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Retirement plan issues for Finance Department

2020 lessons learned – lump sum de-risking in the context of steeply declining interest rates

Defined benefit plan valuation interest rates have declined nearly 200 basis points since late 2018. Interest rate stabilization has significantly mitigated the effect of this decline on plan funding. GAAP accounting (e.g., balance sheet disclosure) is, however, indexed to current rates, and the steep declines in interest rates have presented a number of challenges and opportunities for defined benefit plan sponsors.

September 2020 Pension Finance Update

Lower stock prices hit pensions during September. Both model plans we track lost ground last month, with Plan A dropping 2% and Plan B slipping 1% during the month. For the year, Plan A is now down 5% and Plan B is down more than 1% through the first three quarters of 2020.

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.

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

Annuity Purchase Update: July 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.

June 2020 Pension Finance Update

June was another positive month for pension finance, rounding out a solid quarter during which plans clawed back about one-third of the ‘hole’ created in the first quarter.

Annuity Purchase Update: June 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.