s premium could jump around $500,000.

Annuity Purchase Update: March 2020 Interest Rates

March 2020 Duration: 7 Years 15 Years   7 Years 15 Years Range Rate: 1.41% – 1.82% 1.66% – 2.12% Average Rate: 1.65% 1.87% As mentioned in our February 2020 Pension Finance Update, pension plans lost ground last month. The strong equity market returns of 2019 were set back by poor performance in both January… Read More

Markets 2020 – effect on ERISA minimum funding requirements

We are beginning a series of articles on the effect of the current crisis on retirement plan finance.  As we discussed in our introduction to these issues, the current situation is (to state the obvious) very volatile. For most plans (on a calendar year), 2020 funding requirements will depend on year-end interest rate and asset data,… Read More

Interest rates 2020: effect on retirement finance – introduction

The valuation interest rates for a typical DB plan have declined around 90 basis points since the beginning of the year, and – extraordinarily – almost 50 basis points since the beginning of March. This in the context of a 75-100 basis point decline for 2019. This decline, and the simultaneous decline in stock values… Read More

February 2020 Pension Finance Update

Pension pain intensified in February, as stock markets and interest rates tumbled last month. Both model plans we track[1] lost ground: Plan A lost more than 5%, ending the month almost 10% lower than at the end of 2019, while Plan B slipped 2% and is now down 3% for the year: Assets Stock markets moved… Read More

Supreme Court holds for plaintiffs in Sulyma v. Intel

ERISA’s 3-year statute of limitations does not apply where plaintiff “doesn’t remember” reviewing disclosure On February 26, 2020, the Supreme Court handed down its decision in Sulyma v. Intel, holding, in a unanimous opinion, that ERISA’s 3-year statute of limitations, which requires “actual knowledge” of the alleged breach, does not apply where, notwithstanding that the participant… Read More

De-risking in 2020

In this article we discuss how changes in interest rates, Pension Benefit Guaranty Corporation premiums, and mortality assumptions may affect sponsor decisions to de-risk (or not de-risk) defined benefit plan liabilities in 2020. For purposes of this article, by de-risking we mean paying out a participant’s benefit as a lump sum and thereby eliminating the… Read More

Interest rates 2020 — signal or noise?

In November 2019 we published an article reviewing interest rates broadly. At that time, interest rates were down 75-100 basis points for the year and nearly 120 basis points from their high in November 2018. In that context, we identified the key question for DB plan sponsors, for whom plan-related interest rate risk is a significant… Read More

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