Monthly Archives: March 2025

03.10.25
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ARPA Update as of March 7, 2025

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

It is often said that March comes in like a lion and goes out like a lamb. This phrase is typically associated with weather patterns, but it may just be appropriate in describing the PBGC’s effort last week. As you will soon find out, there was a little bit of nearly everything last week.

The good news, Southwestern Pennsylvania and Western Maryland Area Teamsters and Employers Pension Fund, a Priority Group 5 member, received approval for the revised application. They are expected to receive $131.1 million in SFA for their 2,759 members. There have now been 14 of 15 Group 5 members to receive approval. One application needs to be refiled after having been withdrawn some time ago.

In other news, the PBGC’s eFiling portal remained open long enough for U.F.C.W. District Union Local Two and Employers Pension Fund to submit a revised application seeking $125.5 million plus interest for 5,546. This plan had withdrawn its non-priority group application earlier on that day (3/5/25). The PBGC’s note indicates that this application’s review is being expedited, although they have still given themselves the 120-days to complete the review (7/3/25).

In addition to this filing, Local 584 Pension Trust Fund repaid a portion of the SFA as a result of census errors. They returned just over $1 million from the $225.8 million that they received or 0.46%. There have now been 43 plans, from 60 that potentially received excess funds, that have combined to repay $181.9 million from the total of $43.9 billion that was initially paid to these plans. That represents 0.41% of the SFA grants. Furthermore, it only represents 0.26% of the total SFA paid to date ($71.02 billion).

Despite the significant effort to date, the PBGC still has approximately 93 applications to get through, including 48 yet to be submitted. This process needs to be completed by the end of 2026.

03.07.25
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Reminder: Pension Liabilities are Bond-like

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

Milliman has released the results for their corporate pension index. The Milliman 100 Pension Funding Index (PFI), which tracks the 100 largest U.S. corporate pension plans showed deterioration in the funded ratio dropping from 106.0% to the 104.8% as of month-end. This was the first decline following four consecutive months of improvement. It was the fall in the discount rate from 5.60% to 5.36% during the month that lead to growth in the combined liabilities for the index constituents. As a reminder, pension liabilities (benefit payments) are just like bonds in terms of their interest rate sensitivity. As yields fall, the present value of those future promises escalate.

Milliman reported an asset gain of $18 billion during the month, but that wasn’t nearly enough to offset the growth in liabilities creating a $13 billion decline in funded status. “Gains in fixed income investments helped shore up the Milliman 100 pension assets, but were not strong enough to counter the sharp discount rate decline,” said Zorast Wadia, author of the PFI. Given the uncertain economic and capital markets environments, it is prudent to engage at this time in a strategy to effectively match asset and liability cash flows to reduce the volatility in the funded ratio. Great strides have been made by America’s private pensions. Allowing the assets and liabilities to move independently could result in significant volatility of the funded status leading to greater contribution expenses.

You can view the complete pension funding report here.

03.06.25
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Markets Hate Uncertainty

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

I’ve published many posts on the impact of uncertainty on the well-being of individuals and our capital markets. In neither case are the outcomes positive.

What we are witnessing in the last several trading days is the direct result of policy flip-flopping that is creating abundant uncertainty. As a result, the business environment is deteriorating. One can argue the merits of tariffs, but it is the flip-flopping of these policy decisions that is wreaking havoc. How can a business react to these policies when they change daily, if not hourly.

The impact so far has been to create an environment in which both investment and employment have suffered. Economic uncertainty is currently at record levels only witness during the pandemic. Rarely have we witnessed an environment in which capital expenditures are falling while prices are increasing, but that is exactly what we have today. Regrettably, we are now witnessing expectations for rising input prices, which track consumer goods inflation. It has been more than four decades since we were impacted by stagflation, but we are on the cusp of a repeat last seen in the ’70s. How comfortable are you?

We just got a glimpse of how bad things might become for our economy when the Atlanta Fed published a series of updates driving GDP growth expectations down from a high of +3.9% earlier in the quarter to the current -2.4% published today. The key drivers of this recalibration were trade and consumer spending. The uncertainty isn’t just impacting the economy. As mentioned above, our capital markets don’t like uncertainty either.

I had the opportunity to speak on a panel last week at Opal/LATEC discussing Risk On or Risk Off. At that point I concluded that little had been done to reduce risk within public pension plans, as traditional asset allocation frameworks had not been adjusted in any meaningful way. It isn’t too late to start the process today. Action should be taken to reconfigure the plan’s asset allocation into two buckets – liquidity and growth. The liquidity bucket will provide the necessary cash flow in the near future, while buying time for the growth assets to wade through these troubled waters. Doing nothing subjects the entire asset base to the whims of the markets, and we know how that can turn out.

03.04.25
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A Retirement is Out of the Question for Many – Unfortunately!

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

Is there such a thing as a retirement anymore? According to Fidelity’s Q4 2024 Retirement Analysis, 41% of “retirees” are working, have worked, or are currently seeking work. I would guess that the need to work is strongly correlated to the demise of the DB pension plan.

In other Fidelity news, a big deal was made out of the fact that 527k participants had account balances >$1 million (2.2% of their account holders), but despite those attractive balances, the “average” balance was still only 131k at year-end following two incredible years of growth for the S&P 500 specifically, and equities generally, especially if you rode the tech sector.

