04.09.26
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A Ryan ALM, Inc. Client Portfolio Review

By: Russ Kamp, CEO, Ryan ALM, Inc.

We are blessed to work with a wonderful array of clients, both pension and E&F. They have chosen to bring an element of certainty to the management of their fund. We commend them for that decision and thank them for the confidence that they’ve shown in us and our cash flow matching (CFM) strategy/capability.

Our client relationships begin with the acquisition of important inputs including projections of benefits/grants, expenses, and contributions as far into the future as possible. Most often these are provided by the fund’s actuary. The next step in building a portfolio is to create a Custom Liability Index (CLI), that will establish the framework for monthly distributions.

Upon completion of the CLI, we will work with the client and their advisors to determine the appropriate allocation to CFM. We often suggest converting the current core fixed income allocation since bonds should only be used for their cash flows. Once that has been determined, we will build a high quality bond portfolio (most often 100% IG corporate bonds) that carefully matches asset cash flows of interest and principal with the liability cash flows (benefits and expenses (B&E)).

Once this portfolio is built, we have created an element of certainty for the plan sponsor, as asset cash flow will march in harmony with the liability cash flows barring a bond default, which occurs <0.2% annually (40-year study by S&P). It is only upon changes in the actuaries forecast that lead us to adjust the portfolio, and those annual changes tend to be quite insignificant.

Now the fun part: We are often asked to provide quarterly updates on our portfolio, which couldn’t be any easier. My last portfolio review lasted about 37 seconds. I stated that the projected cash flows that had been shared with us were matched by the asset cash flows, and that there have been no instances in which monthly cash flow needs were not met in their entirety. Furthermore, there have been no defaults in our portfolio ensuring that future cash flow needs will also be met as required. Any questions?

As you can see, there is no need to fret about the direction of U.S. interest rates. No worry about what the “Fed” may do today, tomorrow, or next year. No forecasting of the economic environment, inflation, and/or the geopolitical landscape. Once the CFM portfolio is constructed, the cost savings (cost to fund future B&E) is known and locked in. How many investment managers can tell you how the portfolio will perform over the duration of the program?

Why wouldn’t you want to bring an element of certainty to your fund? Wouldn’t a “sleep-well-at-night” strategy bring comfort to you and those that you serve? If the true objective in managing a defined benefit fund is to SECURE the promised benefits at low cost and with prudent risk, is there another investment strategy that can match the positive attributes of CFM? If we’ve grabbed your attention, reach out. We provide a free analysis of how CFM can make your fund less volatile and uncertain.

04.07.26
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Not Quite Ripken-like, but it is over!

By: Russ Kamp, CEO, Ryan ALM, Inc.

Like clockwork, Milliman has released its monthly Milliman 100 Pension Funding Index (PFI), that analyzes the 100 largest U.S. corporate pension plans, and for the first time in 11-months, the collective funded ratio for this cohort failed to advance.

Investment returns for the constituents in this index fell -3.33% causing assets for PFI members to collectively fall to $1.3 trillion. Unfortunately, a 32-basis-point increasein the discount rate was not enough to offset asset depreciation. The discount rate at 5.65% caused the present value of liabilities to fall to $1.2 trillion. As a result, the funded ratio marginally declined from 109.3% as of February 28, to 108.9%, as of March 31, 2026.

Despite the recent setback, the index showed a 0.7% improvement in the funded ratio which began 2026 at 108.2%. The 0.7% improvement resulted in a $6 billion funding improvement for the first quarter, as a 19-basis-point rise in the discount rate offset quarterly returns for the index constituents of -0.21%.

“March was the first month of funding level declines in almost a year,” said Zorast Wadia, PFI author. “While funding levels improved overall during the first quarter, it is uncertain how long these gains will last, given current volatility. Surplus management strategies focused on both sides of the balance sheet continue to be prudent.” We, at Ryan ALM, Inc., couldn’t agree more. A cash flow matching (CFM) strategy, designed to carefully match asset cash flows (bond interest and principal) with liability cash flows (benefits and expenses) would bring an element of certainty to the management of defined benefit plans. CFM provides all the liquidity to meet ongoing monthly obligations, while extending the investing horizon for the non-bonds. It also eliminates interest rate risk for that portion of the portfolio using CFM.

View this month’s complete Pension Funding Index.

04.06.26
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ARPA Update as of April 3, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

Good morning. We hope that you had a good holiday weekend.

ARPA is now more than 5-years old (March 11, 2021), and the PBGC continues to plug along implementing this critical pension legislation. We are still waiting to hear how the 80 multiemployer plans on the waitlist that were terminated by Mass Withdrawal before 2020 Plan Year will be treated.

