August 2015 Pension Finance Update

Fears of a slowdown in China rippled through financial markets in August, producing drops in stock markets around the world and erasing most of the ‘cushion’ pension sponsors had built up during 2015. Both model pension plans we track lost ground in August – Plan A slipped more than 3% and Plan B lost more… Read More

Funding impact of changes in interest rate and mortality assumptions

In our prior article, we discussed the financial statement impact for defined benefit plans of changes in interest rate and mortality assumptions. In this article we consider the effect of those changes on ERISA minimum funding requirements. For funding, we now have some certainty about what will be two major drivers of increases in minimum… Read More

2016 mortality tables published by IRS

On July 31, 2015, IRS released Notice 2015-53, providing static mortality tables for 2016, updated for mortality improvements. The update in the notice is in line with expectations and reflects the current rules. Those rules use the RP-2000 Mortality Tables “adjusted for mortality improvement using Projection Scale AA.” As we have discussed (see our article… Read More

Accounting impact of changes in interest rate and mortality assumptions

Two major factors affecting defined benefit plan finance are interest rate and mortality assumptions. We expect significant changes to both these factors in the coming years. Federal Reserve Chair Janet Yellen has indicated that the Fed expects to increase short-term interest rates later this year. Interest rate relief under Highway and Transportation Funding Act of… Read More

July 2015 Pension Finance Update

as of July 31, 2015 Falling interest rates during July increased pension liabilities, producing losses during the month, although both model pension plans we track remain ahead for the year. Plan A lost 2% last month but remains up 5% for the year, while Plan B dropped 1% during July but remains up 2% so… Read More

Washington Update – July 2015

In this Current Outlook we review legislation introduced that would ease the rules on electronic disclosure. We also briefly discuss the effect of the Supreme Court’s decision in Obergefell (the same-sex marriage case) on retirement plans and its decision not to review the Fourth Circuit’s decision in Tatum v. R. J. Reynolds Tobacco Company. Electronic… Read More

Cash balance plans: 2015 update

Many sponsors maintain cash balance plans, either as (1) their main retirement benefits program, (2) a program for a specific group of employees (e.g., employees ‘grandfathered’ in connection with a ‘soft freeze’), or (3) a legacy benefit for certain employees (in connection, e.g., with a ‘hard freeze’). In 2014, IRS finalized cash balance plan regulations,… Read More

IRS bans lump sums to already retired pension participants

On July 9, 2015, IRS released Notice 2015-49, Use of Lump Sum Payments to Replace Lifetime Income Being Received By Retirees Under Defined Benefit Pension Plans. The Notice effectively prohibits, as of July 9, 2015, the payment of lump sums to retiree-annuity recipients in de-risking transactions. In this article we review the Notice. Background –… Read More

Pension regulatory and legislative update – May 2015

In this Current outlook we review a number of recent developments: DOL’s new rule providing a 2-month ‘cushion’ for the annual statement deadline; IRS’s extension of its ‘closed plan’ relief to 2016; Congressional questioning about why the SEC is not more involved in the conflicted advice regulation project; the reintroduction of the SEAL Act, providing… Read More

IRS provides safe harbor for correcting missed pension contributions

Under IRS’s Employee Plans Compliance Resolution System (EPCRS), if a 401(k) plan sponsor fails to make a contribution that an employee has elected, ‘correction’ generally requires that the sponsor, among other things, make a contribution equal to 50% of the employee’s ‘missed deferral.’ In Revenue Procedure 2015-28, released on April 2, 2015, IRS provided two… Read More

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