Cerulli: Midsize
U.S. Corporate Pension Plans Focusing More on Risks, Fees
Pensions & Investments | By Rob
Kozlowski | MAY 6, 2019
Midsize U.S. corporate defined benefit
plans are focusing more on investment risks and money
management fees in 2019 following a volatile end of 2018, a survey
from Cerulli Associates shows.
In an April white paper called
"De-risking DB Plans in Flux," Cerulli said when
asked about third-party investment management fees, 70% of
surveyed plan executives said third-party money management
fees were somewhat concerning, 22% said very concerning and
8% said not concerning. When asked about performance/risk measurement
and generating returns/yield, the same amount of plan
executives, 22% said those were very concerning as well.
Forty-eight percent and 38% were somewhat concerned about
generating returns/yield and performance/risk measurement,
respectively, while a respective 30% and 40% were not
concerned at all.
Regarding midsize DB plan executives, the
white paper said "after years of low discount rates
negatively reflecting the present value of future
liabilities, followed by rates rising for much of 2018 (providing
some relief), the current environment has now muddied the
waters of plans' interest rate outlook." On an
asset-weighted basis, 42% of surveyed plan executives are
concerned about the interest rate environment, while 37% are
not, according to the paper. Click
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Largest DB Plans
Move to Fixed Income and Continues to Derisk
PLANADVISOR |By Rebecca Moore | April
16, 2019
During 2018, the $20 billion club shifted
asset allocations significantly away from risky assets and
into fixed income, Russell Investments found.
According to the latest report from
Russell Investments about the largest corporate defined
benefit (DB) plan sponsors in the United States, they are
uniquely situated to set the trends that the rest of the
industry often follow.
Based on its analysis of the FYE 2018
annual filings, these corporations continued to make changes
to their pension plan policies to take more control of the
costs and to better manage their risks.
As for investment policy, the analysis
finds over the last several years, the $20 billion club (the
group of 20 publicly listed U.S. corporations with pension
liabilities in excess of $20 billion) has been shifting from
the traditional asset-only focus to an asset-liability focus.
During 2018, the $20 billion club shifted asset allocations
significantly away from risky assets and into fixed income.
On average, equity allocations were down 5% and fixed income
allocations were up 5%, which was the highest de-risking
movement in the past eight years. Click
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IRS Expands
Opportunities for Retirement Plan Sponsors to Self-Correct
PLANADVISOR |By Rebecca Moore | April
24, 2019
The IRS Self Correction Program (SCP) has
been expanded to include certain plan document failures and
certain loan failures and a way to self-correct via plan
amendments.
The Internal Revenue Service has issued Revenue Procedure
2019-19 to expand Self Correction Program
(SCP) eligibility to permit correction of certain plan
document failures and certain plan loan failures, and also to
provide an additional method of correcting operational
failures by plan amendment under SCP.
The agency says the revenue procedure
updates the comprehensive system of correction programs for
sponsors of retirement plans that are intended to satisfy the
requirements of Sections 401(a), 403(a), 403(b), 408(k), or
408(p) of the Internal Revenue Code, but that have not met
these requirements for a period of time. The Department of
the Treasury and the IRS have concluded that an expansion of
SCP will facilitate compliance for plans, while reducing
costs and burdens of compliance by allowing plan sponsors to
self-correct in certain additional circumstances. The
new procedures were effective April 19.
Correcting certain plan document failures
Numerous conforming changes to the revenue
procedure have been made to implement the expansion of SCP to
permit correction of certain plan document failures. Section
4.01 is revised to provide that SCP is available to correct
certain plan document failures. Section 4.01(1)(b)
provides that, if otherwise eligible to correct under SCP, a
sponsor of a qualified plan or 403(b) plan may correct
certain plan document failures under SCP, other than the
initial failure to adopt a qualified plan or the failure to
adopt a written 403(b) plan document timely. Plan
document failures under SCP are always treated as significant
failures and may be corrected under SCP only if the plan, as
of the date of correction, is subject to a favorable letter
and the correction is made within the SCP correction period.
The new revenue procedure also permits
certain plan document failures to be corrected by plan
amendment if the plan has a favorable letter and meets other
requirements stated in the revenue procedure. Click
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