Tag Archives: db-pensions

03.13.26
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What is the PCE Price Index Telling Us?

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

As most investors know, the Federal Reserve’s primary inflation measure is the Core Personal Consumption Expenditures (PCE) price index. The Federal Open Market Committee (FOMC) targets 2% annual PCE inflation while trying to balance long-term price stability and maximum employment. The PCE is produced by the Department of Commerce. Why the PCE? The PCE inflation index covers broad household spending and importantly it adjusts for shifts in consumer behavior, unlike fixed-basket indexes, such as the Consumer Price Index (CPI). Furthermore, the PCE reflects actual expenditures economy-wide and updates the index weights more dynamically. The goal of the PCE inflation measure is to help gauge underlying trends in the broader economy.

The most recent PCE inflation data was published as of today, March 13, 2026, covering a period through January 2026. Core PCE (excluding food and energy) ticked up to 3.06% in January 2026, after having touched 3% at year-end. Cleary, this reading remains well above the Fed’s 2% target, reflecting persistent underlying pressures that may become even more dramatic with the 41% increase per barrel of WTI registered since the close on Friday, February 27th.

The PCE inflation measure has recently accelerated while CPI cooled primarily due to differences in housing weights (lower in PCE) and consumer behavior adjustments.

MonthHeadline PCE (%)Core PCE (%)Headline CPI (%)Core CPI (%)
Dec 20252.93.02.72.9
Jan 20262.93.12.42.5
Feb 2026 (est)??2.4?

The fact that core PCE has now exceeded 3% must be worrying for the FOMC/FED that are also dealing with broader economic pressures, such as employment and US interest rates. Speaking of rates, historically the U.S. 10-year Treasury note has traded at a premium yield to inflation of roughly 2%, with periods as high as 3% or greater. The 10-year Treasury note is currently trading at a yield of 4.25% (as of 10:29 am) suggesting that a “normal” spread should have the YTM at 5.1%.

Given the great uncertainty related to current economic and geopolitical issues, it would not be surprising to see the Treasury yield curve continue to shift upwards. Such a move would create a wonderful environment for pension plan sponsors to de-risk through a cash flow matching (CFM) strategy. It is time to bring an element of certainty to the management of DB pensions to reside in a state of great uncertainty! Don’t wait to explore the amazing benefits provided by CFM.

03.09.26
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It’s Not Just the Price of Gasoline!

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

Folks (the investment community) seem to be focused on the rising price of oil for its effect on gasoline prices, but the impact of rising oil prices has far greater implications for the broader U.S. economy. Evidence indicates that a vast majority of manufactured goods and industrial processes use petroleum products that are feedstocks to make plastics, synthetic fibers, solvents, and many chemicals, which then become inputs into consumer goods, packaging, vehicles, electronics, building materials, and more.

Because plastics, synthetic fibers, and petrochemical-derived materials pervade sectors from automotive to consumer goods to packaging, a large majority of U.S. manufactured products (“most”) depend on oil products somewhere in their supply chain, either as material or as critical process input.

An extended increase in the price oil could have a dramatic impact on inflation, U.S. interest rates, the labor force, and overall economic activity. Have pension plans done enough to secure the necessary liquidity to meet the promised benefits and the expenses incurred to meet those monthly payments? Has the significant migration of pension assets to alternatives significantly reduced the available liquidity? Do plans understand that in crisis most asset classes tend to find correlations closer to 1 than 0, making the forced sale of assets to meet benefits challenging and more expensive.

Dividing a pension plans asset allocation into two buckets – liquidity and growth – as opposed to having the plan’s assets focused on the return on asset (ROA) assumption can mitigate liquidity risk. Use a cash flow matching (CFM) strategy to ensure that the necessary liquidity (asset cash flows of interest and maturing principal from bonds) is available to meet the liability cash flows of benefits and expenses monthly. While the CFM strategy is SECURING the promised benefits, the remainder of the assets can just grow unencumbered – no forced selling.

Who knows how long this conflict in the Middle East will last. Pension plans may be “long-term” investors, but they have short-term cash needs that must be met. There is no kicking the can down the road. Adopt this bi-furcated asset allocation and enjoy the benefits that come from the knowledge that your promises have been secured.

03.06.26
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Milliman: Corporate Pension Funding now at 109.4%

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

Milliman has released the latest monthly report on the Milliman 100 Pension Funding Index (PFI). As a reminder, this index analyzes the 100 largest U.S. corporate pension plans.

