Subject:                                     BCG Pension Insider June 2019



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.


June 2019 - Volume 92, Edition 1



OCIOs Foresee More Derisking DB Plans Using Alternative Investments

By Rebecca Moore 6/3/19 PLANSPONSOR


Long-duration private debt can be used for hedging liabilities, and other alternative investments may be used for enhancing risk-adjusted returns, a report from Cerulli Associates explains. 


During the past decade, growth in the outsourced chief investment officer (OCIO) space has been driven by institutions’ lack of internal investment resources to cover and manage all asset classes, and a lack of access to higher-quality investment opportunities.


Recent research from Cerulli Associates, a global research and consulting firm, indicates that these OCIO clients are increasingly seeking alternative investments to diversify their portfolios and to obtain higher returns than those currently available from public investments.


According to “The Cerulli Edge - U.S. Asset and Wealth Management Edition, June 2019 Issue,” corporate defined benefit (DB) plans are generally not the largest holders of alternative investments, and most professionals who work with DB plans report that allocations tend to be found in plans that remain open. Although there could be call for using alternatives to better hedge liabilities, derisking corporate plans will likely see more value in using alternatives in their risk-seeking investments. OCIO providers indicate they expect allocations to alternative asset classes to increase for nearly all institutional client types while equity allocations are trimmed.

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PRT Transactions Surged in First Quarter of 2019

By John Manganaro 5/22/19 PLANSPONSOR


Data from LIMRA Secure Retirement Institute shows a 240% increase in pension risk transfer activity in the first quarter of 2019 relative to the same period in 2018.


According to new data shared by the LIMRA Secure Retirement Institute (LIMRA SRI), U.S. single premium pension buyout product sales surpassed $4.7 billion in the first quarter 2019.


LIMRA SRI’s data suggests this is an increase of 240% compared with first quarter 2018 results, making for the highest first-quarter pension risk transfer (PRT) sales total in over 30 years. This data comes from LIMRA SRI’s U.S. Group Annuity Risk Transfer Survey.


“Buyout products had a very strong start to the year with $4.7 billion in sales,” says Mark Paracer, assistant research director for LIMRA SRI. “Previous first quarter sales had never exceeded $1.5 billion.”


Notably, LIMRA SRI finds the increase in sales was not limited to just one or a few insurance companies. Rather, two-thirds of companies engaging in PRT transactions reported higher first quarter sales compared to the previous year.

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What to Know About Financial Audits Filed with Form 5500s

By Lee Barney 5/20/19 PLANSPONSOR


Plan sponsors required to file a financial audit along with their Form 5500 should know how regulators use the information and how to pick the best auditor.


Any retirement plan with 100 or more participants must be independently audited by a certified public accountant (CPA) firm and include those findings along with the annual Form 5500 it electronically files with the Department of Labor (DOL), which in turn, shares it with the Internal Revenue Service (IRS).


It is imperative that plan sponsors work with qualified CPA firms since the “2015 Assessing the Quality of Employee Benefit Plan Audits” from the DOL found that 39% of plans that were audited had either unacceptable or major deficiencies, says Anne Morris, employee benefit plan practice leader at Windham Brannon in Atlanta. And the auditor must use Generally Accepted Accounting Principles (GAAP), says David Guadagnoli, a partner at Sullivan & Worcester in Boston.


The Form 5500, which includes the audited financial statements, is used by the DOL, IRS and, in the case of a defined benefit plan, the Pension Benefit Guaranty Corporation (PBGC), Guadagnoli adds. “The idea is that Congress felt that the plan administrator, the government and participants needed financial statements reviewed by an independent auditor to make sure retirement plans are properly managed for participants,” he says.

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ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Retirees - 2.88%

Term Vesteds - 2.93%

Actives - 3.00%

Annuity Purchase Rates as of June 10, 2019



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