Legal and Regulatory Update – December 2015

In this article, we discuss: the final IRS rules for hybrid plans not in compliance with the market rate of return standard – those rules also postpone the effective date of 2014 hybrid rules to 2017; the recent decision in Pfeil v. State Street, a stock drop case; ERISA Advisory Council recommendations with respect to… Read More

November 2015 Pension Finance Update

November saw pension sponsors mostly tread water, consolidating gains from a strong October, in what is shaping up as a solid, if unspectacular, year for pension finances. Both model pension plans we track1 were close to flat last month: Plan A gained a fraction of 1% and is now ahead 4% on the year, while… Read More

Pension Plan termination strategy – part 2

In our prior article, we discussed the basic factors in a standard plan termination analysis: taking as a baseline the plan’s PBO, we considered the key variables of the present value of future administrative costs (including PBGC premiums) and the annuity purchase premium. In this article we will consider a factor that is left out… Read More

Update on State Plans

The Government Accountability Office has released a report – Retirement Security – Federal Action Could Help State Efforts to Expand Private Sector Coverage. The report reviews (1) estimates of workplace retirement savings program coverage, (2) strategies being pursued by some states to expand coverage and (3) possible legal obstacles under federal law (primarily ERISA) to… Read More

PBGC premium increases: significance for funding, de-risking & plan termination

We have previously posted articles on strategies for borrowing-and-funding and reducing headcount to reduce Pension Benefit Guaranty Corporation premiums. The increases in PBGC premiums in the Bipartisan Budget Act of 2015 (BBA2015) have made this strategy even more compelling. In this article we review the cost of borrowing-and-funding vs. continuing to pay the PBGC variable-rate… Read More

De-risking activity: Impact of interest rate and mortality assumption changes

We recently published two articles, Accounting impact of changes in interest rate and mortality assumptions and Funding impact of changes in interest rate and mortality assumptions. Since we wrote those articles the Fed Open Market Committee met (in September) and decided not to raise the Fed funds rate, although reports are the committee is still… Read More

Pension plan termination strategy – part 1

While interest rates remain near historic lows and, thus, measured pension liabilities remain high, some plan sponsors, particularly sponsors of frozen plans, have decided on (or are considering) plan termination. In this article we discuss the financial factors affecting a decision to terminate or not terminate a frozen plan, comparing the cost of buying annuities… Read More

Benefit provisions of proposed debt ceiling bill

On October 30 the Senate followed the House and approved a debt ceiling fix that includes increases in Pension Benefit Guaranty Corporation premiums, a modification of Tax Code rules for when plan-specific mortality assumptions may be used, and an extension of Highway and Transportation Funding Act of 2014 (HATFA) interest rate stabilization relief. In this… Read More

October 2015 Pension Finance Update

Pension sponsors saw an improvement in funded status during October, as both stocks and interest rates moved higher. Both model pension plans we track gained ground last month: Plan A picked up almost 5% during October and is now ahead 3% for the year, while Plan B improved close to 2% last month and is… Read More

Update on Company Stock in Retirement Plans

Whitley v. BP (aka In Re: BP p.l.c. Securities Litigation), a stock drop case, is on appeal before the Fifth Circuit Court of Appeals. The case provides a useful review of post-Fifth Third stock drop litigation theories and counter-theories. In this article we begin with a review of the Fifth Third stock drop standard and… Read More

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