For February, the PFI funded ratio rose from 109.1% as of January 31, to 109.4% as of February 28, marking the highest collective funded ratio since the 109.9% mark observed in July 2001. However, the funding improvement was solely a result of asset performance, as declining discount rates of 14 basis points reduced the discount rate to 5.33% and raised the PFI projected benefit obligation (liabilities) to $1.235 trillion. Fortunately, monthly returns of 2.15% offset the impact of falling U.S. interest rates leading to growth in the market value of plan assets by $22 billion, to $1.351 trillion.

“February’s investment performance drove the month’s $5 billion gain in funding levels,” said Zorast Wadia, author of the Milliman PFI. He went on to say that “while this marks 11 straight months of funding improvements, further declines in interest rates may occur, and ongoing market volatility makes it vital for plan sponsors to undertake surplus-management strategies focused on both sides of the balance sheet.” We continue to support Zorast in recommending that managing assets to liabilities is critical for DB pension plans in all market environments, but especially given the significant uncertainty under which markets are currently operating. As a reminder, the primary objective in managing a DB pension is to SECURE the promised benefits at a reasonable cost and with prudent risk. It is NOT a return objective.

We, at Ryan ALM, do not forecast interest rates, but the impact of rising oil prices (WTI currently up 30.7% as of 9:13 am EST since Friday) will likely have an impact on inflation and interest rates. It will be interesting to see if a potential fall in the value of liabilities proves greater than the potential impact that rising rates might have on equity markets and other assets. Will we see the 12th consecutive month of improved funding levels?

Please click on the link below for a look at the complete Milliman corporate pension funding report.

View this month’s complete Pension Funding Index.

03.02.26
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ARPA Update as of February 27, 2026

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

Welcome to March and all the “madness” that comes with it!

Regarding ARPA and the PBGC’s implementation of this critical pension legislation, last week proved to be fairly quiet, and I imagine it will continue to be so, as the PBGC works through the remaining applications currently under review (14) and those that will likely be resubmitted (25). Quiet, unless some action is taken on the 80 plans sitting on the waitlist that were terminated by mass withdrawal prior to 2020.

During the past week there were no applications approved or denied, no pension plans were asked to repay a portion of their SFA and no pension funds asked to be added to the waitlist.

In other news, there was one revised application filed. Bricklayers Local No. 55 Pension Plan, a non-priority group member, is seeking $6.4 million for its 483 members. The PBGC has 120-days to review and approve the application before it is automatically accepted. The only other news of note related to two pension funds that withdrew applications. Non-priority group member, Retail Bakers’ Pension Trust Fund of St. Louis, withdrew its initial application. They’d been seeking $5.7 million for 566 plan members. Warehouse Employees Union Local 169 and Employers Joint Pension Plan, another non-priority group member, withdrew an already revised application in which they were hoping to secure $77.8 million for 3,609 plan participants.

The uncertainty related to action in Iran has U.S. Treasury yields rising across the Treasury yield curve as inflation concerns once again come into focus. Rising rates are challenging for bond investors unless a cash flow matching (CFM) strategy has been used. As a reminder, CFM will secure the promised benefits (and expenses, if desired) for as long as the SFA allocation lasts. As a reminder, those B&E are future values which are not interest rate sensitive. Importantly, higher interest rates will create more cost savings related to those future promises for pension plans still waiting to receive their SFA.

02.25.26
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New Jersey’s Pension System’s “High” Investment Return

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

As a taxpaying resident in New Jersey and a huge supporter of defined benefit plans who has a daughter in the system, I was happy to read that NJ’s pension systems generated strong investment returns in fiscal year 2025, reporting a nearly 11% return. Terrific. Yet, despite the above target return (7.0% ROA), the impact on the system’s funded status was negative. Yes, the funded ratio improved (assets/liabilities), but the funded status further deteriorated (funding gap in $s). Since the system is striving for 7% and the combined funded ratio of the various plans is <50%, a system like NJ’s would need to double the annual return on asset target just to keep the $ deficit stable.

It is great to see that NJ is finally bringing some financial discipline to the management of its pensions, with contributions at least matching the Actuarial Determined Contribution (ADC), but after decades of failing to do so (I think since Washington slept here), the systems are in need of significant funding improvement. Trying to generate outsized gains through a riskier asset allocation is not a long-term winning formula, often leading to greater annually required contributions when markets behave badly and assets get whacked.

