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 2019 - Volume 94, Edition 1



How to Walk the Line With Pension Overpayments

By Mary Shah and Mindy Zatto, Strategic Benefit Advisors | 6/18/19 | PLANSPONSOR


Mary Shah and Mindy Zatto, from Strategic Benefits Advisors, discuss ways to recoup pension overpayments that satisfy regulators and do not place burden on retirees, as well as how to prevent overpayments from happening.


Every few years, it seems, a new pension overpayment story makes the papers. Last summer, we saw AT&T on the front page of the Wall Street Journal, its attempts to recoup funds from retirees, with the help of a collection agency, unflatteringly reported under the headline “AT&T Overpaid Some Pensioners; Now It Wants the Money Back.”


Plan sponsors nearly always find themselves in a difficult position when pensioners have been paid more than the plan’s provisions stipulate. Recovering overpayments is easier said than done, and the ill will generated from doing so can run counter to a company’s other objectives. Yet, the IRS mandates that, in the case of an overpayment, the plan should be made whole so it is preserved for all pensioners who rely on its funds.


Lump-sum or installment repayment

Requiring repayment in a lump sum is fairly straightforward for the plan sponsor, but it can have the effect of substantially—or entirely—draining affected retirees’ savings. Spreading repayments over a fixed schedule of installments can lessen the blow. However, if the participant passes away before overpayments are fully recouped, the plan sponsor generally must make a lump-sum contribution to the plan to complete the repayment.


Actuarially equivalent permanent reduction

Another approach is to recoup the value of pension overpayments over the remainder of each participant’s lifetime. This option satisfies the IRS, which deems plans to be repaid as soon as the actuarially equivalent permanent reduction is established. It’s also more attractive to participants than lump-sum repayment, and it’s a smart choice for plan sponsors, which are not required to make additional payments in the event a participant passes away before the plan is made whole.

Click Here for full article.



Lower Interest Rates Continue to Plague DB Plan Funded Status

By Rebecca Moore | 8/9/19 | PLANSPONSOR


“Plan sponsors should review their risk management toolkit to consider whether their investment policy is aligned with the current market environment and to explore potential risk transfer activity,” suggests Scott Jarboe, with Mercer.


Defined benefit (DB) plan funding ratios decreased throughout the month of July, primarily driven by tightening credit spreads, resulting in a decrease in the discount rate, according to Legal & General Investment Management America (LGIMA). It estimates that the average plan’s funding ratio fell 0.8% to 82.3% through July.


LGIMA’s Pension Solutions’ Monitor report notes that, “The rates market once again took its cues from the central bank. Echoing sentiments other members had voiced in June speeches, Fed Chair Powell’s comments before Congress at the Humphrey Hawkins meeting emphasized concerns over trade issues, slowing global growth, and inflation trending below target. This testimony, coupled with the release of the June FOMC minutes, set the groundwork for the first Fed cut since the financial crisis. At the July 31 meeting, the Fed cut interest rates by 25 basis points and ended their balance sheet runoff two months earlier than planned.”


LGIMA estimates the discount rate’s Treasury component increased by 1 basis point while the credit component tightened 7 basis points, resulting in a net decrease of 6 basis points. The negative impact due to the change in Treasury rates is a function of positive carry of the liabilities. Overall, liabilities for the average plan increased 1.21%, while plan assets with a traditional “60/40” asset allocation increased by approximately 0.28%.


Due to lower interest rates, liability values increased, and were only partially offset by muted asset performance, according to Ned McGuire, managing director and a member of the Investment Management & Research Group of Wilshire Consulting. According to the firm, the aggregate funded ratio for U.S. corporate pension plans decreased by 0.4 percentage points to end the month of July at 85.6%. It says liability values increased 0.7% for the month, while asset values increased 0.3%.

Click Here for full article.





Austin Office

Patrick McLean


(512) 480-8309



 Boston Corporate Office

Michael E. Devlin,


(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


(312) 550-3844



Cincinnati Office

Debbie M. Sharp


(855) 432-7658 ext. 405



Boise/Los Angeles Offices

Sean O'Flaherty


(855) 432-7658 ext. 402




Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, disability or unusual provisions)

Retirees - 2.43%

Term Vesteds - 2.48%

Actives - 2.55%

Annuity Purchase Rates as of August 19, 2019



BCG Pension Risk Consultants

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

Bridging the Pension Gap





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

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