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.


July 2019 - Volume 93, Edition 1



DB Funded Status Improved in June, but Down for Q2

By Rebecca Moore 7/9/19 PLANSPONSOR


While asset returns gave defined benefit (DB) plan sponsors a funded status bump in June, lower interest rates led to an overall decline for the second quarter of 2019.


The aggregate funded ratio for U.S. corporate pension plans increased by 0.8 percentage points to end the month of June at 86.4%, according to Wilshire Consulting.


The monthly change in funding resulted from a 3.8% increase in asset values more than offsetting the 2.8% increase in liability values. “June’s increase in funded ratio was driven by the best performance for June in Wilshire 5000 history,” stated Ned McGuire, Managing Director and a member of the Investment Management & Research Group of Wilshire Consulting. “June’s 0.8 percentage point increase in funded ratio is the fourth monthly increase this year.”


The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased by 2% in June to 87%, as a result of an increase in equity markets which offset a decrease in discount rates, according to Mercer. As of June 30, the estimated aggregate deficit of $308 billion decreased by $31 billion as compared to $339 billion measured at the end of May.


The S&P 500 index increased 7.05% and the MSCI EAFE index increased 5.97% in June. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased from 3.63% to 3.44%.


According to Northern Trust Asset Management (NTAM), corporate defined benefit (DB) plans’ funded ratio improved from 86% to 87% in June. Global equity market returns were up approximately 6.55% during the month. The average discount rate decreased from 3.27% to 3.06% during the month. This led to higher liabilities, though again these were more than offset by the favorable returns in the equity markets.


While an improvement came during the last month, the drop in discount rates has kept funded status from recovering to the 2019 highs of just below 90%, NTAM notes. Click Here for full article.



Supreme Court Asked If Well-Funded Pensions Can Harm Participants

By John Manganaro 6/19/19 PLANSPONSOR


ERISA allows plan participants to sue to remedy demonstrable harms they have suffered as a result of fiduciary breaches. Less clear is how to apply ERISA’s remedies when a breach is alleged to have occurred within a well-funded pension plan.


In a newly published analysis, a trio of attorneys with Bressler, Amery & Ross consider the case of Thole v. U.S. Bank, which has been appealed to the Supreme Court in the hope of testing the question of whether well-funded pensions can be sued for “harming” retirees.


The authors are Thomas Roberts, a principal in the firm’s securities practice; Donald Winningham III, counsel; and Kathryn Rockwood, an associate in the firm’s securities practice. According to the trio, the case of James J. Thole et al. v. U.S. Bank NA et al. asks the question whether participants in U.S. Bank’s pension plan can sue their employer for alleged Employee Retirement Income Security Act (ERISA) fiduciary breaches even though their pension plan is not facing funding issues—implying that individual retirees cannot establish that they have suffered an actionable harm.


Specifically, the Supreme Court has been asked to weigh the following questions: “(1) Whether an ERISA plan participant or beneficiary may seek injunctive relief against fiduciary misconduct under 29 U.S.C. § 1132(a)(3) without demonstrating individual financial loss or the imminent risk thereof; and (2) whether an ERISA plan participant or beneficiary may seek restoration of plan losses caused by fiduciary breach under 29 U.S.C. § 1132(a)(2) without demonstrating individual financial loss or the imminent risk thereof.”


As the attorneys point out, back in October 2018, the Supreme Court requested the United States Solicitor General to “opine whether the court should grant cert to the matter filed by retirees.” As detailed in a lengthy brief, the Solicitor General responded in the affirmative. The next step in the case is a conference of the Supreme Court justices on this matter, set for June 20. Click Here for full article.






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Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, disability or unusual provisions)

Retirees - 2.88%

Term Vesteds - 2.93%

Actives - 3.00%

Annuity Purchase Rates as of July 15, 2019



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