From:                                         BCG Pension Risk Consultants <>

Sent:                                           Monday, August 27, 2018 2:16 PM

To:                                               Terry McCauley

Subject:                                     BCG Pension Insider August 2018


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.



August 2018 - Volume 82, Edition 1



Your DB Funded Status Has Improved? Now What?

PlanSponsor | July 31, 2018 | By Rebecca Moore


Corporate DB plans have experience funded status improvement, and LDI strategies help plan sponsors preserve this; however, investment committees are looking for new asset classes that can provide greater returns at a reasonable level of risk.


Northern Trust Asset Management (NTAM) believes it is critical for corporate defined benefit (DB) plan sponsors to understand the impact the DB plan has on overall corporate financials, and it ties this in to pension investment strategy in an new report, “Corporate Pensions: The Bottom Line.”


According to the report, during 2017, corporate DB plans experienced their greatest improvement in funded status in the last five years—improving from 81% to 85%—the largest one-year increase since 2012 to 2013. While the equity markets were a significant contributor to that growth, another significant contributor came from corporate cash contributions.


During 2017, corporations in the S&P 500 contributed $77 billion in cash to their DB plans. NTAM says that is a material capital allocation to what is essentially a debt obligation for many plan sponsors and a tie-up of capital that cannot be used for corporate growth or distributed to shareholders. However, a key benefit to these large contribution is the effect on corporations’ income statement—the pension expense recorded on corporate income statements has fallen to its lowest levels since the financial crisis. In 2017, the average pension expense was just 3.4% of total operating income—a significant drop from 5.2% in the prior year.


As corporations are allocating more capital to their DB plans, they are better able to manage their pension costs and improve the funded health of their plans. And, they are looking hard at their investment strategy to try to preserve improved funding and seeking ways to reduce the outstanding deficit of their plans. Click Here for full article



PSNC 2018: Pension Risk Transfer Options

PlanSponsor | June 20, 2018 | By Judy Faust Hartnett


DB plan sponsors want to keep control of their plans as they de-risk.


The transferring of risk, or de-risking, from defined benefit (DB) plans has become a focus of pension plan providers over the past few years.


Risk transfer or de-risking transactions addressing pension plan risks can include several options: the purchase of annuities from an insurance company that transfers liabilities for some or all plan participants (removing the risks cited above with respect to that liability from the plan sponsor); the payment of lump sums to pension plan participants that satisfy the liability of the plan for those participants (either through a one-time offer or a permanent plan feature); and the restructuring of plan investments to reduce risk to the plan sponsor.


At the 2018 PLANSPONSOR National Conference, David Hinderstein, president, Strategic Retirement Group, Inc., in White Plains, New York said, “Many pension plans are frozen and these plan sponsors have been waiting for something to happen. They are hoping and hope has become expensive.”


Maintaining a frozen pension plan is expensive, according to Hinderstein, and it means contributing fees to the Pension Benefit Guaranty Corporation (PBGC). The flat-rate-per-participant premium for single employer plan increased 130% since 2013. The variable rate is a percentage of a plans unfunded status.


Hinderstein said, “Plan sponsors have begun to take action to deal with liabilities but there are a few service providers that can help plan sponsors keep their frozen plans which slows down the process. Why derisk? To help fund the plan they are derisking.”


An example of a partial risk transfer is how FedEx recently entered into an agreement to purchase a group annuity contract with Metropolitan Life Insurance Co. to transfer about $6 billion in pension plan obligations. By taking on a portion of the payment obligations of the FedEx DB plan, it will help the company secure its pension obligations and provide its retirees with financial security. Companies are chunking out their liabilities so that those funds do not grow.


In addition, many plan sponsors are offering terminated employees lump sums payments. Hinderstein said there is on average a 65% take rate.


Mike Devlin, principal, BCG Pension Risk Consultants, which specializes in assisting plan sponsors with managing their pension risk, stressed the importance of a plan sponsor keeping control of its plan as it derisks. He said, “Restructuring the plan through an IRS determination letter can be complex and interest rates are unpredictable. Instead transact under your own conditions and you can predetermine the timing with the market as to what you do. Plus, never move all your retirees at one time. Figure out how much you will save over X amount time and do what makes sense economically.”

Click Here to continue reading



In Focus at DOL: Missing and Terminated Participants

PlanSponsor | July 16, 2018 | By John Manganaro

Over the last few years, all three federal agencies that regulate retirement plans have been focusing on missing participants; advisers have a key role to play when it comes to helping clients ensure compliance.


A recent web seminar covered the topic of missing participants with Mercer experts Margaret Berger, principal, Princeton, New Jersey, Brian Kearney, principal, Washington, D.C., Norma Shaiara, principal, Washington, D.C.


Dealing with missing participants is a big issue for defined benefit (DB) and defined contribution (DC) retirement plans. Sponsors of ongoing retirement plans (including frozen plans) may need to rethink their procedures for tracking down missing participants in light of the Department of Labor’s (DOL)’s expanded audit initiative and Internal Revenue Service’s (IRS)’s recent informal guidance.


Over the last few years, Congress, the Governmental Accountability Office (GAO) and all three federal agencies that regulate retirement plans have been focusing on missing participants according to Shaiara. “This comes at the time of the silver tsunami, when Baby Boomers are retiring at a rate of ten thousand per day. This increasing number of participants turning 65 or 70.5 are required to take their defined benefit or defined contribution benefits.”


What types of retirement plans need to worry about missing participants? All Employee Retirement Income Security Act (ERISA) plans and tax-qualified plans including 401(a) and 403(b) plans. Most DB plans say that benefits for terminated participants will typically begin at the normal retirement age although the plan could be written to meet required minimum distribution rules (RMD) after age 70.5. Therefore, if a DB plan participant is missing at retirement age, there may be a failure to follow the terms of plan if the benefit isn’t paid out which could be a qualification problem under the tax code and could be a fiduciary breach under ERISA. For both DB and DC plans, RMDs generally must begin by 4/1 of calendar year after the year a participant turns 70.5 unless the participant is still working for the employer.

Click Here for full article






Austin Office

Patrick McLean, CPA

(800) 832-7742



 Boston Corporate Office

Michael E. Devlin, Principal

(855) 432-7658  ext. 403


Steve Keating

(203) 955-1566


David Geloran, CEBS®, MBA

(855) 432-7658 ext. 401



Chicago Office

David Rumas, FCA, EA, MAAA

(855) 432-7658 ext. 406


Karen Ambrose

(855) 432-7658 ext. 410


Karl K. Oman, ASA, EA

(855) 432-7658 ext. 408



Cincinnati Office

Debbie M. Sharp, CEBS®

(855) 432-7658 ext. 405



Boise/Los Angeles Offices

Sean O'Flaherty AIF®, CRPS®

(855) 432-7658 ext. 402



ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Retirees - 3.08%

Term Vesteds - 3.13%

Actives - 3.20%

Annuity Purchase Rates as of August 06, 2018



BCG Pension Risk Consultants

We specialize in settling pension liabilities for terminating and ongoing pension plans.

Today’s Solutions for Tomorrow’s Needs. 




BCG Pension Risk Consultants | 100 Grandview Road , Suite 303, Braintree, MA 02184

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