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Retirement plan accounting

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.

Retirement Policy Update – November 2021

President Biden signed into law the Infrastructure Investment and Jobs Act (IIJA). The new legislation (among many other things) extends 25-year average interest rate stabilization relief under ERISA’s DB plan minimum funding rules another five years.

De-risking in 2021 – 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 2021.

2020 lessons learned – annuity settlements for small benefits

Even for plans not at the VRP headcount cap, with respect to (relatively) smaller benefits, annuity settlement may be an efficient strategy. For almost all pension plans, there exists a threshold, greater than zero, below which these settlements make sense.

Interest rates 2020 — signal or noise?

In November 2019 we published an article reviewing interest rates broadly. At that time, interest rates were down 75-100 basis points for the year and nearly 120 basis points from their high in November 2018. In that context, we identified the key question for DB plan sponsors, for whom plan-related interest rate risk is a significant…Read More

Interest rates 2019 — signal or noise?

Medium- and long-term interest rates have declined 75-100 basis points since the beginning of the year. We have published a series of articles on measuring UVBs for variable-rate premiums, managing funding and PBGC variable-rate premiums in a volatile interest rate environment, DB funding strategy, and the effect of interest rate declines on DC plans. In this article we very briefly…Read More

Society of Actuaries publishes MP-2019 mortality improvement scale and new mortality tables, showing decrements in life expectancy

In October 2019, the Society of Actuaries published (1) a new Mortality Improvement Scale MP-2019 and (2) new base Pri-2012 Mortality Tables. Both MP-2019 and Pri-2012 reflect decrements in age 65 life expectancy which, when adopted by sponsors and regulators, will generally reduce (marginally) defined benefit plan liability valuations. In this article we very briefly…Read More

Interest rates 2019 – DB funding strategy

In this article, we begin with a review of the interest rates used for plan funding – 25-year average Highway and Transportation Funding Act (HATFA), 24-month average, and one-month spot rates – reflecting the significant declines this year. We then consider the short- and medium-term effect of those declines on sponsor funding requirements. We conclude…Read More