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Our Perspective

Annuity Purchase Update: September 2020 Interest Rates

Pensions enjoyed their best month of the year in August, driven by higher stock prices and higher interest rates. The average duration 7 annuity purchase interest rates increased 16 basis points and average duration 15 rates increased 27 basis points since last month as seen in the below graph titled Annuity Purchase Interest Rates.

Agencies release guidance on SECURE Act changes

On September 2, 2020, IRS released Notice 2020-68, providing Q&A guidance on (among other things) issues for qualified retirement plans under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). On August 20, 2020, DOL released a proposed rule establishing requirements for (required) registration of “pooled employer plans” (PEPs, also known as open multiple employer plans or Open MEPs) under the SECURE Act, providing a new Form PR for that purpose.

DOL proposes new rules on proxy voting

On August 31, 2020, the Department of Labor released a proposed regulation revising DOL’s rules for the voting (or not voting) of proxies by ERISA plan fiduciaries. The new rule requires that fiduciaries apply an economic cost-benefit analysis to decisions about whether or how to vote proxies and/or engage in shareholder activism that is explicitly stricter than current rules.

August 2020 Pension Finance Update

Pensions enjoyed their best month of the year in August, driven by higher stock prices and higher interest rates. Both model plans we track gained ground last month, with Plan A improving 6% and Plan B gaining 1% during August. For the year, Plan A is still down more than 3% and Plan B is down 1% through the first eight months of 2020.

DB contribution timing 2020

DB contribution timing is critical with respect to at least three issues – ERISA minimum funding, Internal Revenue Code tax deductions, and the calculation of unfunded vested benefits (UVBs) for purposes of determining Pension Benefit Guaranty Corporate variable-rate premiums.

Annuity Purchase Update: August 2020 Interest Rates

Pension plans have experienced unprecedented volatility in 2020. While the market volatility has caused the treasury rates to fall dramatically, the spread between treasury bonds and the bonds insurance companies invest in have widened. The widening of this spread would typically tell us that now would be a good time for pension plans to purchase annuities.

July 2020 Pension Finance Update

July was a mixed month for pension finance, with strong stock markets offsetting the impact of new all-time low interest rates. Both model plans we track[1] were close to even last month, with Plan A slipping 1% and Plan B treading water during July. For the year, Plan A is down 9% and Plan B is…Read More