The management of DB pension plans is not rocket science if the basics of sound pension management are followed. For instance, plans receiving the full ADC have on average an 80% funded ratio, while those not receiving the full ADC sit with funded ratios <70% (NCPERS study). Plans sitting with funded ratios below 50% are not likely to create enough excess return relative to the annual ROA to be able to close the funding gap. This often leads to plans making difficult decisions such as creating plans with multiple tiers, which I really despise.

Plans should focus on meeting the ADC, securing the promised benefits in the near-term, which buys time for the growth or alpha assets to perform, and reduce costs of administration, including management fees. DB plans are critical to the creation of a dignified retirement. Having a significant percentage of our seniors lacking the financial wherewithal to remain active in our economy is a major problem with long-term implications.

02.18.26
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Good Question!

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

We occasionally post questions received in reaction to our blogs in new blog posts since many of our readers might have similar thoughts/ideas. In reaction to yesterday’s post, “All-time High Funded Ratio” a reader calling themselves LoudlyObservant (great name) stated the following:

Why wouldn’t such well-funded plans take steps to lock in the funding of their beneficiary payments through a cash flow matching portfolio? Isn’t the first fiduciary duty of loyalty expressed in controlling the relevant risk to the beneficiaries, which involves BOTH securing adequate assets and then actually funding the payments? Many of these plans have hit the first goal but are still exposed to funding risk. With a ready solution at hand, the plan sponsors open themselves to criticism for not acting on their second responsibility.

Thank you, Loudly! Great questions and observations. We often talk about the fact that pension plans at all funding levels need liquidity, not just well-funded plans, but when you have a universe of plans that on average are fully funded, why not dramatically reduce risk. We witnessed what happened to DB pension plans at the end of 1999, when most plans were well overfunded only to see the funded status plummet and contribution expenses explode following two major market corrections.

I’m neither smart enough nor is my crystal ball better than anyone else’s to know if a major market correction is on the horizon but why take the chance unnecessarily. We’ve seen a significant percentage of Special Financial Assistance (SFA) recipients engage in cash flow matching to secure the SFA assets and the benefits that they will protect. Why not adopt CFM for the legacy assets, too? As we’ve mentioned, we are providing a service to you and your plan participants. It isn’t just another product. Time to get off the proverbial rollercoaster of returns and secure the promises and your plan’s funded status.

02.12.26
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It Should Be Relative and NOT Absolute

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

I was participating on a panel at the Opal/LATEC conference yesterday. The moderator asked a question about the importance of process. In my response, I mentioned a number of process elements that are critical to the successful management of pension plans. Here is one point that I made that doesn’t get the attention that it deserves. Many, if not most, defined benefit pension plans have created an investment policy statement (IPS) that specifically restricts certain investments and their respective weights within the pension fund. The plan sponsor and their consultant likely allow investments in public equities and certain styles of equity management (i.e. value and growth, large and small cap, etc.). However, in many cases they restrict the exposure to any one security by an absolute amount such as 5%. This is the wrong approach.

Limiting exposures does reduce the risk that any one stock could have an outsized impact on the pension plan’s return, but by doing so, the plan sponsor is potentially negatively impacting the investment manager. Not all U.S. equity benchmarks are the same and treating them as such is potentially damaging to the manager and fund.

If a large cap growth manager has been retained and they are asked to manage a portfolio relative to the Russell 1000 Growth Index, limiting exposure in a stock to 5% would mean forcing that manager to make a negative bet against any stock in the index that has a weight greater than 5%. As of today, there are three stocks – Nvidia (12.9%), Apple (11.6%), and Microsoft (8.8%) – that the manager couldn’t own at benchmark weight, let alone own them above the index weight. This index is cap weighted, and as the stocks perform well their weight in the index grows. Not being able to own the stock at its index weight is harmful.

Worse, if the investment manager wants to make a positive bet on the stock, they can’t, forcing them to potentially choose weaker companies to round out their portfolio. When a manager is chosen, they are often picked because of their past track record of producing an excess return for a level of risk (tracking error). Restricting exposures to an absolute weight may render those previous return/risk characteristics moot. Furthermore, the exposure to a single stock should be relative to the weight in the index +/- band, which would be very dependent on the amount of tracking error that is comfortable to the plan sponsor.

