Tag Archives: Retirement

12.02.24
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ARPA Update as of November 29, 2024

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

We hope that you had a very enjoyable holiday weekend. Welcome to December. That doesn’t seem possible.

Despite the holiday shortened week, the PBGC was quite busy, announcing that four multiemployer plans had submitted applications seeking Special Financial Assistance (SFA). Those funds included Laborers’ Local No. 91 Pension Plan, Southwestern Pennsylvania and Western Maryland Area Teamsters and Employers Pension Fund, Oregon Processors Seasonal Employees Pension Plan, and The Legacy Plan of the UNITE HERE Retirement Fund. Local 91’s application was its initial attempt at getting the SFA, while the other three submitted revised applications. In total, these four are seeking a total of just over $1 billion for the 102,356 plan participants. A significant majority of the assets being requested and plan members are in the UNITE HERE fund.

With regard to the Teamsters’ plan, they withdrew and then resubmitted the application on November 27th. That plan is hoping to receive $120.7 million in SFA for the 2,759 members of its fund. In other news, two funds received approval for their applications, including Lumber Industry Pension Plan and Local 1034 Pension Plan. Both plans had submitted revised applications. In total, they will get $159.6 million in SFA and interest for 7,155 plan participants. I suspect that the announcement of a successful PBGC approval made for a wonderful Thanksgiving celebration.

Finally, there were no applications denied, no funds repaid excess SFA, and no plans sought to be added to the waitlist at this time, which continues to list 53 non-priority plans that have not yet been allowed to submit an initial application.

The two plans that received approval for the SFA last week brings to 102 the number of plans that have been awarded SFA grants ($69.7 billion) since the program launched in July 2021. There are still 100 plans that may be eligible to receive this special financing.

11.22.24
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And So It Is!

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

Milliman has released the results for its Public Pension Funding Index (PPFI), which analyzes data from the nation’s 100 largest public defined benefit plans. They are reporting that the collective funded ratio deteriorated during the last month from 82.8% as of September 30th, to 81.2% as of October 31st, as the combined investments of these plans fell for the first time since April. The estimated return for the PFFI was -1.6%, as losses ranged from -2.9% to -0.6%. The $s lost were roughly $80 billion during the month. The funding deficit now stands at about $1.1 trillion.

You may recall that on November 8th, I produced a blog post titled, “Another Inconsistency”, in which I wrote about Milliman’s reporting of its corporate index that highlighted the fact that the collective funded ratio improved during the month despite asset losses due to the fact that liabilities fell to a great extent as interest rates rose.

I also wrote the following, “what do you think will happen in public fund land? Well, given weak markets, asset levels for Milliman’s public fund index will likely fall” (they did, as reported above). “Given that the discount rate for public pension systems is the ROA, there will be no change in the present value of public pension plans’ future benefit obligations (silly). As a result, instead of witnessing an improvement in the collective funded status of public pensions, we will witness a deterioration.” (and we did!) The inconsistency is startling!

Decisions with regards to benefits and contributions are made all the time based on information related to the funded ratio/status of these pension plans. Using different accounting standards clearly produces different outcomes that might just lead to inappropriate conclusions and the subsequent decisions. Oh, boy!

11.18.24
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ARPA Update as of November 15, 2024

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

I can’t believe that Thanksgiving is next week. It appears that the PBGC was motivated to get some things done in anticipation of that holiday, as we witnessed more activity last week than we’ve been seeing in the most recent past.

There were four applications filed last week, including the following pension plans: Roofers and Slaters Local No. 248 Pension Plan, Pension Plan of the Asbestos Workers Philadelphia Pension Fund, Local 1783 I.B.E.W. Pension Plan, and Cement Masons Local Union No. 567 Pension Plan. These plans are not seeking significant sums as far as the SFA goes, as in total they are seeking $92.6 million for 2,637 participants. The IBEW plan out of Armonk, NY submitted a revised application. The other three were the initial filings for these plans.

