The Ryan ALM Pension Monitor

We are pleased to share with you the Q4’21 Ryan ALM Pension Monitor, which is a look at how pension assets and liabilities performed during 2021. As you will note, there are significant differences in the relationship of assets to liabilities based on the type of plan. Corporate pension plans use a FAS (ASC 715) AA corporate discount rate to value pension liabilities. Using this approach produces a -4.6% return for pension liabilities in 2021 for a pension plan with a 12-year duration. Despite lower returns among the average corporate plan due to their much greater fixed income exposure (P&I’s asset allocation survey of the top 1,000 plans), corporate plan assets outperformed plan liabilities by 12.5%.

Public and multiemployer plans that use the return on asset assumption (ROA) for their liability discount rate don’t benefit from the rising US interest rate environment, as liability growth is a static or plugged number. We are using 7.25% as the average discount rate among these plan types. Given the 7.3% return on liabilities in 2021 for plans using this ROA discounting methodology, assets only outperformed liabilities by 6.5% for public plans and 6.3% for multiemployer plans. As a reminder, liabilities are bond-like in nature and move daily with changes in the interest rate environment. The 39-year bull market for bonds crushed pension funding, as US interest rates plummeted causing the PV of liabilities to grow significantly. We may very well be entering a period of time that will prove beneficial to Pension America as liability growth could be muted as rates rise. But will public and multiemployer plans even notice?

Lastly, the primary objective for any pension plan should be to SECURE the promised benefits in a cost-efficient manner and with prudent risk. The only way that this can be achieved is through cash flow matching of assets versus the plan’s liability cash flows. Not focusing on or masking the true value of a plan’s liabilities makes this process nearly impossible.

2 thoughts on “The Ryan ALM Pension Monitor

  1. Road Carriers 707 Pension Update

    Road Carriers 707 Pension Fund Update This email was sent by the Road Carriers 707 Fund office to keep you informed of any updates to the 707 Pension Fund Road Carriers 707 Pension Fund

    Pension Fund Update January 20, 2022

    It’s Official! Yesterday the PBGC announced on their website our application for Special Financial Assistance was approved by the PBGC.

    I spoke with the PBGC and their goal is to release the Special Financial Assistance to our pension fund as soon as possible. The Regulations require the release of the SFA to our pension fund within 90 days. The PBGC in the two most recent approvals expect to make payments within 30 days and I was told 30 days was their target for the Local 707 plan.

    Very shortly all participants currently receiving a benefit will be sent an individualized statement detailing the restoration of your monthly benefit prior to reductions under the PBGC’s insolvency rules. The statement will also detail the amount you will receive in a lump sum reflecting the amount between the benefits you received after the reduction and the benefits you would have received had they not been reduced.

    We will also be enclosing a Special Tax Notice that explains your rights to roll over lump sum payment into an Individualized Retirement Account or another tax qualified retirement plan.

    I will continue to keep you updated, please feel free to email me with any questions. I am also scheduling a zoom call for retirees to answer any questions you may have. Details will follow and be sent out via another email update.

    As always thank you to the Senate Majority Leader Chuck Schumer for his continual support.

    Kevin McCaffrey President, Teamsters Local 707

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    Road Carriers 707 Pension Fund | (516)560-8500 | (516)486-7375 | ‌ Road Carriers 707 Welfare & Pension Funds | 14 Front Street Street, Suite 301, Hempstead, NY 11550 Unsubscribe Update Profile | Constant Contact Data Notice Sent by powered by

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    Ray Shorter


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