Subject:                                     BCG Pension Insider November 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.



November 2018 - Volume 85, Edition 1



Should Plan Sponsors Purchase Annuities for Their Pension Plan?

PlanSponsor | October 22, 2018 | David Davala, Sr. Consultant at Findley


David Davala, with Findley, discusses considerations for defined benefit (DB) plan sponsors before deciding whether to transfer some of their pension risk to an annuity provider.


At times, the recommendations of trusted advisers can seem to be at odds. This may be true concerning whether to use an annuity purchase to de-risk a company pension plan. How does the plan sponsor get to the best answer? Consider this scenario:


Recent reports show that pension plans have experienced a growth in their funding percentages. Company XYZ’s pension plan’s funded status has improved over the last year and a half. The sponsor has also read articles concerning lump-sum buyouts, plan terminations and annuity purchases.


The phone rings. On the line is an annuity broker. He explains that there are advantages to purchasing annuities for some of XYZ’s pension plan participants. This transaction would transfer the liabilities and associated assets to an insurance company. The broker goes on to explain the advantages of an annuity purchase:


·     It lowers a plan’s participant count, resulting in a lower Pension Benefit Guaranty Corporation (PBGC) premium;

·     It lessens volatility in financial measurements, as the pension liability would be lower;

·     It transfers risk;

·     It lowers record-keeping and administrative costs; and

·     It removes the requirement for a plan audit, if the plan’s participant count drops below 100.


The broker also notes that annuities can be purchased with plan assets.


An annuity purchase sounds like it might be a good idea to explore. So the sponsor calls the plan’s actuary to discuss the prospect.

Click Here for full article



Goldman Sachs: Many Pensions Stand in PRT Goldilocks Zone

PlanSponsor | October 15, 2018 | John Manganaro


If interest rates continue to rise, this may have a negative impact on equity valuations; consequently, according to Goldman Sachs research, the present period may represent a limited window for optimal pension risk transfer actions.


According to Goldman Sachs Asset Management’s new white paper, “Stars Aligning for Corporate Plans to Take De-Risking Actions,” almost 25% of U.S. corporate defined benefit (DB) plans are now in a fully funded or over-funded position.


As the paper’s title indicates, this means many plan sponsors are in a great position to take further de-risking actions.


“Our work would indicate that the aggregate system-wide funded level hit 91% at the end of September, the highest level since the financial crisis,” the paper says. “This represents a five percentage point improvement in funded status year-to-date and a 10 percentage point increase since the end of 2016.”


The paper says all of this is occurring when the S&P 500 has offered strong returns during the first three-quarters of 2018 and is still close to its all-time high, despite some rocky days in the second week of October.


“Consequently, many equity market valuation metrics, as well as metrics for other risk assets, are at the high end of their historical ranges,” Goldman Sachs researchers say. “If interest rates continue to rise, this may have a negative impact on equity valuations, as has been evident over the first few trading days of October. Consequently, the present period may represent a window of time when sponsors can seek to lock in gains from both higher interest rates and equity valuations. This may provide further impetus for sponsors to consider taking incremental de-risking actions within their portfolios.”


According to Goldman Sachs, a significant portion of the recent funded status improvements is also attributable to the notable contribution activity observed ahead of the September 15 tax deadline. Generally speaking, this was the deadline for pension plan sponsors to make a contribution in order to potentially benefit from a tax deduction at the higher, 2017 rate.

For full article Click Here or To view white paper Click Here






Austin Office

Patrick McLean


(800) 832-7742



 Boston Corporate Office

Michael E. Devlin, Principal

(855) 432-7658  ext. 403


Steve Keating

(203) 955-1566


David Geloran


(855) 432-7658 ext. 401



Chicago Office

David Rumas


(855) 432-7658 ext. 406


Karen Ambrose

(855) 432-7658 ext. 410


Karl K. Oman


(855) 432-7658 ext. 408



Cincinnati Office

Debbie M. Sharp


(855) 432-7658 ext. 405



Boise/Los Angeles Offices

Sean O'Flaherty


(855) 432-7658 ext. 402



ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Retirees - 3.28%

Term Vesteds - 3.33%

Actives - 3.45%

Annuity Purchase Rates as of November 12, 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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