Pleased to report that Local 360 Labor-Management Pension Plan received approval for its revised application. This fund will receive $30.4 million for the 6,117 members of the plan. This fund initially filed an SFA application in early 2023 only to withdraw it in July 2023. Good for them that they were finally successful in receiving the grant.

Local 810 Affiliated Pension Plan wasn’t as fortunate as Local 360, as they withdrew the initial application that had been seeking $104.1 million for 1,437 members of the plan. In addition to the four new filings, the one withdrawal, and the one approved application, the PBGC also was involved in negotiating two repayment of excess SFA due to census errors. Iron Workers Local 17 Pension Fund
Bricklayers and Allied Craftsmen Local 7 Pension Plan returned $260,471.70 representing only 19 bps of the SFA grants awarded. To date, 25 funds have returned a total of $149.9 million representing 0.38% of the awarded grants.

Recessionary expectations have waned in the last couple of months and flows into bonds, which had been strong for most of the year have recently turned negative. As a result, US interest rates have backed up. It is a great time to secure the promised benefits (and expenses) through cash flow matching strategies. A rising rate environment will be quite bearish for traditional fixed income shops. We’ll be happy to provide you and your fund with a free analysis of what can be achieved through a defeasement strategy.

11.04.24
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ARPA Update as of November 1, 2024

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

Welcome to November. I’m shocked by how quickly the year is flying by. I’m also thankful that the incessant political commercials will soon be behind us.

The PBGC had a very good and busy last week, as we witnessed quite a bit of activity in the implementation of the ARPA legislation. Always pleased to announce that three plans received approval for Special Financial Assistance, including the last member of the #6 priority group. Pension Plan of the Marine Carpenters Pension Fund (their initial application), United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Plan (the Priority Group 6 member), and Local 111 Pension Plan were granted a total of $736.1 million for just over 32k participants.

In addition to the approvals, the eFiling portal was open to Lumber Industry Pension Plan and the Laborers’ Local No. 130 Pension Fund. In the case of the lumber Industry plan, it appears that they get to chop off some of the wait time for approval as their application indicates an expedited review. This plan is seeking $103.2 million for 5,834 members. Local No. 130 filed its initial application in which they are hoping to receive $32.1 million for 641 plan participants.

There were also four plans that withdrew initial applications for SFA. Alaska Plumbing and Pipefitting Industry Pension Plan, Lumber Industry Pension Plan, Upstate New York Engineers Pension Fund, and Pension Plan of the Automotive Machinists Pension Trust were collectively seeking $438.3 million for just under 22k participants. Each of these plans are non-priority funds. Only 15 of the original 87 Priority Group members have not received approval at this time.

Finally, there were no applications denied during the prior week and no funds rebated excess SFA on account of census errors. There were also no pension plans added to the waitlist which stands at 63 that haven’t seen any activity at this time. There hasn’t been a plan added to the waitlist since July 2024 with the addition of the Production Workers Pension Plan.

10.30.24
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“More Needs To Be Done!” – Do You Think?

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

This post is the 1,500th on this blog! I hope that you’ve found our insights useful. We’ve certainly appreciated the feedback – comments, questions, and likes – throughout the years. A lot of good debate has flowed from the ideas that we have expressed and we hope that it continues. The purpose of this blog is to provide education to those engaged in the pension/retirement industry. We have an incredible responsibility to millions of American workers who are counting on us to help provide a dignified retirement. A goal that is becoming more challenging every day.

As stated numerous times, doing the same-old-same-old is not working. How do we know? Just look at the surveys that regularly appear in our industry’s media outlets. Here is one from MissionSquare Research Institute done in collaboration with Greenwald Research. The survey reached a nationally representative sample of 1,009 state and local government workers between September 12 and October 4. What they found is upsetting, if not surprising. According to the research, “81% are concerned they won’t have enough money to last throughout retirement, and 78% doubt they’ll have enough to live comfortably during their golden years.”

