Category: Regulation

DC Plans Use Pension Features to Improve Retirement Outcomes

Mary Pat Campbell

Link:https://www.plansponsor.com/in-depth/dc-plans-use-pension-features-improve-retirement-outcomes/

Excerpt:

To help participants grow their balances, employer-sponsored DC plans are also incorporating behavioral finance concepts into plan design and architecture by automating systems.

“Now we see automatic enrollment, we see target dates, we see managed accounts that are becoming more complex and having more options as baked into defined contribution plans,” says Deb Dupont, assistant vice president for retirement plans research at the LIMRA Secure Retirement Institute. “All of these things make it much easier and in fact [a] more passive decision on the part of the participant.”

Legislation, including 2019’s Setting Up Every Community for Retirement Act, has also eased plan sponsors’ responsibilities when selecting an insurer to offer annuitization options for participants’ decumulation stage. The safe harbor has prompted sponsors to increasingly build lifetime income options into their plans to provide retirement income certainty. And prior to the SECURE Act, the Pension Protection Act of 2006 led to widespread adoption of qualified default investment alternatives, including target-date funds, which helped DC plans incorporate ideas from DB plans, Dupont adds.   

Author(s): Noah Zuss

Publication Date: 9 Feb 2022

Publication Site: Plansponsor

Developing Countries Brace for Impact From Fed Rate Increases

Mary Pat Campbell

Link:https://www.wsj.com/articles/developing-countries-brace-for-impact-from-fed-rate-increases-11644321780

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Excerpt:

Central bankers in developing countries have been ratcheting up interest rates for months, seeking to stay ahead of a rise in U.S. rates that could destabilize their economies by pushing up their own cost of debt, weakening their currencies and driving capital out of their markets and into higher-yielding U.S. securities.

Now, the Fed is expected to raise rates anywhere from four to seven times this year. If successful in taming inflation, the Fed could help central banks everywhere, because a turbocharged U.S. economy, huge government stimulus and a splurge by Americans on everything from toys and household appliances have snarled supply chains and driven inflation higher world-wide.

Until now, overseas central banks have found it difficult to get on top of the inflation surge withthe Fed sitting on the sidelines. But with the Fed now poised to join the battle, some say the prospects of success are greater.

Author(s): Paul Hannon

Publication Date: 8 Feb 2022

Publication Site: WSJ

Thomas Bond Sprague (1830-1920)

Mary Pat Campbell

Link:https://mathshistory.st-andrews.ac.uk/Biographies/Sprague/

Graphic:

Excerpt:

Dr Sprague was the main person behind a mortality study covering the experience of twenty U. K. life offices. This study resulted in the Institute of Actuaries Life Tables (the so-called Twenty Offices Table) which was published in 1869 [2]. From this study, he produced, in 1879, the first Select Tables of Mortality [3] which were the first two-dimensional mortality tables ever published (the two dimensions being ‘insured duration’ i.e. the ‘select period’ and ‘age attained’). The ‘select period’ was five years.

Dr Sprague pioneered the important 1870 Life Insurance Companies Act [4] which was introduced following the notorious insolvencies of both the Albert and the European life assurance companies. The 1870 Act required:-

… an investigation into the financial condition of a life insurance company to be made regularly by an actuary,

required a separate “long-term fund” and required the:-

… preparation of a revenue account and balance sheet every year in prescribed form to be filed with the Board of Trade,

the latter being a public document. Dr Sprague was one of the foremost advocates of the principle of ‘Freedom with Publicity’ (i.e. documents available to the public) and was opposed to there being any Government regulation prescribing the manner of valuation of policy liabilities. He wrote the major 19th century work on the preparation of life office accounts in conformity with the 1870 Act [5].

Author(s): David O Forfar

Publication Date: accessed 9 Feb 2022

Publication Site: MacTutor History of Math Archives

California financial audit arrives a year late and raises flags about unemployment benefits paid

Mary Pat Campbell

Link:https://reason.org/commentary/california-financial-audit-arrives-a-year-late-and-raises-flags-about-unemployment-benefits-paid/

Excerpt:

On Feb. 3, 2022, the state of California finally produced its audited financial statements for its fiscal year that ended June 30, 2020. The filing, known as an annual comprehensive financial report, was over a year late and came with an unpleasant surprise in the form of a qualified audit opinion.

