By: Russ Kamp, Managing Director, Ryan ALM, Inc.

We hope that you enjoyed your St. Patty’s Day weekend.

Here is your weekly ARPA update on the progress of the PBGC as it implements the legislation. Last week saw a little action. Importantly, Employers’ – Warehousemen’s Pension Plan and American Federation of Musicians and Employers’ Pension Plan each filed revised applications. The Warehousemen’s plan, a non-priority group member, is seeking just over $40 million in SFA for its 1,821 plan participants. The AFM, a Priority Group 6 member, is seeking $1.44 billion for its nearly 50k members. The PBGC has 120 days to respond to these applications although I suspect that the necessary timeframe to evaluate the worthiness of the SFA applications will be shorter due to previous submissions.

In other news, there were no applications denied, approved, or withdrawn, but there was an additional plan added to the waitlist, which now #s 113 members, although 27 have been submitted to the PBGC through their portal. The newest addition to the waiting list is PMPS-ILA Pension Trust Fund. They have elected not to lock in their valuation date at this time.

The US Treasury rate environment continues to rise from fourth quarter 2023’s bond rally. The increase in yields will allow for some greater cost reduction, and thus a longer coverage period for future benefits, for plan’s looking to defease those liabilities through a cash flow matching strategy. Since the beginning of 2024, the Treasury yield curve has shifted up about 40 bps for each key rate. As positive as this trend is for those looking to cash flow match, active, return-seeking fixed income products will have generated losses, especially for those with a longer duration objective. As a reminder, a portfolio with a 10-year duration will have lost about 4% in principal value.