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PBGC

The 2021 PBGC Premium Burden Report

plan sponsors are paying PBGC Variable Rate Premiums and of those that still are, fewer sponsors are leaving money on the table than at any previous year since we began publishing the PBGC premium report

New Administration, new Congress

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.

SECURE 2.0 – the Securing a Strong Retirement Act

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.

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.

2021 Increases for Retirement Plans, Social Security

The Social Security Administration just announced benefit increases effective in 2021. Current retirees will receive a cost-of-living increase, beginning in January 2021, of 1.3%, reflecting the increase in CPI-W between the 3rd quarter of 2019 and the 3rd quarter of 2020.

Measuring UVBs for variable-rate premiums – the alternative vs. standard method election

Defined benefit plan sponsors that (1) currently using the standard (spot-rate) method to determine unfunded vested benefits (UVBs) for purposes of calculating Pension Benefit Guaranty Corporation variable-rate premiums, and who (2) have the ability to elect to switch to the alternative (24-month average) method, may have an opportunity to reduce (in some cases significantly) 2020 variable-rate premiums by doing so.