As far as those that are currently going through the process, this week saw one plan added to the waitlist, one plan receive approval for their revised application, and three funds that withdrew initial applications.

Pension Plan of the Automotive Machinists Pension Trust, a non-Priority Group member, is seeking $139 million in SFA through a revised application for their nearly 7,500 plan participants. While the Machinists wait for an answer on their application, the members of the UFCW – Northern California Employers Joint Pension Plan are celebrating the announcement that its revised application has been approved. They will receive nearly $2.6 billion in SFA and interest for their >138k members.

Lastly, Bricklayers and Stonemasons Local Union #2 Pension Plan, Communications Workers Local 1109 Pension Plan, and Local 1430 I.B.E.W. Pension Plan have each withdrawn an initial application seeking SFA. Collectively they are trying to secure $50.2 million for 1,690 pensioners.

Since the PBGC began implementing the ARPA pension legislation in July 2021, more than 18% of the roughly 11 million participants in multiemployer plans have had their promised pension benefits secured. Of the nearly 1,350 multiemployer plans, more than 20% have or will go through the application process to help fund those pension promises. It has been an extraordinary legislative effort.

04.01.26
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March Proves Challenging for Core Fixed Income

By: Russ Kamp, CEO, Ryan ALM, Inc.

March was a difficult month for active core fixed income managers, as the Bloomberg U.S. Aggregate Index fell -1.8%. Uncertainty related to the impact of the Iran War on oil prices and subsequently inflation, pushed rates higher across the Treasury yield curve. The U.S. 10-year Treasury note saw yields rise 38 bps to 4.31%.

Agencies fell -1.7% in line with Treasuries, while the Corporate sector declined -2.0%. Corporate spreads ended March with an option adjusted spread (OAS) of 88.6 bps. The best performing Corporate sector was Financials (-1.7%), while Utilities performed worst at -2.2%.

The greatest risk managing bonds is interest rate risk. Given both geopolitical (Iran, Taiwan, Ukraine) and economic risks (oil, inflation, interest rates), now is the time to significantly reduce risk within your fund, whether that be a DB pension or E&F. Why continue to ride active fixed income through these uncertain markets? One can use a cash flow matching (CFM) strategy to SECURE and fund net liabilities chronologically well into the future. In the process, interest rate risk is eliminated as future benefits and expenses are not interest rate sensitive.

Furthermore, by securing near-term liabilities, the non-bond assets can now grow unencumbered providing more time to wade through these challenging times. I have no idea how long this conflict will last. I also don’t know how much damage has occurred and that which might still happen to oil production in the Middle East. Implementing a strategy that doesn’t rely on forecasting U.S. interest rates should be a high priority today.

Making the switch is easy. Rotate your current core fixed income assets from an active investment strategy to a CFM portfolio. There isn’t a need to revisit the fund’s asset allocation. We’ll even look for opportunities to take-in-kind some of your existing holdings. You’ll appreciate not having to search each month for the liquidity to meet the monthly promises that have been made to your participants, as the CFM strategy will provide all the liquidity that you need. Moreover, the Ryan ALM CFM model is skewed to A/BBB+ corporate bonds which should outyield most generic bond indexes that are skewed to Treasuries (e.g. the AGG).


03.31.26
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Trouble Paying the Bills?

By: Russ Kamp, CEO, Ryan ALM, Inc.

“The worst thing that can happen,” Andrew Junkin, CIO, Virginia Retirement System says, “is that you’re a forced seller in any market.”

That quote appeared in a Chief Investment Officer article from March 4, 2026. We couldn’t agree more with Mr. Junkin. Despite improved funding, public funds are being challenged to find adequate cash flow to meet the monthly benefits and expenses. Two factors are at play: 1) improved funding leads to lower annual contributions, and 2) much heavier allocations to alternatives have dried up liquidity, as expected capital distributions fail to materialize.

According to a report by NIRS, from 2001 to 2023, public pension plans shifted roughly 20% of public equity and fixed income into alternatives such as private equity, real estate, and private credit. These are illiquid investments. Despite the “wisdom” of the pension crowd, illiquidity is a RISK and not an alpha generator. As more assets shifted into these illiquid investments, the trades became ever more crowded reducing liquidity further. That is, unless one was willing to take a significant haircut through the secondary markets.

As a reminder, public pension funds are designed to become cash-flow negative over time. Contributions into these funds exceed benefits in earlier decades, building a corpus to be used to fund retirements down the road. They are designed to have the last $ pay the last promised benefit. There is no inheritance waiting for the last few beneficiaries.

