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Browsing Defined Benefit

Annuity Purchase Update – June 2022

Annuity Purchase interest rates hit a record-setting high in June, with the average duration 7 rate at 3.82% and average duration 15 rate at 3.87%.

Which participants can sue?

A number of recent cases have addressed the issue of which participants have “standing” to bring an ERISA fiduciary action against plan fiduciaries. The cases generally focus on the issue of whether the participant-plaintiffs have a “concrete stake” in the dispute. In what follows, we discuss two recent cases involving participant-plaintiffs in defined contribution plans…Read More

May 2022 Pension Finance Update

Financial markets continued to roil in May, but the net impact on pension finance was modest. Both model plans1 we track were close to even on the month. Through the first five months of 2022, Plan A remains up 4%-5% while the more conservative Plan B is holding at even on the year: Assets Stocks…Read More

Annuity Purchase Update – May 2022

May marks the second straight month of Annuity Purchase interest rates hitting record levels as rates increased over 120 basis points these last two months

DOL issues RFI on disclosure and fiduciary issues with respect to “climate-related financial risks”

On February 14, 2022, the Department of Labor published a “Request for Information on Possible Agency Actions to Protect Life Savings and Pensions from Threats of Climate-Related Financial Risk.” Among other things, the RFI solicits comments on whether DOL should collect data on climate-related financial risk (CRFR) for retirement plans, whether certain guaranteed lifetime investment products (e.g., annuities) may mitigate/hedge CRFR and whether DOL should facilitate their inclusion in DC plans, and whether there is a need to educate participants (e.g., in participant directed DC plans) about CRFR.

De-risking in 2022 – Part 2 – the de-risking decision in the context of rising interest rates

many plans will use a 2021 August, September, October, November, or December lookback month to determine the interest rate to be used to value 2022 lump sums. For these plans, the increase in interest rates in 2022 will mean that 2022 lump sums will be valued at an interest rate that is lower than current market rates, generating a lump sum that is greater than the current market value of the associated liability.

De-risking in 2022 – 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 2022. For purposes of this article, we focus solely on de-risking by paying out a deferred vested participant’s benefit as a lump sum and thereby eliminating the related liability.

Pension Finance Update – January 2022

January was a mixed month for pensions, as higher interest rates and lower stock markets pushed pension assets and liabilities down last month.