With the focus currently on how President-Elect Biden will staff his new Administration and on the change in control of the Senate, we provide a brief review of the key Administration jobs that President Biden will have to fill, and the key Congressional leadership, that directly affect retirement savings policy, and some of the issues they will be considering.
December gave us one more turn of the screw from extraordinary 2020 stock markets, pushing pension sponsors into the black for the year.
Pensions experienced their strongest month of the year in November. The average duration 7 annuity purchase interest rates increased 4 basis points and average duration 15 rates increased 1 basis point since last month as seen in the below graph titled Annuity Purchase Interest Rates.
On December 11, 2020, the Department of Labor released a final regulation revising DOL’s rules for the voting (or not voting) of proxies by ERISA plan fiduciaries.
Stocks enjoyed their strongest month of the year in November, propelling pensions toward positive territory for the year. Both model plans we track gained ground last month, with Plan A adding close to 5% and Plan B close to 2% during the month. For the year, Plan A is down less than 1% and Plan B is even through the first eleven months of 2020.
Pension plans have experienced unprecedented volatility in 2020. While the market volatility has caused the treasury rates to drop dramatically, the spread between treasury bonds and the bonds insurance companies invest in have widened. The widening of this spread typically tells us that now would be a good time for pension plans to purchase annuities.
The IRS had in Notice 2020-61 (August 6, 2020) clarified that the extended CARES Act contribution deadline applied to both minimum and “excess” contributions – a critical issue in the calculation of PBGC variable-rate premiums. The extension did not, however, apply to the contribution due date for tax deductions or for filing Form 5500.
On October 27, 2020, House Ways and Means Committee Chairman Neal (D-MA) and Ranking Member Brady (R-TX) released the Securing a Strong Retirement Act – a set of retirement savings policy changes with bi-partisan support. The bill builds on changes made by 2019’s Setting Every Community Up for Retirement Enhancement (SECURE) Act and may provide a template for further improvement of our current retirement savings system.
Stocks slipped again in October, producing modest declines for pensions. Both model plans we track lost less than 1% during the month. For the year, Plan A is down more than 5% and Plan B is down almost 2% through the first ten months of 2020.
In this article we present some “lessons learned,” thus far, with regard to 2020 annuity settlements – transferring DB liabilities with respect to one or more participants to an annuity carrier. We say “thus far” because it is still practical for some sponsors to transfer DB liabilities to a carrier this year.