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Our Perspective

De-risking in 2021 – Part 1

In this article we provide our standard analysis of de-risking: how changes in interest rates and Pension Benefit Guaranty Corporation premiums may affect sponsor decisions to de-risk (or not de-risk) defined benefit plan liabilities in 2021.

Annuity Purchase Update: February 2021 Interest Rates

De-risking defined benefit pension plans through the purchase of annuities has been executed by companies of all sizes as a way to manage their liabilities and expenses. In 2020, $26.5B of annuities were purchased by plan sponsors. Many frozen plans implement this strategy to move them a step closer to their ultimate end game.

January 2021 Pension Finance Update

Higher interest rates gave pension finance a boost in January. Both model plans we track gained ground last month, with Plan A improving 2% while the more conservative Plan B gained less than 1%.

Committee Chairmen Introduce Multiemployer Pension Plan Reform in House

Multiemployer plans that would be eligible for partitioning through 2024 would be those in critical and declining status, those with significant underfunding and at least 50% more retirees than actives, those that have suspended benefits, and certain plans that have already become insolvent.

DOL publishes limited guidance on missing participants, allows transfers from terminating DC plans to PBGC program

DOL’s “best practices” document outlines its view of the “best practices that the fiduciaries of defined benefit and defined contribution plans, such as 401(k) plans, can follow to ensure that plan participants and beneficiaries receive promised benefits when they reach retirement age.” The document begins by identifying “red flags,” then discusses issues with respect to census/plan data, communications, missing participant search, and documentation.

Annuity Purchase Update: January 2021 Interest Rates

The COVID-19 pandemic brought on numerous negative consequences, including a sharp market decline, reduced employee workforces, and decreased overall productivity. This caused plan sponsors to shift their priorities away from their pension plans and place annuity purchase transactions on hold during the second and third quarter of 2020.

House Committee Chairmen introduce single employer funding relief

On January 21, 2021, Congressman Neal (D-MA), Chairman of the House Ways and Means Committee, and Congressman Scott (D-VA), Chairman of the House Education and Labor Committee, introduced single employer plan funding relief proposals. Both bills are titled the “Emergency Pension Plan Relief Act of 2021.”

2021 Retirement policy legislative agenda

With the Democrats in control of both houses of Congress, they are now in a position to move legislation. In what follows we discuss, briefly, the procedural issues that may limit what legislation may be viable, and then consider a variety of proposals that indirectly or directly affect retirement policy that Democrats may consider giving priority.