Some of the other findings in the survey also tell a sad story. In fact, 73% of respondents are concerned they won’t be able to retire on time, while the same number are unsure whether they’ll have sufficient emergency savings. How terrible. The part about being able to retire “on time” is not often in the workers control wether because of health and the ability to continue to do the required task or as a result of other plans by their employer. Amazingly, public sector workers believe that their current retirement situation is better than those in the private sector. Wow, if that isn’t telling of the crisis unfolding in this country.

Given these results, it shouldn’t be shocking that unions are seeking a return of DB plans as the primary retirement vehicle. We know that asking untrained individuals to fund, manage, and then disburse a “benefit” through a defined contribution plan is poor policy. We’ve seen the results and they are horrid, with median balances for all age groups being significantly below the level needed to have any kind of retirement. Currently, the International Association of Machinists and Aerospace Workers are on strike at Boeing, and a major sticking point is the union’s desire to see a reopening of Boeing’s frozen DB plan.

We’ve also recently seen the UAW and ILA memberships seek access to DB plans. It shouldn’t be a shock given the ineffectiveness of DC plans that were once considered supplemental to pensions. Again, asking the American worker to fund a DC offering with little to no disposable income, investment acumen, or a crystal ball to help with longevity concerns is just foolish. Yes, there is more to do, much more! It is time to realize that DB plans are the only true retirement vehicle and one that helps retain and attract talented workers who aren’t easily replaced. Wake up before the crisis deepens and everyone suffers.

10.15.24
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We Are # 29 – WOW!

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

The  16th annual Mercer/CFA Institute Global Pension Index report was released on Oct. 15. I want to extend a big thank you to Mercer and the CFA for their collective effort to elevate retirement issues, while celebrating those countries who are getting it right. According to the survey, “the overall index value is based on three weighted sub-indices—adequacy (40%), sustainability (35%) and integrity (25%)—to measure each retirement income system. Adequacy looked at areas such as benefits, system design, savings and government support. Sustainability examined pension coverage, total assets, demography and other areas. Integrity encompassed regulation, governance and protection.” There are more than 50 indicators that support these three broad categories.

The United States was given a score of 60.4 (63 in 2023’s study), which placed our retirement readiness at 29 of 48 countries that were evaluated. That 29 is 7 spots lower than 2023’s rank. According to the Mercer CFA study, a score of 60.4 places us slightly below the average score (63.4) among those ranked and we were given a letter grade of C+. I don’t know about you but if I had scored a 60 (scale of 0-100) during my school days, my letter grade would have likely been an F. Based on how I feel that we are prepared as a nation, I think that an F is much more appropriate than a C+. What about you?

I’m not trying to pick on the U.S. retirement system, which scored 63.9 on adequacy, 58.4 on sustainability and 57.5 on integrity, with Integrity being the poorest ranking as it trailed the worldwide average score by >16 points at 74.1. Our retirement system was evaluated based on the Social Security system and voluntary private pensions, which may be job-related (DB or DC) or personal, such as an IRA. Other systems with comparable overall index values to the U.S. (60-65) included Colombia (63), Saudi Arabia (60.5) and Kazakhstan (64.0). I don’t know about you but being ranked among those countries doesn’t make me feel warm and fuzzy about our effort or achievement. Systems scoring the highest were the Netherlands (84.8), Iceland (83.4), Denmark (81.6), and Israel (80.2) – they were given an ‘A’ grade.

Anyone participating in our industry knows that can AND MUST do better. The loss of DB pension plans within the private sector is a very harmful trend. Leakage within DC plans makes them more like glorified savings accounts rather than retirement vehicles, and Social Security provides small relief for a majority of recipients. As I’ve uttered on many occasions, asking untrained individuals to fund, manage, and then disburse a “retirement benefit” without the financial means, investment skill, and a crystal ball to forecast longevity is just silly policy.

