Tag Archives: Ryan ALM

03.06.26
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DB Pension Plan “Absolute Truths” Revisited

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

This post may be familiar to some of you, as I originally published it in October 2024. Given today’s great uncertainty related to geopolitics, markets, and the economy, I thought it relevant to share once again. Please don’t hesitate to reach out to me if you want to challenge any part of this list. We always welcome your feedback.

The four senior members at Ryan ALM, Inc. have collectively more than 160 years of pension/investment experience. We’ve lived through an incredible array of markets during our tenures. We have also witnessed many attempts on the part of Pension America to try various strategies to meet the promises that have been made to the pension plan participants.

Regrettably, defined benefit (DB) pension plans continue to be tossed aside by corporate America in favor of defined contribution (DC) plans. Both public and multiemployer plan sponsors would be wise to adopt a strategy that seeks more certainty to protect and preserve these critically important retirement vehicles before they are subject to a similar fate.

We’ve compiled a list of DB pension “Absolute Truths” that we believe return the management of pension plans back to its roots when SECURING the promised benefits at a reasonable cost and with prudent risk was the primary objective. The dramatic move away from the securing of benefits to the arms race focused on the return on asset assumption (ROA) has eliminated any notion of certainty in favor of far greater variability in likely outcomes.

Here are the Ryan ALM DB Truths:

  • Defined Benefit (DB) pension plans are the best retirement vehicle!
  • They exist to fulfill a financial promise that has been made to the plan participant upon retirement.
  • The primary objective in managing a DB plan is to SECURE the promised benefits at a reasonable cost and with prudent risk.
  • The promised benefit payments are liabilities of the pension plan sponsor.
  • Liabilities need to be measured, monitored, and managed more than just once per year.
  • Liabilities are future value (FV) obligations – a $1,000 monthly benefit is $1,000 no matter what interest rates do. As a result, they are not interest rate sensitive.
  • Pension inflation is not equal to the CPI but a rate unique to each plan sponsor.
  • Best way to hedge pension inflation is through Cash Flow Matching (CFM) since inflation is in the actuarial projections
  • Plan assets (stocks, bonds, real estate, etc.) are present value (PV) or market value (MV) calculations. We do not know the FV of assets except for bonds cash flows (interest and principal at maturity).
  • To measure and monitor the funded status, liabilities need to be converted from FV to PV – a Custom Liability Index (CLI) is absolutely needed.
  • A discount rate is used to create a PV for liabilities – ROA (publics), ASC 715 (corps), STRIPS, etc.
  • Liabilities are bond-like in nature. The PV of future liabilities rises and falls with changes in the discount rate (interest rates).
  • The nearly 40-year decline in US interest rates beginning in 1982 crushed pension funding, as the growth rate for future liabilities far exceeded the growth rate of assets.
  • The allocation of plan assets should be separated into two buckets – Liquidity (beta) and Growth (alpha).
  • The liquidity assets should consist of a bond portfolio that matches (defeases) asset cash flows with the plan’s liability cash flows (benefits and expenses (B&E)).
  • This task is best accomplished through a CFM investment process.
  • The liquidity assets should be used to fund B&E chronologically buying time for the alpha assets to grow unencumbered in their quest to meet those faraway future liabilities not yet defeased by the liquidity assets.
  • The Growth assets will consist of all non-bonds, which can now grow unencumbered, as they are no longer a source of liquidity. Growth assets will fund those remaining future liabilities not yet defeased by the liquidity assets.
  • The Return on asset (ROA) assumption should be a calculated # derived through an Asset Exhaustion Test (AET)
  • The pension plan’s asset allocation should be responsive to the plan’s funded status and not the ROA.
  • As the funded status improves, port alpha (profits) from the Growth portfolio into the Liquidity bucket (de-risk) extending the cash flow matching assignment and securing more promises.
  • This de-risking ensures that plans don’t continue to ride the asset allocation rollercoaster leading to volatile contribution costs.
  • DB plans are a great recruiting and retention tool for managing a sponsor’s labor force.
  • DB plans need to be protected and preserved, as asking untrained individuals to fund, manage, and then disburse a “benefit” through a Defined Contribution plan is poor policy.
  • Unfortunately, doing the same thing over and over and over is not working. A return to pension basics is critical.

