Author Archives: russkamp

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 One application needs to be refiled after having been withdrawn some time ago.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 This plan had withdrawn its non-priority group application earlier on that day (3/5/25).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.

02.28.25
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Milliman Reports on Public Pension Funding

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

Milliman has released details related to the recent update of its Milliman 100 Public Pension Funding Index (PPFI) covering both December 2024 and January 2025. The index consisting of the U.S.’s largest 100 public pension funds revealed a slight decline in the average funded ratio at the end of 2024 to 80.0% from 81.7% at November 30. An average return of -1.7% on assets drove the funded ratio down. However, January’s result highlighted a 1.9% average gain and an improvement in the average funded ratio to 81.1% at month-end.

It was also reported that the deficit between plan assets and liabilities grew by $44 billion, as a deficit of $1.184 trillion at the beginning of December 2024 became $1.227 trillion at the end of January 2025. These mega funds experienced combined outflows of about $9 billion/month. Importantly, 31 of the index constituents have funded ratios greater than 90% with 7 of those plans registering a funded ratio of 105% or better. Unfortunately, 9 of the plans have funded ratios <50%. As a reminder, a plan with a 50% funded status and a 7% ROA objective actually needs to produce a return of 14% just to keep the funded status from deteriorating…and a 80% funded status requires an actual ROA of 8.75%.

It would be interesting to know what asset allocation changes, if any, have been adopted by those plans with funded ratios >90%. Given significant uncertainty in the markets and the U.S. economy, plans should be looking to reduce risk and improve liquidity at this time. We’ve seen considerable improvement in the funded status of a number of large public pension systems. It would be a tragedy to see this improved funding go to waste should markets enter a period of weakness.

02.26.25
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Risk On or Risk Off?

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

I have the pleasure of speaking at the Opal/LATEC conference on Thursday. My panel has been given the topic of Risk On or Risk Off: How Are You Adjusting Your Portfolio, and Which Investment Risks Concern You Most? I think it is an incredibly timely discussion given the many cross-currents in the markets today.

Generally speaking, what is risk? At Ryan ALM, Inc. we would say that risk is the failure to achieve the objective. What is the objective in managing a defined benefit pension plan? We believe that the primary objective is to secure the promised benefits at a reasonable cost and with prudent risk. We don’t believe that it is a return objective.

However, most DB pension systems are NOT focused on securing the promised benefits, but they are engaged in developing an asset allocation framework that cobbles together diversified (overly perhaps) asset classes and investment strategies designed to achieve an annual return (ROA) target that has been established through the contributions of the asset consultant, actuary, board of trustees, and perhaps internal staff, if the plan is of sufficient size to warrant (afford) an internal management capability.

Once that objective has been defined, the goal(s) will be carefully addressed in the plan’s investment policy statement (IPS), which is a road map for the trustees and their advisors to follow. It should be reviewed often to ensure that those goals still reflect the trustees’ wishes. The review should also incorporate an assessment of the current market environment to make sure that the exposures to the various asset classes reflect today’s best thinking.

There are numerous potential risks that must be assessed from an investment standpoint. Some of those include market (beta), credit, liquidity, interest rates, and inflation. For your international managers, currency and geopolitical risk must be addressed. From the pension management standpoint, one must deal with both operational and regulatory risk. Some of these risks carry greater weight, such as market risk, but each can have an impact on the performance of your pension plan.

However, there are going to be times when a risk such as inflation will dominate the investing landscape (see 2022). Understanding where inflation MAY be headed and its potential impact on interest rates and corporate earnings is a critical input into how both bonds and stocks will likely perform in the near-term. Being able to assess these potential risks as a tool to adjust your funds asset allocation could reduce risk and help mitigate the negative impact of significant drawdowns that will impact the plan’s funded status and contribution expenses. Of course, the ability to reduce or increase exposures will depend on the ranges that have been established around asset class exposures (refer to your IPS).

So, where are we today? Is it risk on or risk off as far as the investing community is concerned? It certainly appears to me that most investors continue to take on risk despite extreme equity valuations, sticky, and perhaps worsening inflation, leading to an uncertain path for U.S. interest rates, and geopolitical risk that can be observed in multiple locations from the Middle East, to Ukraine/Russia, and China/Taiwan. The recent change in the administration and policy changes related to the use of tariffs has created uncertainty, if not anxiety, among the investment community.

So, how are you adjusting your portfolio? If your plan is managed similarly to most where all the assets are focused on the ROA, the ability to adjust allocations based on the current environment is likely limited to those ranges that I described above. Also, who can market time? I would suggest that the best way to adjust your portfolio given today’s uncertainty is to adopt an entirely different asset allocation framework. Instead of having all of the assets focused on that ROA objective, bifurcate your asset allocation into liquidity and growth buckets.

