January 2016 Pension Finance Update

For the second straight year, pension sponsors suffered a significant setback in January, due to a combination of declining stock markets and lower long-term interest rates. Both model pension plans we track were down last month: Plan A dropped more than 6%, while Plan B lost almost 3%: Assets Equity markets around the world were… Read More

Candidates tax proposals and 401k “tax appeal” Part 1

In the primary campaign, on both the Republican and Democratic side, there has been a lot of talk about changing our current income tax system – everything from “closing loopholes” to abolishing the IRS and switching to a “business flat tax” that some have compared to a value added tax. Later in the year –… Read More

Factors affecting DC returns

We recently discussed the Boston College Center for Retirement Research Brief, Investment Returns: Defined Benefit vs. Defined Contribution Plans (the “BC Brief”). The Brief reviewed over 20 years of Form 5500 data and determined that (after accounting for asset allocation and plan size) DB plans outperform DC plans by 0.7 percent. As we said in… Read More

2015 retirement policy in review

In this article we review significant 2015 retirement policy developments. We begin with defined contribution plan initiatives and DOL’s re-proposal of its re-definition of an ERISA ‘fiduciary.’ After discussing other DC developments, we then discuss defined benefit plan initiatives, where issues related to risk transfer and de-risking, Pension Benefit Guaranty Corporation premiums and valuation assumptions… Read More

DB vs. DC investment performance and fee significance

The Center for Retirement Research at Boston College has released a Brief, Investment Returns: Defined Benefit vs. Defined Contribution Plans (the “BC Brief”), reviewing over 20 years of Form 5500 data to determine the rate of return in defined benefit and defined contribution plans. The report finds that, after accounting for size of plan and… Read More

ERISA Advisory Council recommendations on lifetime participation

Last December, the ERISA Advisory Council has released a summary of its 2015 recommendations. One of the (two) issues the Department of Labor had asked the EAC to consider for 2015 was “lifetime plan participation.” Together with its summary, the EAC released a “Sponsor Tip Sheet and Sample Communications” which would, if adopted by DOL,… Read More

DOL regulation & Releases Interpretive bulletin authorizing stae plans proposed

At the July 2015 White House Conference on Aging, President Obama instructed the Department of Labor to propose guidance “clarifying how states can move forward” with state retirement plan initiatives. On November 16, 2015, DOL released (1) a proposed regulation addressing issues raised by state auto-IRA initiatives and (2) an Interpretive Bulletin (IB) setting forth… Read More

December 2015 Pension Finance Update

Pension plans lost a bit of ground in December due to stock market declines, but ended 2015 modestly ahead. Both model pension plans we track1 were down last month: Plan A lost 1%, ending the year up 3%, while Plan B dropped a fraction of 1% but still finished up close to 2% during 2015…. Read More

How will the Fed interest rate increase affect pension plans?

On Wednesday, December 16, 2015, the Federal Reserve Federal Open Market Committee announced that it had “decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent.” The target range has been, for the last seven years, 0 to 1/4 percent – so this represents, roughly, a 25 basis point… Read More

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