News

"[PBGC] has approved the application submitted ... by the UFCW Regional Pension Fund. The plan, based in Mount Laurel, New Jersey, covers 4,605 participants in the service industry across the Mid-Atlantic region primarily in Delaware, Pennsylvania, and New Jersey. The UFCW Regional Fund, which is in critical status, will receive approximately $54.6 million in special financial assistance, including interest to the expected date of payment to the plan."

"The first quarter of this year ... was the largest first quarter on record, as [an] estimated $15 billion in pension risk transfers closed in the period.... [J]umbo transactions continue to be the driving force behind the market's strong performance, as two transactions that closed in Q1 totaled $11 billion."

"Throughout the past few revisions, the ASB has adopted identical language in ASOP Nos. 27 and 35 where practical ... When [this] adopted revision to ASOP No. 27 is effective as the single assumption standard for pensions, ASOP No. 35 will be repealed.... This standard is effective for any actuarial report that meets the following criteria: (a) the actuarial report is issued on or after January 1, 2025; and (b) the measurement date in the actuarial report is on or after January 1, 2025."

"[C]alendar-year plan sponsors that have the flexibility to select a lump sum basis as part of a derisking effort would be best served by choosing an annual reset and October lookback.... 2024 may represent the last opportunity for plan sponsors to implement lump sum windows under the old, pre-SECURE 2.0 rules.... But before proceeding with a lump sum offer, [there] are a few important questions to ask[.]"

"[Since 2022, the authors]have observed a marked decrease in the election rates for lump-sum windows when offered outside of plan termination; almost 10% lower. ... [S]ince 2022 [the authors] have observed a marked increase in the percentage of window participants electing a monthly lifetime annuity. Whereas we previously saw an average election rate of 2% or less, we are now seeing an average election rate between 3% and 5%."

"After two straight months of positive market performance, April's investment losses caused the Milliman 100 PPFI funded ratio to drop from 79.7% as of March 31 to 77.6% as of April 30. In aggregate, the PPFI plans saw estimated investment returns of -2.1% in April ... These losses caused the plans to shed approximately $110 billion in market value for the month ... The deficit between estimated plan assets and liabilities widened from $1.271 trillion on March 31 to $1.404 trillion as of April 30."

"[A] federal judge certified a class of more than 1,700 participants and beneficiaries in two of CITGO Petroleum Corporation's pension plans.... The lawsuit against CITGO alleges that the Houston-based gas and energy giant violated [ERISA] by failing to properly calculate joint and survivor annuity ('JSA') benefits for retired employees and imposing a 'marriage penalty' that reduced their monthly pension payments." [ Urlaub v. Citgo Petroleum Corp. , No. 21-4133 (N.D. Ill. May 16, 2024)]

"This notice specifies updated static mortality tables to be used for defined benefit pension plans under Section 430(h)(3)(A) of the Internal Revenue Code and Section 303(h)(3)(A) of [ERISA]. These updated static mortality tables ... apply for purposes of calculating the funding target and other items for valuation dates occurring during the 2025 calendar year. This notice also includes a modified unisex version of the mortality tables for use in determining minimum present value ... for distributions with annuity starting dates that occur during stability periods beginning in the 2025 calendar year."

"Under the DOL's current guidance, a plan fiduciary that is considering a defined benefit plan 'lift-out' must take steps calculated to obtain the safest annuity available, unless under the circumstances it would be in the best interests of participants and beneficiaries to do otherwise. In connection with this requirement, the DOL provides [a list] of factors that a plan fiduciary should consider ... when selecting an annuity provider[.]"

"Large employer pensions looking to offload their funding liabilities through pension risk transfers are anticipating tougher future regulatory scrutiny as the [DOL] prepares a report for Congress on the $45 billion de-risking market. [EBSA's] report appears likely to propose changes to a 1995 interpretive bulletin on pension risk transfers that laid out standards for employers in selecting third-party insurers to convert plan funds into annuity contracts."

"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates ... and the 24-month average segment rates ... [as well as] the interest rate on 30-year Treasury securities ... as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate[.]"

"[T]he Milliman 100 PFI funded ratio improved from 102.2% at the end of March to 103.4% as of April 30. Rising discount rates again drove this result, as they increased 44 basis points, from 5.24% in March to 5.68% in April and reduced plan liabilities by $60 billion. This offset April's investment returns of -3.00%, which reduced the market value of PFI plan assets by $46 billion."