You’ve made a promise: measure it – monitor it – manage it – and SECURE it…   

Get off the pension funding rollercoaster – sleep well!

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.

02.12.26
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It’s Not A Product – It’s A Service!

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

Anyone who has read my blogs (>1,700 to date) knows that my personal mission and that of Ryan ALM, Inc. is to protect and preserve defined benefit pension plans. How is our collective mission pursued? It is through the implementation of unique client-specific cash flow matching (CFM) assignments. Since every pension plan has liabilities unlike any other fund, a unique solution must be created unlike most investment management products sold today.

Here is the reality: There are a lot of wonderful people in our industry, representing impressive investment organizations, tasked with introducing a variety of investment products. Plan sponsor trustees, with the help of their investment consultants, must determine which products are necessary for their plan to help reach the goal of funding the promised benefits. This is an incredibly challenging exercise if the goal is to cobble together a collection of investment managers whose objective is to achieve a return on asset assumption (ROA). This exercise often places pension funds on the proverbial rollercoaster of returns. The pursuit of a return as the primary goal doesn’t guarantee success, but it does create volatility.

On the other hand, wouldn’t it be wonderful if one could invest in strategy that brings an element of certainty to the management of pension plans? What if that strategy solved the problem of producing ALL of the necessary liquidity needed to fund monthly benefits and expenses without having to sell securities or sweep cash (dividends and capital distributions) from higher earning products? Wouldn’t it be incredible if in the process of providing the liquidity for some period of time, say 10-years, you’ve now extended the investing horizon for the residual assets not needed in the liquidity bucket? Impossible! Hardly. Cash flow matching does all that and more.

I recently had the privilege of introducing CFM to someone in our industry. The individual was incredibly curious and asked many questions. Upon receiving my replies, they instinctively said “why isn’t everyone using this”? That person then said you aren’t selling a product: it is a SERVICE. How insightful. Yes, unlike most investment strategies that are sold to fill a gap in a traditional asset allocation in pursuit of the “Holy Grail” (ROA), CFM is solving many serious issues for the plan sponsor: liquidity and certainty being just two.

Substituting one small cap manager for another, or shifting 3% from one asset class or strategy to another is not going to make a meaningful impact on that pension plan. You get the beta of that asset class plus or minus some alpha. None of these actions solve the problem of providing the necessary liquidity, with certainty, when needed. None of them are creating a longer investing horizon for the residual assets to just grow and grow. None of those products are supporting the primary pension objective which is to SECURE the promised benefits at low cost and with prudent risk.

So, Ryan ALM, Inc. is providing a critical service in support of our mission which is to protect and preserve your DB pension plan. Why aren’t you and others (everyone) taking advantage of this unique service?

02.10.26
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Milliman: Corporate Pension Funding Soars

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

Milliman has once again released its monthly Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, and the news continues to be quite good.

Market appreciation of 1.05% during January lifted the market value of PFI plan assets by $8 billion increasing total AUM to $1.327 trillion. A slight 1 bp rise in the discount rate to 5.47% lowered plan liabilities marginally to $1.217 trillion at the end of January. As a result, the PFI funded ratio climbed from 108.2% at the beginning of the year to 109.0% as of January 31, 2026. 

“January’s strong returns contributed $8 billion to the PFI plans’ funding surplus, while declining liabilities contributed another $2 billion,” said Zorast Wadia, author of the Milliman 100 PFI. “Although funded ratios have now improved for 10 straight months, managing this surplus will continue to be a central theme for many plan sponsors as they employ asset-liability matching strategies going forward.” We couldn’t agree more, Zorast! Given significant uncertainty regarding the economy, inflation, interest rates, and geopolitical events, now is the time to modify plan asset allocations by reducing risk through a cash flow matching strategy (CFM).

CFM will secure the promised benefits, provide the necessary monthly liquidity, extend the investing horizon for the non-CFM assets, while stabilizing the funded status and contribution expenses. Corporate plan sponsors have worked diligently tom improve funding and markets have cooperated in this effort. Now is not the time to “let it ride”. Ryan ALM will provide a free analysis to any plan sponsor that would like to see how CFM can help them accomplish all that I mentioned above. Don’t be shy!