For instance, a good information ratio (excess return/tracking error) is 0.33%. Meaning that for every 1% excess return, the manager is taking 3% tracking error. If the manager is hoping to add 2% above the benchmark over a cycle, that manager is going to have a tracking error close to 6%. The relative weight of a stock in a portfolio must reflect that level of potential tracking error. Higher tracking error portfolios need more flexibility. In this case, it would make sense to allow the manager to invest in Nvidia at the index weight +/- 2%. For lower risk strategies such as an enhanced index that only has 1% tracking error, perhaps the index weight +/- 0.5% would be appropriate.

Now, the Russell 1000 Growth Index is one of the more concentrated indexes with nearly 60% of the weight of the index in just the top 10 holdings, but it isn’t the only one. Currently, the S&P 500 has the same three stocks (Nvidia, Apple, and Microsoft) at weights greater than 5% and two others, Amazon and Alphabet, at weights >3%. If the manager wants to overweight a holding in the S&P 500 by +/- 2%, they would be restricted with a 5% absolute restriction and no ability to overweight.

I recommend that you review your IPS and make sure that your “risk control” objectives are not restricting your manager’s ability to produce an excess return. Remove any absolute constraint and replace it with a relative weighting based on the tracking error that the manager produces. Again, lower risk enhanced index managers will only need a +/- 0.5% to +/-1% restriction, while higher tracking managers will need greater flexibility.

01.26.26
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Another Cockroach!

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

As most folks were focused on the massive snowstorm that crippled a large swath of the U.S., BlackRock was disclosing another significant loss in one of their private debt funds. In this case, BlackRock TCP Capital, a publicly traded middle-market lending fund, expects to mark down the net value of its assets 19 per cent after a string of troubled loans weighed on results, marking the latest sign of pressure in the private credit market.

BlackRock’s vehicle is a business development company (BDC), which pools together private credit loans and trades like a stock. According to multiple reports, the fund has struggled in part because of its exposure to e-commerce aggregators which are companies that buy and manage Amazon sellers. Furthermore, BDC shares have been hit over the past year. There are currently 156 active BDCs, of which 50 are publicly traded. BDC Investors have concerned over private credit returns, underwriting standards and increased regulatory scrutiny. FINALLY!

Of course, this is not an isolated incident for either private credit/debt in general or specifically BlackRock. As you may recall, BlackRock was forced to reprice a private debt holding from par to zero last November, when Renovo Home Partners, a Dallas-based home-remodeling roll‑up that collapsed into Chapter 7 bankruptcy, triggering a roughly $150 million total loss on a private loan largely held by BlackRock.

Funds managed by BlackRock (notably its TCP Capital Corp. BDC) provided the majority of roughly $150 million in private credit to Renovo, while Apollo’s MidCap Financial and Oaktree held smaller slices. As of late September 2025, lenders were still marking this loan at 100 cents on the dollar, implying expectations of full repayment. This shouldn’t have come as a complete surprise because earlier in 2025, lenders had already agreed to a partial write‑off and debt‑to‑equity swap, trying to stabilize Renovo’s capital structure.​

This unfortunate outcome highlights how “mark‑to‑model” valuations in private credit can keep loans at par until very late, then reprice suddenly when a borrower fails. This practice suggest that headline yields in private credit may understate true default and loss severity risk, especially for highly leveraged sponsor‑backed roll‑ups. Yet, it doesn’t seem to have rattled either the market or institutional asset owners who continue to plow significant assets into this opaque and potentially saturated market. It continues to amaze me the number of “searches” being conducted for private credit/debt. Asset classes can get overwhelmed driving down future returns. Do you know what the natural capacity is for this asset class and the manager(s) that you are hiring? Caveat emptor!

01.20.26
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ARPA Update as of January 16, 2026

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

We hope that the continuing success of the ARPA pension legislation warms your heart despite ridiculously cold temperatures in New Jersey and elsewhere.

Regarding last week’s activity, pleased to report that two plans received approval for their SFA applications. Pension Trust Fund Agreement of St. Louis Motion Picture Machine Operators and Teamsters Local 837 Pension Plan, both non-priority group members, will receive a combined $19.9 million in SFA and interest for their 1,431 members. These approvals are the first for the PBGC in just under one month.

In other ARPA news, there were no new applications filed, as the e-Filing portal remains temporarily closed. In addition, as we’ve been reporting, the window for initial applications to be submitted was to close on 12/31/25. From this point forward, only revised applications should be received by the PBGC. Despite that impediment, two more funds, NMU Great Lakes Pension Fund and UFCW Pension Fund of Northeastern Pennsylvania, added their names to the extensive waitlist seeking Special Financial Assistance. These plans and the others currently on the list must believe that the current deadline in place will be amended.