"[T]he interest rate environment has helped the funding status of many corporate DB plans, making it a positive environment for PRT transactions.... [T]hose in the DB space will likely see funded status either flatline or decrease when the Federal Reserve can finally start bringing rates down, ... which could start to curtail this market. When that comes, asset managers who can adjust to lower rates by way of funding may have opportunity."

"While the pandemic, for the most part, has subsided, mortality rates ... [are] still higher than normal, and may be poised to climb even higher. And while theories abound as to the cause, no one -- from industry analysts to healthcare specialists, to policymakers, to underwriters -- has a handle on this chilling phenomenon."

"[F]ollowing a buyout, DB plans are more likely to be frozen or terminated, and defined contribution (DC) plans are not likely to provide sufficient substitutes. Regarding the actuarial assumption and the pension characteristics, [the author finds] an increase in the pension liability discount rate and decreases in the projected benefit obligations (PBO), pension assets (PA), and contributions, but [does] not find significant effects on funding ratio.... [I]nvestment strategies for these plans become riskier ... However, there is no significant effect on realized returns."

"The aggregate funded ratio for U.S. corporate pension plans increased by an estimated 1.1 percentage points in April, ending the month at 110.8% ... This month's change in funded ratio resulted from a 5.2% decrease in liability value partially offset by a 4.2% decrease in asset value. The aggregate funded ratio is estimated to have increased by 5.8 and 10.3 percentage points year to date and over the trailing twelve months, respectively."

"At the end of 2023, the OASDI program was providing benefit payments to about 67 million people ... Social Security's total cost is projected to be higher than its total income in 2024 and all later years.... Under the Trustees' intermediate assumptions ... the level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2035, one year later than projected in last year's report."

"Pension finances were mixed during April, as higher interest rates largely offset the impact of lower stock markets ... Plan A improved less than 1% last month, ending April up more than 6% this year, while Plan B slipped a fraction of 1% in April but remains up more than 1% through the first four months of 2024."

"The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of total scheduled benefits.... The Hospital Insurance (HI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2036, 5 years later than reported last year. At that point, that fund's reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits."

"The lawsuit was filed as a result of violations under [ERISA] and the pension plan's failure to honor the settlement agreement, which was negotiated to guarantee continued payments to participants and beneficiaries of the plan, following the PBGC's 2017 determination the plan should be terminated." [PBGC v. Fay Construction Co. Inc., No. 24-1860 (E.D. Penn. complaint filed May 1, 2024)]

"Three class action complaints filed in March reveal that the plaintiffs' bar views pension risk transfers as an area of significant liability for sponsors of DB plans. The lawsuits ... potentially signal a new area of litigation in an environment where plan sponsors are increasingly interested in transferring pension risk. The plaintiffs bringing these lawsuits all decry the selection of a specific annuity provider ... as the fiduciary's wrongdoing. The three lawsuits concern risk transfers involving billions of dollars of pension liability, impacting over 100,000 participants and beneficiaries."

An unofficial monthly report of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans).

"The publicly traded U.S. companies with the 100 largest defined benefit plans can now boast an average funding ratio of 99.9% as of Dec. 31 ... That's a slight drop from the average ratio of 100.2% in the [same] analysis a year earlier, but it still represents a level of stability for funding among corporate pension plans not seen in years. While not all the 100 measured plans are fully funded, 49 had funding ratios of 100% or more as of Dec. 31, and 30 plans even have funding ratios of 110% or more."

"The funded percentage decreased from 99.4% to 98.5%. The pension deficit increased from $8.5 billion to $19.9 billion. The average return on investments was 7.2%. The average discount rate decreased from 5.18% to 5.01%. The average expected return on assets assumption increased from 5.8% to 6.4%."

"A second consecutive month of overall positive market performance in March increased the Milliman 100 [Public Pension Funding Index (PPFI)] funded ratio from 78.6% at the end of February to 79.7% as of March 31. This marks the highest level since March 31, 2022, when the funded status stood at 82.7%. The PPFI plans returned an estimated 1.7% in aggregate for March 2024, with individual plan returns ranging from an estimated 0.9% to 2.6% for the month."