Click on the link below for a look at Milliman’s January funding report.

View this month’s complete Pension Funding Index.

For more on Ryan ALM, Inc.

02.10.26
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ARPA Update as of February 6, 2026

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

It looks like those of us in the Northeast will finally get some respite from the bitter cold, as temps will moderate this week and actually hit the 30s. However, those multiemployer pension plans currently sitting on the waitlist and classified as a Plan Terminated by Mass Withdrawal before 2020 Plan Year, continue to be frozen in place. According to the PBGC’s latest update, there are 80 plans that fall under the Mass Withdrawal classification. I’ll share more info on this subject later in this post.

Regarding last week’s activity, the PBGC is reporting that one fund, Operative Plasterers & Cement Masons Local No. 109 Pension Plan, a Troy, MI, construction union, will receive $13.7 million for the 1,439 plan members. In addition to the one approval, there was another fund that withdrew its initial application. Norfolk, VA-based International Association of Bridge, Structural, Ornamental and Reinforcing Ironworkers Local No. 79 Pension Fund was seeking $14.6 million in SFA for 462 participants in the plan.

There were no applications submitted for review. It appears that only one non-mass withdrawal plan, Plasterers Local 79 Pension Plan, remains on the waitlist. Fortunately, there were no plans asked to rebate a portion of the SFA grant due to census errors or any funds deemed no eligible.

Regarding the 80 mass withdrawal funds currently sitting on the waitlist, MEPs terminated by mass withdrawal under ERISA §4041A(a)(2) are explicitly ineligible for SFA under ARP/IRA rules, regardless of application timing. Furthermore:

No “initial application” option exists post-termination date.

Mass withdrawal means that all/substantially all employers completely withdraw leading to a plan termination.

PBGC SFA statute excludes §4041A(a)(2) terminated plans.

For the 80 funds sitting on the waitlist, it seems like a long shot that the APRA legislation will be amended to accommodate these funds seeking SFA. I’ll continue to monitor this situation in future posts.

02.02.26
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ARPA Update as of January 30, 2026

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

So much for escaping the bitter cold in New Jersey by flying to Orlando, FL. The reality is that Orlando is sitting at 25 degrees this morning (Sunday 2/1). Someone is playing a nasty trick on all those snowbirds. It is a good thing for me that I’ll be spending most of my time in a conference room until Wednesday (FPPTA). I hope that you have a great week.

Regarding ARPA and the PBGC’s continuing implementation of this critical legislation, there was activity last week, and some of it was surprising. As I’ve mentioned on several occasions, the ARPA legislation specifically states that all initial applications seeking special financial assistance (SFA) needed to be submitted to the PBGC by 12/31/25. Revised applications could be resubmitted after that date and until 12/31/26. That said, there were three initial applications filed with the PBGC during the week ending January 30th. What gives?

In other news, Cincinnati-based Asbestos Workers Local No. 8 Retirement Trust Plan received approval for SFA. They will get $40.1 million to support their 451 plan participants. In other news, Local 1814 Riggers Pension Plan, withdrew its initial application which had been filed through the PBGC’s e-Filing portal last October. They are hoping to secure a $2.5 million SFA grant for their 65 members.

Fortunately, there were no previous recipients of SFA asked to repay a portion of the grant due to census errors nor were any applications denied due to eligibility issues. Lastly, no new pension plans asked to be added to the waitlist which currently numbers more than 80 systems.

The U.S. Treasury yield curve remains steep, with 30-year bond yields exceeding the yield on the 2-year note by 1.34% as of Friday’s closing prices. This steepening provides plan sponsors and grant recipients with attractive yields on longer maturity cash flow matching programs used to secure the promised benefits.

01.30.26
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“Everybody’s looking under every rock.” Jay Kloepfer

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

Institutional Investor’s James Comtois has recently published an article that quoted several industry members on the near-term (10-years) return forecast for both public and private markets, which according to those asked are looking anemic. No one should be surprised by these forecasts given the incredible strength of public markets during the past three years and the fact that regression to the mean tendencies is not just theory.

