From:                                         BCG Pension Risk Consultants <>

Sent:                                           Monday, August 27, 2018 2:17 PM

To:                                               Terry McCauley

Subject:                                     The Pension Insider April 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.



April 2018- Volume 79, Edition 1



Largest DB Plans Lead in Accelerating Pension Funding

By Rebecca Moore | PLANSPONSOR | March 1, 2018


According to Justin Owens, director, Client Strategy & Research, Russell Investments, while total 2017 contributions were the single largest ever recorded, just as noteworthy was the contribution above requirements.


Following a pattern as trendsetters, the 20 members of the $20 billion club collectively dismissed funding relief and paid more than triple their mandated contributions in 2017, according to Russell Investments.


Each corporation in the $20 billion club maintains global pension liabilities in excess of $20 billion. These collective global liabilities represent approximately 40% of all the defined benefit (DB) plan liabilities held by U.S.-listed companies.


For the first time since 2013 (when rates rose and equity markets cooperated), funded status meaningfully improved. This was despite discount rates (grouped into “actuarial losses”) falling. In fact, for the first time since 2009, actuarial gains/losses were not the leading driver in funded status changes; net asset returns (asset returns in excess of interest cost) were.


According to Justin Owens, CFA, FSA, EA, director, client strategy and research at Russell, while total 2017 contributions were the single largest ever recorded, just as noteworthy was the contribution above requirements. “Recently many sponsors have been content to contribute to their DB plans only when they were required to. In contrast, they took a proactive approach in 2017 by contributing discretionary amounts in order to satisfy objectives beyond the government-mandated minimum,” he says.


Between the years of 2009 and 2013 the total contributions hovered from about $25 to $30 billion. Since Moving Ahead for Progress in the 21st Century Act (MAP-21) - and its successors the Highway and Transportation Funding Act of 2014 (HATFA) and the Bipartisan Budget Act of 2015 - was passed, contributions have generally been much lower, bottoming out at about $13 billion in 2015 when funding relief was in full effect.


Tax reform and Pension Benefit Guaranty Corporation (PBGC) premiums were the key contribution motivators, according to Russell Investments. Funding contributions with cash, company equity, and borrowing all took place in 2017.

With tax reform finalized, several members of the $20 billion club have announced massive contributions for 2018, Russell notes. “We expect others in the industry will take similar actions,” says Owens.


Accelerating DB contributions in the future will still benefit plan sponsors.

Click Here for link to article




LIMRA Secure Retirement Institute: U.S. Single Premium Pension Buy-out Sales Nearly Double in the Fourth Consecutive Quarter  LIMRA News Release | WINDSOR, Conn. | March 1, 2018


U.S. single premium pension buy-out product sales were $11.1 billion in the fourth quarter of 2017, a 96 percent increase compared with fourth quarter 2016 results. This is first time that fourth quarter buy-out sales have surpassed $10 billion in the last 5 years and the 11th consecutive quarter of sales over $1 billion, according to LIMRA Secure Retirement Institute’s quarterly U.S. Group Annuity Risk transfer Survey.


In 2017, single premium buy-out product sales were $23 billion, 68 percent higher than 2016.


“Following record sales in the second and third quarters, single-premium buy-out sales marked the second highest fourth quarter sales total on record since 2003,” noted Eugene Noble, research analyst, LIMRA Secure Retirement Institute. “Total sales in 2017 reflected broad growth in the industry with 11 in 15 companies reporting double-digit growth in sales. With the exception of 2012 - when there were two significant jumbo deals (>$1 billion) - annual sales have never exceeded $23 billion since the Institute began tracking sales of these products.”


Total assets of buy-out products were over $114.3 billion in 2017, almost 16 percent higher than prior year. Survey participants reported 29,517 contracts sold as of Dec. 31, 2017.


“Institute research finds about 1 in 3 employer-sponsored pensions have a funding status of 80 percent or more. Facing increasing Pension Benefit Guarantee Corporation premiums, more employers are exploring the option to transfer their pension risk to an insurer,” said Noble. “As plans approach full funding, they become attractive candidates for pension risk transfers. The Institute expects funding ratios to improve as interest rates increase, leading more and more plan sponsors to consider buy-outs in the next few years.”

A group annuity risk transfer product, such as a pension buy-out product, allows an employer to transfer all or a portion of its pension liability to an insurer. In doing so, an employer can remove the liability from its balance sheet and reduce the volatility of the funded status.


Fifteen companies, representing 100 percent of the U.S. market, participated in this survey. A breakout of pension buy-out sales by quarter since 2012 is available in the LIMRA Data Bank.

Click Here for link to article



Regulators ‘Making Progress’ on Missing Participant Guidance

By John Iekel | ASPPA |April 11, 2018


The IRS and Treasury Department are “making progress” on guidance regarding missing participants, according to a panelist at an April 11 session of the Enrolled Actuaries meeting held by the Conference of Consulting Actuaries and the American Academy of Actuaries in Washington, DC.


Session moderator Tonya B. Manning, the U.S. Retirement Leader and Chief Actuary for Conduent HR Services’ U.S. Wealth Practice, noted that the IRS and Treasury listed guidance on missing participants as one of their plans in their 2017-18 Priority Guidance Plan. She asked the panelists - IRS attorney Linda Marshall, IRS actuary Carolyn Zimmerman and Treasury Department actuary Harlan Weaver - what that means.


“The missing participant issue is big and complex,” remarked Weller. He said that as regulators, one of the determinations they have to make is whether to wait to answer questions until all issues are addressed, or issue smaller pieces of guidance that are not comprehensive and all-encompassing, but concern limited aspects of a matter. He said he considers it “likely” that they will take the latter approach regarding guidance on missing participants.


“We have work to do with our colleagues at the Department of Labor,” he said, but added, “we are making progress.”


Tax and Regulatory Reform

When an attendee raised the issue of earlier proposals during the crafting of the Tax Cuts and Jobs Act that called for new thresholds for and tax treatment of 401(k)s, Weller said that “the retirement system has a lot of bipartisan support” and “there doesn’t seem to be much appetite to use retirement plans as a funding source for other things.”


And when asked if President Trump’s “two-for-one” executive order (mandating that for every new regulation put in place, two must be eliminated) would affect regulations governing pensions, Weller averred that such matters are “way above my pay grade” but also observed that cost-benefit analysis is different for tax regulations than for rules in other departments.

Click Here for link to article




Austin Office

Patrick McLean, CPA





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Michael E. Devlin, Principal

(855) 432-7658  ext. 403



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855-432-7658 ext. 401




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David Rumas, FCA, EA, MAAA

(855) 432-7658 ext. 406


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(855) 432-7658 ext. 410




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ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Retirees - 2.78%

Term Vesteds - 2.83%

Actives - 2.98%

Annuity Purchase Rates as of April 9, 2018



BCG Pension Risk Consultants

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