There was one application withdrawn during the prior week, as the Dairy Employees Union Local #17 Pension Plan pulled their initial application seeking $3.5 million in SFA for the 633 plan participants. Under the current rules, they have until 12/31/26 to resubmit a revised application.

Lastly, there were no applications denied nor were any of the previous recipients of SFA asked to rebate a portion due to census errors.

The U.S. interest rate environment is reacting to some of the global uncertainty. As a result, longer dated Treasury yields are marching higher. As of 9:51 am, the yield on the 30-year Treasury bond is 4.93%, while the 10-year Treasury note yield is at 4.29%. These yields are quite attractive for plans receiving SFA and wanting to secure benefits and expenses with the proceeds. Don’t miss this opportunity to significantly reduce the cost of those future benefits.

01.16.26
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Is A “K” Truly Representative?

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

I recently attended the Opal Public Fund Forum in Arizona. I’ve always appreciated the opportunity to attend and speak at Opal’s pension conferences. This latest version was no exception. However, I found it interesting that there were two thoughts being expressed over and over again. First, many presenters talked about uncertainty. The other idea centered on the current economic environment, which was frequently described as being K-shaped.

Regarding uncertainty, we often write about the onerous impact of uncertainty on individuals, both from a psychological as well as a physiological standpoint. Yet the pension community continues to embrace uncertainty through implementation of traditional asset allocation approaches, which are potentially subject to significant market events. Why? I’m not going to dwell on this topic today as I’d rather focus some attention of the current economic environment, and I’ve covered many times how Ryan ALM can bring certainty, and a sleep-well-at-night approach, to pension management.

As the title above questions, is defining the current economic environment as a K appropriate? When I look at the letter K, it says to me that 50% of something is advancing while another 50% is declining. Is that what is happening in today’s economy? Are 50% of American workers showing strong economic gains, while 50% struggle? I would say, “NO”! No matter what metrics one reviews, indications are that a far greater percentage of the American workforce is struggling to meet basic living needs than a K would suggest. I’m not sure what letter truly represents today’s conditions, but when only 10%-20% of our households are seeing improved conditions that doesn’t conjure up a K in my mind.

The idea of American Exceptionalism is being challenged by today’s economic realities. It is so disappointing given the potential that we possess as a nation. However, our collective wealth continues to be concentrated among a small percentage of American households at the same time that expenses for basic needs – housing, medical coverage, education, childcare, food, insurance, utilities, and retirement – continue to challenge most budgets.

In a recent article by Adam Bonica, titled “The Wall Looks Permanent Until it Falls”, Adam highlights (lowlights perhaps) the significant differences in key metrics relative to a U.S. peer democracy group of 31 developed nations (OECD). For instance, he shows multiple stats in four broad categories, including Economy and Inequality, Family and Livelihood, Survival and Safety, and Institutions and Justice. It is not to say that these peers don’t have these issues – they do. They just experience them at much lower rates. The comparisons that Mr. Bonica focused on were just the averages for the peer group relative to the U.S., and they prove quite stark.

For instance, the peer average for the Top 1% of households by income is 12.8%, while in the U.S. it is 21%! If the Top 1% of earners just took 12.8%, every American household would get an additional $19k/year. If the Top 1% of Household wealth in the U.S. only had 23.2% of the country’s wealth instead of the 30.6% it currently has, every American household would have an additional $96k. A big expenditure every year for American households is healthcare. Our peers average 9.2% of one’s household spending while we average 17.1%. Just matching the rate of spending would reduce our annual expenditure for healthcare by -2.1T/year. Oh, and it isn’t like our “investment” in healthcare is reaping longevity rewards – it isn’t, as we average -4.1 years less than our average peer (78.4 years versus 82.5 years).

We can do a lot better as a society and economy. There are currently 15 million Americans working full-time that earn a level of income that is below the poverty line. Not acceptable. Only about 10% of the American workers are in DB pension plans. As I’ve stated many times, asking untrained individuals to fund, manage, and then disburse a “benefit” without disposable income, no investment acumen, and no crystal ball to help with longevity is just poor policy. Again, we can do better. Ron and I and the Ryan ALM team are focused on protecting and preserving DB pension plans. I wish that we could do more!