An equally, if not greater, challenge is liquidity. As the title above highlights, Jay Kloepfer, Director of Capital Markets Research at Callan, told II that “Liquidity has become a bigger issue,” He went on to say that “Everybody’s looking under every rock.” Not surprising! Given the migration of assets from public markets to private during the last few decades. The rapid decline in U.S. interest rates certainly contributed to this asset movement, but expectations for “outsized” gains from alternatives also fueled enthusiasm and action. The Callan chart below highlights just how far pension plans have migrated.

I’ve written a lot on the subject of liquidity. Of course, the only reason that pension plans exist is to fund a promise that was made to the participants of that fund. Those promises are paid in monthly installments. Not having the necessary liquidity can create significant unintended consequences. No one wants to be a forced seller in a liquidity challenged market. It is critical that pension plans have a liquidity policy in place to deal with this critical issue. Equally important is to have an asset allocation that captures liquidity without having to sell investments.

Cash flow matching (CFM) is such a strategy. It ensures that the necessary liquidity is available each and every month through the careful matching of asset cash flows (interest and principal) with the liability cash flows of benefits and expenses. No forced selling! Furthermore, the use of CFM extends the investing horizon for those growth assets not needed in the CFM program. Those investments can just grow unencumbered. The extended investing horizon also allows the growth assets to wade through choppy markets without the possibility of being sold at less than opportune times.

So, if you are concerned about near-term returns for a variety of assets and with creating the necessary liquidity to meet ongoing pension promises, don’t rely on the status quo approach to asset allocation. Adopt a bifurcated asset allocation that separates plan assets into liquidity and growth buckets. Your plan will be in much better shape to deal with the inevitable market correction.

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!

01.23.26
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How Does One Secure A Benefit?

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

We hope that you’ll agree that going to Chicago in January demonstrates the lengths that Ryan ALM personnel will go to help plan sponsors and their advisors protect and preserve DB pension plans. We are just thankful that we left yesterday, as today’s temperature is not expected to get to 0. OUCH!

Ron Ryan and I spent the last couple of days speaking with a number of funds and consultants about the many benefits of cash flow matching (CFM), which is gaining incredible traction among pension sponsors of all types. Who doesn’t want an element of certainty and enhanced liquidity within their plans given all the uncertainty we are facing in markets and geopolitically.

The idea of creating an element of certainty within the management of pension plans sounds wonderful, but how is that actually achieved? This is a question that we often receive and this trip was no exception. We had been discussing the fact that the relationship between asset cash flows (bond principal and interest) and liability cash flows (benefits and expenses) is locked in on the day that the bond portfolio is produced. The optimization process that we created blends the principal and interest from multiple bonds to meet the monthly obligations of benefits and expenses with an emphasis on longer maturity and higher yielding bonds to capture greater cost reduction of those future promises.

However, to demonstrate how one defeases a future liability, my example below highlights the matching of one bond versus one future $2 million 10-year liability. In this example from 18-months ago we purchased:

Bond: MetLife 6.375% due 6/15/34, A- quality, price = $107.64

Buy $1,240,000 par value of MetLife at a cost = $1,334,736

Interest is equal to the par value of bonds ($1,240,000) times the bond’s coupon (6.375%)

As a result of this purchase, we Receive: 

  Interest =  $78,412.50 annually ($39,206.25 semi-annual payments)

                            Total interest earned for 10 years is $784,125

  Principal = $1,240,000 at maturity (par value)

Total Cash Flow = $2,024,125  – $2,000,000 10-year Liability  = $24,124.99 excess

                             ($24,124.99 excess Cash Flow)

Benefits:

Able to fund $2 million benefit at a cost of $1.335 million or a -33.25% cost reduction

Excess cash flow can be reinvested or used to partially fund other benefits

In today’s yield environment, our clients benefit to a greater extent asking us to create longer maturity programs given the steepness of the yield curve. If they don’t have the assets to fund 100% of those longer-term liabilities, we can defease a portion of them through what we call a vertical slice. That slice of liabilities can be any percentage that allows us to cover a period from next month to 30-years from now. In a recent analysis produced for a prospect, we constructed a portfolio of bonds that covered 40% of the pension plan’s liabilities out to 30-years. As a result, we reduced the present value cost to defease those liabilities by –42.7%!!

Reach out to us today to learn how much we can reduce the future value cost of your promised benefits. We do this analysis for free. We encourage you to take us up on our generous offer.