Mercer and the CFA institute recommended a series of potential reforms to improve the long-term success of the US retirement system. I just loved this one:

“Promoting higher labor force participation at older ages, which will increase the savings available for retirement and limit the continuing increase in the length of retirement;“

A truly amazing suggestion – if you never retire then you don’t have to worry about whether or not your system will provide an adequate benefit! Problem solved! Many Americans would welcome the opportunity to extend their careers/employment opportunities, but some jobs require physical labor not easily done at more mature ages, while many American companies are anxious to rid themselves of higher priced and experienced talent in favor of younger workers (ageism?).

When I wrote about this survey last year, I’d hoped that the higher US interest rate environment would begin to improve outcomes for our workers whether their plans are a defined benefit or defined contribution offering. Unfortunately, current trends have US rates falling again. That just puts more pressure on DB plans and individual participants in DC plans and encourages (forces) everyone to take more risk. That development isn’t going to help next year’s score!

10.15.24
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ARPA Update as of October 11, 2024

By: Russ Kamp, Ryan ALM, Inc.

I hope that you enjoyed a wonderful holiday weekend. Autumn’s beautiful colors are finally present in the Northeast – enjoy those, too. As you will soon read, the PBGC had a busy week according to its latest update, so the extra day of rest was likely necessary.

The PBGC’s effort implementing the ARPA legislation continues in full swing. During the prior week there were three new applications received, two approved, another 2 withdrawn, and finally there were two more plans rebating excess SFA as a result of census corrections. Thankfully, there were no applications rejected. Lastly, there were no multiemployer plans seeking to be added to the waitlist (non-Priority Group members).

The plans receiving approval included Midwestern Teamsters Pension Plan and the Carpenters Pension Trust Fund – Detroit & Vicinity. The Carpenters nailed a $635.0 million SFA grant for its 22,576 participants, while the much smaller Midwestern Teamsters plan received $23.6 for 615 members. The PBGC has now awarded $68.6 billion in SFA grants to 94 pension systems.

Sheet Metal Workers’ Local No. 40 Pension Plan, Warehouse Employees Union Local 169 and Employers Joint Pension Plan, and Local 111 Pension Plan were granted the opportunity to submit requests for SFA grants. In the case of Local 111, they submitted a revised application. They are collectively seeking $124,7 million for 6,193 plan members. Good luck! In other news, the Teamsters Local 210 Affiliated Pension Plan and Local 111 Pension Plan withdrew their initial applications. These two funds were seeking $137.3 million collectively.

Finally, Milk Industry Office Employees Pension Trust Fund and Local 805 Pension and Retirement Plan rebated excess SFA grant money as a result of a census audit that confirmed overpayment. The Milk Industry delivered $193k (2.4% of the SFA received) to the PBGC, while Local 805 forked over $3.2 million (1.8% of the grant). Both represented a larger percentage of the SFA received than the previous transactions. At this time, 21 plans have returned $147.5 million in SFA and interest representing 0.37% of the grants received.

I hope that you find these updates useful. I remain incredibly bullish regarding the ARPA legislation and the positive impact that it continues to have on the American worker that earned this pension promise. Please don’t hesitate to reach out to Ryan ALM with any questions related to the legislation and what should be done to secure the promised benefits with the SFA grant assets.

10.02.24
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Welcome to National Retirement (in)Security Month!

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

October isn’t just for leaf peepers, although it is a special time of year for those of us living in the Northeast. Importantly, October is also National Retirement Security Month. For those of you who regularly follow this blog, you know that we (at Ryan ALM, Inc.) are huge supporters of DB pension plans. Fortunately, we aren’t the only ones. In a wonderful post published by the National Public Pension Coalition, Ariel McConnell writes about the importance of supporting public pension plans, as well as those sponsored by private organizations.