By adopting this strategy, liquidity is guaranteed to be available when needed to make those pesky monthly benefit payments. In addition, you’ve just bought time, an extremely important investment tenet, for the remainder of the assets (growth/alpha) to now grow unencumbered. The liquidity bucket will provide a bridge over choppy waters churned up by underperforming markets. Yes, there appears to be significant uncertainty in today’s investment environment. Instead of throwing up your hands and accepting the risks because you have limited means to act, adopt the new asset allocation structure before it is too late to protect your plan’s funded status.

02.25.25
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A Little Late to the Party!

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

P&I is running a story today about two U.S. Congressmen, Representatives Tim Walberg, R-Mich., and Rick Allen, R-Ga., who have produced a Feb. 20 letter to Attorney General Pam Bondi regarding excess Special Financial Assistance (SFA) payments to multiemployer plans under the ARPA pension legislation that has been implemented/overseen by the PBGC. They are demanding that the Justice Department look into the erroneous payments made to some of the SFA recipients base on incorrect census data.

This issue was first raised by the PBGC’s Office of Inspector General back in November 2023 when they found that while the agency required the pension fund to provide a list of all plan participants and proof of a search for deceased participants, “the PBGC did not cross-check that information with the Social Security Administration’s Death Master File — the source recommended by the Government Accountability Office for reducing improper payments to dead people.” Good catch, PBGC. Clearly, no one wants to see incorrect payments made, but for these Congressman to be encouraging a review at this time seems a little misplaced, as the repayment of excess funds has been ongoing since last April when Central States, Southeast & Southwest Areas Pension Plan repaid $126.7 million representing 0.35% of the SFA grant received.

Since the repayment by Central States, the PBGC has worked diligently with 60 pension plans that received SFA prior to the use of the SSA’s DMF to make sure that any excess SFA is recaptured. As of February 21, 2025, 38 plans have repaid $180 million in excess SFA from total grants paid of $43.6 billion or 0.41%. The 38 plans represent 63% of the cohort that might have received excess grant money. Is the $180 million earth-shattering? No. Will it dramatically impact the Federal budget deficit running at roughly $2 trillion per year? Again, no. Might this unfortunate situation tarnish the huge success that ARPA has been? Unfortunately, it just might.

For these Congressman to only now seek to get the Justice Department involved seems misplaced as nothing more than a political hit job. Instead of creating waves, they should be celebrating the fact that ARPA has helped to secure the rightfully earned retirement benefits for 1.53 million American workers and retirees (oh, and they are taxpayers, too) through nearly $71 billion in SFA grants to date. The amount of economic activity created from these monthly benefits will support local businesses and jobs for years to come. Fortunately, there are still more than 90 multiemployer plans that might yet collect some SFA grant money. Let’s hope that they do.

None of the members of these plans ever wanted to be in a situation where their earned benefits might be slashed or worse, eliminated. Yet, that’s exactly where they found themselves following the passage of MPRA. Thank goodness that ARPA was signed into law in March 2021 before more damage was done to struggling multiemployer funds. I’m not sure that I can point to another piece of pension legislation enacted during my 43-year career that has had such a beneficial impact on our pensioners. Most of what I’ve witnessed is the whittling away of benefits.

02.24.25
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ARPA Update as of February 21, 2025

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

Welcome to the last week in February. Spring can’t arrive soon enough in New Jersey!

Last week the Milliman organization published its annual review of the state of multiemployer pension plans. The news was quite positive, but in digger deeper, it became apparent that the payment of the Special Financial assistance (SFA) was the primary reason for the improved funding ratios. Given how critically important the SFA is to the ongoing success of many of these plans, let’s look at what transpired during the previous week.

According to the PBGC’s weekly spreadsheet, there were no new applications filed as the eFiling portal remains temporarily closed. In addition, no applications were approved or denied, but there was one application withdrawn, as non-priority plan Aluminum, Brick & Glass Workers International Union, AFL-CIO, CLC, Eastern District Council No. 12 Pension Plan (the plan’s name is longer than the fund’s size is large) pulled its application seeking $10.6 million for 580 participants.

There was some additional activity though, as five plans were asked to repay a portion of the previously agreed SFA due to census errors. In total, these plans repaid $16.3 million representing just 1.06% of the grants received. To date, $180.8 million has been reclaimed from grants totaling $43.6 billion or 0.41%.

In other news, we had Bricklayers & Allied Craftworkers Local No. 3 NY Niagara Falls-Buffalo Chapter Pension Plan, added to the waitlist (#116). This is the first addition to the list since July 2024. This plan did not elect to lock-in the interest rate for discount rate purposes, joining a couple other plans that have kept their options open.

We should witness dramatic improvement in the Milliman funded ratio study next year, as about 7% (85 funds) were funded at <60% in 2024. There are currently 94 plans seeking SFA support. If granted, they should all see meaningful improvement in the funded status of their plans. As a result, we could have a situation in which the multiemployer universe becomes fully funded. How incredible. Now, let’s not do something silly from an investment standpoint that would jeopardize this improved funding.