State and local governments are normally expected to produce financial statements within six-to-nine months of the fiscal year’s end. California has now missed the nine-month municipal bond market filing deadline for three consecutive years. And, with less than two months to the deadline for its fiscal year 2021 financial reports (for the fiscal year that ended June 30, 2021), another late filing seems inevitable.

California’s financial reporting performance compares poorly with most other states. According to data from Truth in Accounting, the median U.S. state produced its 2020 annual comprehensive financial report 184 days after the end of its fiscal year. By contrast, California took 583 days, nearly 20 months, to file its annual comprehensive financial report for fiscal year 2020. For added perspective, it is worth noting that the Securities and Exchange Commission gives large corporations just 60 days to produce their audited financials.

Author(s): Marc Joffe

Publication Date: 7 Feb 2022

Publication Site: Reason

Appeals panel: No pension benefits for ex-Chicago cop Anthony Abbate, convicted in videotaped beating of female bartender

Mary Pat Campbell

Link:https://cookcountyrecord.com/stories/619782204-appeals-panel-no-pension-benefits-for-ex-chicago-cop-anthony-abbate-convicted-in-videotaped-beating-of-female-bartender

Excerpt:

A state appeals panel has ruled a Cook County judge was wrong to declare Anthony Abbate — a Chicago police officer convicted of a 2007 aggravated battery targeting a female bartender — remained entitled to his pension.

Cook County Circuit Judge Anna Loftus ruled in favor of Abbate in a lawsuit against the Retirement Board of the Policemen’s Annuity and Benefit Fund of the City of Chicago, which stripped Abbate’s pension following his conviction. Loftus determined the battery had no connection to Abbate’s service as a police officer and therefore couldn’t be used to invalidate his pension.

The Illinois First District Appellate Court ruled on the pension board’s appeal in an order issued Feb. 7. Justice Aurelia Pucinski wrote the opinion; Justices Michael Hyman and Carl Walker concurred. The order was issued under Supreme Court Rule 23, which may restrict its use as precedent.

…..

According to Pucinski, the pension board also said “Abbate used his position as a police officer to interfere with a criminal investigation into his own conduct at the bar” and cited testimony from a federal civil trial in which a jury found in favor of the bartender against Abbate and the city. The panel rejected Abbate’s arguments alleging the pension board failed to support its conclusions and selectively included evidence.

…..

The panel further rejected Abbate’s argument it should only consider a specific section of the Illinois Pension Code, explaining it would consider other cases interpreting similar forfeiture provisions, such as those affecting the General Assembly, Illinois Municipal Retirement Fund members and others.

Author(s): Scott Holland

Publication Date: 7 Feb 2022

Publication Site: Cook County Record

New York May Develop Life Policy Disclosure Rules

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/01/24/new-york-may-develop-life-policy-disclosure-rules/

Excerpt:

An NAIC committee formed the Life Insurance Illustrations Working Group in 2016.

The working group chair report said states should become the laboratories for disclosure standards.

The committee disbanded the working group and put the disclosure standards effort back in the hands of the states.

Author(s): Allison Bell

Publication Date: 24 Jan 2022

Publication Site: Think Advisor

AstraZeneca to End Its US Corporate Pension Plan

Mary Pat Campbell

Link:https://www.ai-cio.com/news/astrazeneca-to-end-its-us-corporate-pension-plan/

Excerpt:

AstraZeneca, a British–Swedish biopharmaceutical company responsible for developing one of the world’s most widely distributed COVID-19 vaccines, announced on January 25 that it will be transferring its pension assets to an insurance company.

“This is a common practice, achieved via a process known as ‘plan termination’ and ‘buy-out.’ This action does not impact any participant’s eligibility to receive the benefit earned under the pension plan,” AstraZeneca representatives wrote in a statement explaining the transition.

AstraZeneca’s US pension initially began struggling with its funded status in 2017, and the company made the decision to freeze benefit accruals that year. This move ended up making a significant difference, bringing funded status from 80% in 2017 up to 99.19% by the end of 2018. The plan currently has $1.3 billion in assets under management (AUM) and serves approximately 7,000 employees, according to its Form 5500.

