From:                                         BCG Pension Risk Consultants <>

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

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Subject:                                     The Pension Insider January 2017




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.



January, 2017- Volume 68, Edition 1



What Happens When DB Funding Relief Goes Away?

By Rebecca Moore Editors@ plansponsor com | December 29, 2016

Defined benefit retirement plan sponsors should plan now for the future.

The Pension Protection Act of 2006 (PPA) defined specifically how defined benefit (DB) plans should measure funded status — using high-quality corporate bond interest rates and a specific mortality table. It also prescribed a calculation for minimum required contributions each year, and plan sponsors had seven years to get their plans fully funded.

However, since the passage of the PPA, there have been six efforts to give funding relief to DB plan sponsors.

Currently, funding relief is available until 2020. What happens if no further funding relief is provided?

Jodan Ledford, head of U.S. Solutions at Legal & General Investment Management America (LGIMA), who is based in Chicago, notes that while some DB plan sponsors are using the funding relief, there are several factors which may impact their funding strategies: an increase in Pension Benefit Guaranty Corporation (PBGC) premiums that will cost less-funded plans more; recording deficits on their balance sheets; and the potential that funding more offers more tax relief on the heels of potential corporate income tax relief.

For those that use funding relief, assuming the interest rate environment will stay the same their discount rate could fall as much as 1.5%, Ledford says. Considering a duration of 12 or 13 years, they could see a 19% increase in funding liability, and conceivably will have to contribute more to their plans annually as a result.  Click Here for full article


IRS Releases Proposed Mortality Tables for DB Plans

By Javier Simon Editors@ | December 29, 2016

These proposed regulations would update the mortality tables used to determine minimum required contributions for single-employer plans.

The Internal Revenue Service (IRS) has revealed proposed regulations regarding mortality tables to be used by most defined benefit (DB) pension plans. These tables gage the probability of survival year-by-year for an individual based on age, gender, and other factors. This data along with actuarial assumptions is used to calculate the present value of a stream of expected future benefit payments, for purposes of determining the minimum funding requirements for a plan. These mortality tables also can be used to determine the minimum required amount of a lump-sum distribution from such a plan. 

"The proposed regulations would update the mortality tables used to determine minimum required contributions for single-employer plans and current liability for multiemployer plans effective for plan years beginning in 2018," explains Scott A. Hittner, FSA, partner and chief actuary at October Three. “The base mortality table would be updated from the RP-2000 table to the RP-2014 table.  Projected mortality improvements would be based on the MP-2016 scale, updated from Scale AA.”  Click Here for full article


Corporate Pension Deficits Increased in 2016

By PLANSPONSOR Staff |  Editors@ | January 03, 2017

The aggregate pension funded status for the plans Willis Towers Watson tracked is estimated to be 80% at the end of 2016, compared with 81% at the end of 2015.

The pension funded status of the nation’s largest corporate plan sponsors remained essentially unchanged at the end of 2016 compared with the end of 2015, as lower interest rates, which push up liabilities, negated positive stock market returns, according to an analysis by Willis Towers Watson.

The analysis examined pension plan data for the 410 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December fiscal-year-end date. Results indicate that the aggregate pension funded status is estimated to be 80% at the end of 2016, compared with 81% at the end of 2015. The analysis also found that the pension deficit is projected to have increased $17 billion to $325 billion at the end of 2016, compared to a $308 billion deficit at the end of 2015.

According to the analysis, pension plan assets inched higher in 2016, from $1.30 trillion at the end of 2015 to an estimated $1.31 trillion at the end of last year. Overall investment returns are estimated to have averaged 6.7% in 2016, although returns varied significantly by asset class. Domestic large-capitalization equities returned 12%, while domestic small-/mid-capitalization equities earned 17.6%. Aggregate bonds provided a 2.7% return; long corporate and long government bonds, typically used in liability-driven investing strategies, earned 10.2% and 1.3%, respectively.

NEXT: The effect of the Trump election, pension obligations Click Here to continue reading


Longer Lives, Larger Financial Needs

Published In NOVEMBER 2016 | Sponsored by PACIFIC LIFE

People are living longer than at any other time in history. But what does that mean for defined benefit (DB) plan sponsors? Are there ways to help bolster the financial wellness of employees who might spend decades in retirement? And are sponsors prepared for the impact of longevity: its effect on their plan’s financial wellness? PLANSPONSOR discussed these questions with Russ Proctor and Marty Menin, both Directors of Institutional Sales at Pacific Life Insurance Company, to determine what plan sponsors should know about the impact of longevity.  

PS: How long are people living today?  

Proctor: When the subject is retirement planning, the real question is how long do people think they’re going to live? I hear people approaching retirement who say they expect to live to age 76 because they remember hearing that’s the age of life expectancy. However, that number is a little out of date and—more importantly—that’s from birth. Once you reach age 65, the Society of Actuaries’ mortality tables show that males are typically living to age 86 and females to age 89.

Menin: Especially for married couples; there’s a 50/50 chance that one spouse will live to age 94, and a 20% chance one of them will live to 100. Thirty to 35 years of retirement planning is a long time to plan for and to be certain that your money will last. Click Here for full article

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What Happens When DB Funding Relief Goes Away? Click Here



IRS Releases Proposed Mortality Tables for DB Plans  Click Here


Corporate Pension Deficits Increased in 2016 Click Here



Longer Lives, Larger Financial Needs Click Here

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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 - 2.93%

50/50 Split of Immediates and Deferreds - 2.78%



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