Regrettably, there was once again NO mention of the median account balance, which we know is rather anemic. Can the providers of 401(k)s, IRAs, and 403(b)s, please stop highlighting average accounts which are clearly skewed by the much larger balances of a few participants? According to an analysis provided earlier this year by Investopedia, median account balances at Vanguard were dramatically lower than average accounts. As the chart below highlights, there was not a median balance within 40% of the average balance. In fact, those 65-years-old and up had an account balance at 32% of the average balance. I can’t imagine that this ratio would be much different at Fidelity or any other provider of defined contribution accounts.

It is truly unfortunate that a significant percentage of the American workforce will never enjoy the rewards of a dignified retirement. My Dad, who just recently passed at age 95, enjoyed a 34-year retirement as a result of receiving a modest DB pension benefit. That monthly payment coupled with my parents Social Security enabled them to enjoy their golden years. Providing this opportunity for everyone needs to be the goal of our retirement industry.


Note: Fidelity’s 401(k) analysis covers 26,700 corporate DC plans and 24.5 million participants.

03.04.25
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What’s Your Duration?

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

The recent rise in U.S. Treasuries had us redoubling our effort to encourage plan sponsors of U.S. pension plans to take some risk off the table by using cash flow matching (CFM) to defease a portion of the plan’s liabilities, given all the uncertainties in the markets and our economy. We were successful in some instances, but for a majority of Pension America, the use of CFM is still not the norm. Instead, many sponsors and their advisors have elected to continue to use highly interest rate sensitive “core” fixed income offerings most likely benchmarked to the Bloomberg Barclays Aggregate Index (Agg).

For those plan sponsors that maintained the let-it-ride mentality, they are probably celebrating the fact that Treasury rates have fallen rather significantly in the last week or so as a result of all of the uncertainties cited above – including inflation, tariffs, geopolitical risk, stretched equity valuations, etc. Their “core” fixed income allocation will have benefited from the decline in rates, but by how much? The Bloomberg Barclays Aggregate Index (Agg) has a duration of 6.1 years and a YTW of 4.58%, as of yesterday. YTD performance had the Agg up 2.78%. Not bad for fixed income 2+ months into the new year, but again, equities have been spanked in the last week, and the S&P 500 is down -3.1% in the last 5 days. So, maintaining that exposure sure hasn’t been beneficial.

Also, remember that the duration of the average DB pension plan is around 12 years. Given the 12-year duration, the price movement of pension liabilities, which are bond-like in nature, is currently twice that of the Aggregate index. A decline in rates might help your core fixed income exposure, but it is doing little to protect your plan’s funded status/funded ratio. The use of CFM would have insulated your plan from the interest rate risk associated with your pension liabilities. As rates fell, both assets and the present value of those liabilities would have appreciated, but in lockstep! The funded status for that segment of your asset allocation would have been insulated.

Why wait to protect your hard work in getting funded ratios to levels not seen in recent years? A CFM strategy provides numerous benefits, including providing liquidity on a monthly basis to ensure that benefits and expenses are met when due, reducing the cost to fund liabilities by 20% to 40% extending the investing horizon allowing for choppy markets to come and go with little impact on the plan, and protecting your funded status which helps mitigate volatility in contributions. Seems pretty compelling to me.

03.03.25
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ARPA Update as of February 28, 2025

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

Welcome to March!

We are pleased to provide you with the latest update on the PBGC’s implementation of the ARPA pension legislation. The last week saw moderate activity, as the PBGC’s eFiling portal was temporarily open providing three funds, Local 810 Affiliated Pension Plan, Aluminum, Brick & Glass Workers International Union, AFL-CIO, CLC, Eastern District Council No. 12 Pension Plan, and Sheet Metal Workers’ Local No. 40 Pension Plan the opportunity to submit revised applications seeking Special Financial Assistance. The PBGC has until June 26, 2025, to act on the applications that combined are seeking $112.6 million in SFA for 3,001 plan participants.

In addition to the above-mentioned filings, one pension fund, Roofers and Slaters Local No. 248 Pension Plan, a Chicopee, MA-based fund, withdrew its initial application that was looking for roughly $8.4 million in SFA for 202 members of the plan. As I said, there was moderate activity last week. Fortunately, no multiemployer pension plans were denied SFA and no other plans repaid excess SFA as a result of census issues. There were also no plans approved or added to the waitlist, which contains the names of 116 plans, of which 47 have yet to submit an application.

As you may recall, I wrote a post last week titled, “A Little Late to the Party!“. The gist of the article had to do with an effort on the part of a couple of Congressmen to get the Justice Department involved in the repayment of any excess SFA funds that have been distributed to the 60 funds that received SFA prior to the use by the PBGC of the Social Security Administrations Death File Master. As I’ve reported, this process is well underway (41 funds have repaid a portion of the SFA to date), having begun back in April with the Central States plan. It is unfortunate that pension plans used to have access to this master file, but that ability was rescinded years ago over privacy concerns. ARPA has been a huge success. The repayment of excess SFA should not taint the tremendous benefit that this legislation has brought.