From:                                         BCG Pension Risk Consultants <>

Sent:                                           Monday, August 27, 2018 2:18 PM

To:                                               Terry McCauley

Subject:                                     The Pension Insider December 2016




The Pension Insider


The Pension Insider is a monthly newsletter developed for individuals who work in the pension arena. The Pension Insider was created to share ideas, success stories, coming events and industry specific articles.



December, 2016 - Volume 68, Edition 1



Nearly Half of Corporate Pensions Considering Lump-Sum Payouts

While a majority of plan sponsors are hedging interest rate exposure using LDI strategies, many are also turning to lump-sum distributions to reduce the absolute size of pension liability, a survey found.   By Javier Simon | PLANSPONSOR | December 01, 2016

This is according to the 2016 Defined Benefit Plan Trends Survey by investment consulting firm NEPC.

For those plan sponsors considering other risk reduction measures, 27% said they plan to issue annuities. Twenty-five percent are considering higher contributions. Thirty-nine percent of respondents weren’t planning any changes at the time the survey was taken.

“The real game changer was what occurred at the end of last year with the PBGC rate premium decision, and plan sponsors have been scrambling on what to do ever since,” observes Brad Smith, partner in NEPC’s Corporate Practice. “Our expectation is that this anxiety about the rate premiums will continue, regardless of who is in the White House. We continue to advise clients on best approaches to improve or maintain their funded status in a low-yield environment, even with a slight rate increase expected before the end of the year.”

As projected, longevity increases are affecting pension funding. In 2016, the number of defined benefit plans with a funded status less than 80% increased to 28%, from 21% in 2015. Forty-three percent of plans have a funded status of at least 90%.

Thirty-four percent of respondents considered issuing debt to improve funded status; 47% of these plans have a funded status of less than 80%.  

The firm also points out that while a majority of plan sponsors (69%) are hedging interest rate exposure using liability driven investing (LDI) strategies, many are also taking action to reduce the absolute size of the sponsor’s pension liability by offering lump sum distributions to participants. The 38% of plans not pursuing LDI say they are waiting for interest rates to rise (34%) or are maintaining a total return approach as the plan remains open (29%).

In the past six years, plan sponsors using LDI have materially increased their LDI allocations—36% have an allocation greater than 50% or more today, versus nine percent in 2011, the survey finds. Click Here to continue reading article 


LIMRA: Corporate pension buyouts soar in third quarter

U.S. corporate pension plan buyouts reached $5.9 billion in the third quarter of 2016, a LIMRA Secure Retirement Institute sales survey found.   By Rob Kozlowski | Pensions&Investments| December 01, 2016

It is the sixth consecutive quarter that activity has exceeded $1 billion in group annuity purchases and is the largest amount of third-quarter activity since 1990, according to a news release announcing the results of the survey. In the first and second quarter of this year — traditionally the quarters every year that see the least amount of activity — buyouts totaled slightly more than $1 billion each.

Transactions in the third quarter included WestRock Co.'s purchase of a group annuity contract from Prudential Insurance Co. of America. The Norcross, Ga.-based company transferred about $2.5 billion of its U.S. defined benefit plan liabilities.

Another large transaction was PPG Industries Inc., Pittsburgh, transferring a total of $1.6 billion in pension liabilities to Massachusetts Mutual Life Insurance Co. and MetLife.

“Pension buyout activity in the third quarter jumped 80%, compared with (the) prior year,” said Michael Ericson, analyst for LIMRA Secure Retirement Institute, in the release. The third quarter of 2015 saw about $3.3 billion in buyout activity.

“Traditionally, buyout sales have experienced the largest growth in the fourth quarter. However, given the remarkable sales this quarter, third-quarter sales may be higher than fourth quarter in 2016,” he added.

For the nine months ended Sept. 30, activity totaled $8.06 billion, slightly higher than the first nine months of 2015, which saw $8 billion.

Every quarter, the LIMRA Secure Retirement Institute surveys the 13 financial services companies that provide all the group annuity contracts for the U.S. for its Group Annuity Risk Transfer Survey.

 Contact Rob Kozlowski at | @Kozlowski_PI

Click Here for full article 

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ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Immediates - 2.63%

Deferreds - 3.01%

50/50 Split of Immediates and Deferreds - 2.82%



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