You want to have adequate liquidity that isn’t forcing the sale of assets at inopportune times? Develop an asset allocation strategy that bifurcates your assets into two buckets – liquidity and growth – and stop the focus on the ROA as if it were the Holy Grail. It isn’t! Use a cash flow matching (CFM) investment strategy to ensure that abundant liquidity is available from next month as far into the future as your allocation goes. The remainder of the assets go into the growth bucket. If you still want to maintain a heavy allocation to alternatives, they can now grow unencumbered as they are no longer a source of liquidity.

The allocation should be driven by the pension plan’s funded ratio and ability to contribute. We recently provided a large fund with an analysis that showed a plan with <50% funding could still secure the promised NET benefits for the next 33-years, while creating a substantial surplus that could now be managed as aggressively as members of that Board could withstand. Not only are the promised benefits secure, but so are the participants who can now sleep well at night knowing that myriad risks won’t sabotage their golden years.

03.30.26
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Up >50%!

By: Russ Kamp, CEO, Ryan ALM, Inc.

Crude Oil WTI is up 53.2% (as of 12:57 pm on 3/30) since the outbreak of the war in Iran. As I wrote in the post below, it isn’t just the shock at the pump that one should be focused on, but the 1,000s of U.S. manufactured goods and industrial processes that contain and use oil and its many derivatives. The U.S. economy will be dealing with the aftermath of supply disruptions and rapid price increases for quite some time. I can’t see a near-term scenario in which U.S. interest rates get cut by the Federal Reserve. Can you?

It’s Not Just the Price of Gasoline!
03.30.26
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ARPA Update as of March 27, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

The PBGC isn’t quite down to the wire as UConn was in yesterday’s incredible game with Duke, but they still have a lot to do before December 31, 2026. It doesn’t seem like they’ll have to throw up a prayer to win, but I guess that depends on the outcome related to the 80 or so plans currently on the waitlist related to mass withdrawal prior to 2020.

In last week’s activity, no applications were submitted through the PBGC’s eFiling portal which remains temporarily closed. There were also no applications approved or denied, but there were three applications withdrawn. UFCW, Local 23 and Giant Eagle Pension Plan, District Council 37 Local 389 Home Care Employees Pension Fund, and Bricklayers and Stonemasons Local Union #2 Pension Plan, each withdrew its initial application seeking SFA support. Collectively, they were looking to secure $89.9 million in SFA for their 15,195 members. They can resubmit those applications up until year-end.

In other news, none of the plans that were previously awarded SFA were asked to rebate a portion of that allocation due to census errors. As we’ve previously reported, it has been more than six months since the last rebate occurred. As a reminder, of the 67 plans that were audited, four were shown to have correct census data. For the 63 plans that rebated a portion of the SFA, $261 million or 0.49% of the $53.5 billion was rebated.

The waitlist continues to reveal just one non-mass withdrawal fund that hasn’t seen any activity on its potential application. There have been 113 waitlist SFA candidates that have seen action on applications. Only Plasterers Local 79 Pension Plan, added to the list in March 2025, still waits its turn.

03.25.26
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What is My Funded Ratio? Who Cares!

By: Russ Kamp, CEO, Ryan ALM, Inc.

The funded ratio of a DB pension plan gets a lot of attention, especially if it is perceived to be weak. But does the funded ratio truly tell you the whole story as to the financial health of a DB pension plan? We, at Ryan ALM, Inc. don’t think so.

So, how is the funded ratio calculated:

Funded ratio = MV of plan assets / plan liabilities earned to date X 100

The market value of assets is a present value (PV) calculation. The market value of liabilities is the future value of liabilities earned to date discounted back to a PV calculation based on a discount rate. For public and multiemployer plans the discount rate tends to be the fund’s return on asset assumption (ROA), while it is an AA corporate blended rate for private pensions. In today’s interest rate environment, the discount rate for private plans will be roughly 1.5% less than the discount rate based on the average ROA. That means that liabilities for private funds will have a greater current value than the value of liabilities calculated based on the discount rate using the ROA. Oh, okay, so the choice of a discount rate can change my funded ratio. That’s interesting. So that tells me that if I wanted to improve my funded ratio, all I’d have to do is increase my discount rate to lower the PV of my liabilities. That’s very interesting.

So, it appears that the funded ratio calculation can be manipulated to some extent. As we think about the formula above, is there anything missing? Yes, where are the future contributions, which can be significant. Why are future payment liabilities in the calculation, but projected contributions, which are future assets of the fund, not included? Common thinking suggests that those future contributions aren’t guaranteed, which is why they aren’t factored into the funded ratio calculation. However, is that a correct assumption? In doing some research, it appears >80% of DB pension funds receive 100% of the annual required contribution (ARC). Even NJ’s public pension system is making the ARC and then some.