Ms. McConnell highlights many concerns regarding the current state of retirement readiness among American workers. Frighteningly, she points out that 57% of Americans don’t have any retirement savings, and those with 401(k)s have a median balance of only $27,376. That will barely provide you with the financial resources to get you through one year let alone a retirement that could stretch well beyond 20 years. She also highlights how each of us can become more active in the fight to get every American ready for their retirement. We want each worker to have the chance to enjoy their “golden years”. Let’s not let poor policy decisions tarnish that dream.

Please join Ariel, the National Public Pension Coalition, Ryan ALM, Inc., and many more organizations in the fight to protect and preserve defined benefit plans for all. I can only begin to guess at the significant economic and social consequences if our Senior population is forced to live on a median balance as insignificant as the one mentioned in NPPC’s blog post.

09.11.24
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Falling Rates – Not A Panacea For Pensions

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

Milliman has reported that pension funding for Corporate plans declined in August. The Milliman 100 Pension Funding Index (PFI) recorded its most significant decline of 2024, as the funded ratio fell from 103.6% to 102.8% as of August 31, 2024. No, it wasn’t because markets behaved poorly, as the month’s investment gains of 1.81% lifted the combined plans’ market value by $17 billion, to $1.347 trillion at the end of the period. It was the result of falling US interest rates that impacted the liability discount rate on those future promises.

According to Milliman, the discount rate fell from 5.3% in July to 5.1% by the end of August. That 20 basis points move in rates increased the projected benefit obligations (PBO) for the index constituents by $27 billion. As a result, the $10 billion decline in funded status reduced the funded ratio by 0.8%. The index’s surplus is now at $36 billion.

Markets seem to be cheering the prospects of lower US interest rates that may be announced as early as September 18, 2024 following the next FOMC. Remember, falling rates may be good for consumers and businesses, but they aren’t necessarily good for defined benefit pension plans unless the fall in rates rallies markets to a greater extent than the drop in rates impacts the growth in pension liabilities.

“With markets falling from all-time highs and discount rates starting to show declines, pension funded status volatility is likely in the months ahead, underscoring the prudence of asset-liability matching strategies for plan sponsors”, said Zorast Wadia, author of the PFI. We couldn’t agree more with Zorast. As we’ve discussed many times, Pension America’s typical asset allocation places the funded status for DB pension on an uncomfortable rollercoaster. Prudent asset-liability strategies can significantly reduce the uncertainty tied to current asset allocation practices. Thanks, Milliman and Zorast, for continuing to remind the pension community of the impact that interest rates have on a plan’s funded status.

09.04.24
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Pension Myth #1: Earn the ROA…All is Well!

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

We are pleased to share with you a recent white paper produced by Ron Ryan, Ryan ALM’s CEO. In this excellent piece, Ron reminds us of the fallacy that achieving the ROA as an underfunded DB pension system will make everything good – it won’t! As he correctly points out, the funded ratio may remain the same, but the funded status will continue to deteriorate. If the pension plan is 60% funded, at a market value of $100, that system has a funded status deficit of $40. If that 60% funded plan achieves the 7% ROA, assets will grow by $4.20. However, liabilities at that same discount rate will grow at $7. After 5 years, the funded status will have deteriorated by >40% and the deficit will now be >$56.

DB Pension systems that are poorly funded need to work extra hard to keep pace with the growth in the promised benefits or contribute significantly more to close the funding gap. There aren’t many plan sponsors in a position to contribute whatever is necessary to keep the plan in good funded status. Ron also discusses the need for plan sponsors to produce an Asset Exhaustion Test (AET), which is a requirement under GASB 67/68. It is a test of solvency. Ryan ALM modifies the AET to accurately determine the required ROA to fully fund the liability cash flows. Has your actuary produced the AET for your plan? If not, would you like Ryan ALM to calculate the ROA needed to fully fund your plan?

Please don’t hesitate to reach out to us with any questions that you might have regarding this white paper. Also, don’t hesitate to go to RyanALM.com for all the research that we’ve produced throughout the years. We look forward to being a resource for you.