We recently had a conversation with a large plan sponsor who thought that their fund was <50% funded based on the formula above. Not surprisingly, they were very focused on this ratio and looking for investment strategies that could potentially enhance it. As an FYI, this plan’s future contributions as forecasted by their actuary were significant. In fact, future contributions were so large that they were equal to 73% of the forecasted liabilities! Yes, without including the pension fund’s current assets, this plan was 73% funded, provided those projected contributions were met which they have been for more than a decade.

So, given these forecasted contributions is that pension fund really <50% funded?

In another example, the same fund that thought that they were poorly funded, could defease net pension liabilities for the next 33-years. How is it possible that a plan that believes it is <50% funded able to significantly reduce risk, enhance liquidity, and SECURE pension promises for 33-years? Furthermore, this fund was going to establish a $4.4 billion surplus on the day that those benefits and expenses were defeased for 33-years. If it just earned the projected ROA, that $4.4 billion would grow to $34.2 billion during that 33-year period. Wow! 

So, I ask once more, does that sound like a plan in financial distress, which a funded ratio of <50% might suggest? NO!

The funded ratio is but one measure of a pension plan’s health. Unfortunately, many in our industry would look at that # and say that more risk needs to be taken to achieve “full funding” down the road, when in fact reducing risk through a cash flow matching (CFM) strategy is the appropriate approach. It is past the time to get off the scary asset allocation rollercoaster. 

03.24.26
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ARPA Update as of March 20, 2026

By: Russ Kamp, CEO, Ryan ALM, Inc.

I’m sure that folks were very (perhaps bitterly) disappointed not to get my weekly update yesterday on the PBGC’s implementation of the ARPA pension legislation. I was traveling for business yesterday, but unlike many travelers, my experience at Newark Airport was shockingly positive. I have heard of 4-6 hour waits to get through security and planes that are forced to leave the gate with as few as 5 passengers. Various estimates put the daily impact of these disruptions at $285 million to $580 million once a 10% reduction in flights occurs.

What about ARPA? As regular readers know, the PBGC has worked through a significant majority of non-mass withdrawal applicants. There remains just one fund – Plasterers Local 79 Pension Plan – that hasn’t gotten to submit an initial application form those on the waitlist. There are still a few pension funds from the original Priority Groups that haven’t filed an initial application seeking SFA.

During the prior week, Cumberland, Maryland Teamsters Construction and Miscellaneous Pension Plan received approval of its revised SFA application. They will receive $9.5 million for their 101 plan members. Congrats!

In other news, there is no other news, as there were no new applications submitted, as the PBGC’s eFiling portal remains temporarily closed. Also, there were no applicants denied, no plans were asked to repay a portion of the SFA, and no applications were withdrawn or added to the waitlist.

The treatment of the 80 plans (from potentially 131) currently on the waitlist that fall under the category of plans suffering mass withdrawal prior to 2020 is the last remaining significant issue that the PBGC must still work through.

U.S. Treasury yields have risen sharply since the beginning of the Iran conflict. As challenging as that development is on existing bond funds, the entry point for SFA recipients wanting to use CFM to secure the benefits and expenses is as good as it has been in more than 1-year. As a reminder, higher yields reduce the cost of those future promises.

03.19.26
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Don’t Look Down – That Yield Curve is Steep!

By: Russ Kamp, CEO, Ryan ALM, Inc.

One year ago today, the 2-year Treasury note was trading at a yield of 3.99% and the 30-year Treasury bond had a yield of 4.55% for a very tight 56 basis points spread. What a difference a year makes. Coming into trading this morning, the 2-year Treasury note yield had fallen 0.21% during the last 12-months, while the yield on the 30-year Treasury Bond had risen by 34 bps. The spread between 2s and 30s is now 1.11%!

The steepness of the yield curve is hugely advantageous for cash flow matching (CFM) assignments going out 20- to 30- years. As Ron Ryan likes to point out, BOND math is pretty straightforward: the longer the maturity and the higher the yield, the lower the cost of those future promises. We’ve regularly been producing portfolios with YTMs of between 5.25% and 5.40%. This despite significant tightening within the investment grade corporate bond universe.

For funds (pension and E&F) searching for liquidity and hoping to secure the next 5-years of benefits or grants (and expenses), the YTM on your mandate would be closer to 4%. Geopolitical risk is keeping U.S. interest rates at or slightly above long-term levels. It doesn’t appear that the Fed’s FOMC is in any hurry to reduce rates given the recent and continuing oil shock. While uncertainty reigns, don’t hesitate to reach out to us for a free analysis to highlight how CFM could help bring an element of certainty to your fund and a great night’s sleep for you and the participants.