Author(s): Anna Gordon

Publication Date: 7 Feb 2022

Publication Site: ai-CIO

How Much Is ‘Enough’?

Mary Pat Campbell

Link:https://www.asppa-net.org/news/how-much-%E2%80%98enough%E2%80%99

Excerpt:

Looks like those hoping for some clarity on a threshold issue involving ERISA fee litigation will have to wait for another day.

I’m referring, of course, to last week’s ruling by the Supreme Court on the case of Hughes v. Northwestern University et al.—a case that the law firm of Schlichter Bogard & Denton—which seems to have “invented” this class of excessive fee litigation—said was having a “chilling effect” on this type of lawsuit, more precisely their ability to proceed to trial (or settlement). Consequently, ERISA fiduciaries were waiting anxiously for a ruling on the case, which involved allegations that Northwestern University had failed to comply with its fiduciary responsibilities with regard to the options available to plan participants. 

Indeed, the allegations in this case weren’t all that different from the litany transgressions outlined in any number of such cases over the years—but in making their case to be heard by the nation’s highest court the plaintiffs’ attorneys (the aforementioned law firm)—had noted (complained?) that suits “with virtually identical” claims were being dismissed out of hand, while other courts were allowing them to go to trial. This they claimed was “…not a factual disagreement about whether the specific allegations at issue clear the pleading hurdle,” but rather “a legal disagreement about where that hurdle should be set.” 

….

Consequently. some clarity as to how, and how much, must be established by those who file the suits before they get to take the issue(s) to trial is timely, to say the least. Or, said another way, how much is “enough.” 

….

Rather, the court had merely determined that there were some prudent alternatives on the menu, and that the participants could choose them if they had an issue with those that (allegedly) weren’t as expensive and that, for that district court, was enough.

Author(s): Nevin E Adams, JD

Publication Date: 3 Feb 2022

Publication Site: ASPPA

“What If I Can’t Insure My Home At All?”

Mary Pat Campbell

Link:https://www.dailyposter.com/what-if-i-cant-insure-my-home-at-all/

Excerpt:

Insurance giants Chubb, Liberty Mutual, and AIG are three of the biggest insurers of fossil fuel infrastructure around the world. But the companies have just announced plans to scale back their homeowner coverage in California, where they insist future climate-related losses will likely prevent them from turning a profit.

The coverage withdrawals may soon ignite a big money battle in the state’s legislature, pitting insurance giants against lawmakers trying to preserve coverage for their constituents. Meanwhile, climate campaigners are decrying what they say is a fundamental hypocrisy.

…..

Last year, Chubb’s chairman and CEO Evan Greenberg said the company was reducing its coverage in parts of the state that were “both highly exposed, and even moderately exposed, to wildfire” because it was unable to obtain an “adequate price for the risk, and not by a small amount” due to both the costs of wildfires and California’s regulatory climate.

…..

A main solution proposed by industry is that they be allowed to use “catastrophic modeling,” a method where rates are set based on predictions of future losses, rather than recorded past losses, as is currently the case. All other states allow the use of this technique in at least some cases.

Author(s): Sam Mellins

Publication Date: 7 Feb 2022

Publication Site: The Daily Poster

Ed Slott: Child Tax Credit Is ‘a Mess!’

Mary Pat Campbell

Link:https://www.thinkadvisor.com/2022/02/01/ed-slott-child-tax-credit-is-a-mess/

Excerpt:

The Internal Revenue Service issued Tuesday a revised Fact Sheet and frequently asked questions on the 2021 child tax credit and advance child tax credit to help eligible families properly claim the credit when they prepare and file their 2021 tax return.

Tax expert Ed Slott of Ed Slott & Co. told ThinkAdvisor on Tuesday in an email that the child tax credit situation this year is “a mess! Some people may end up paying a tax pro more than the credit!”

Others, Slott said, “may still pay a tax pro only to end up returning money they already received. Advance payments can always be tricky when it’s time to reconcile.”

Author(s): Melanie Waddell

Publication Date: 1 Feb 2022

Publication Site: Think Advisor

San Diego to Retroactively Replace Thousands of Employees’ DC Plans With Pensions

Mary Pat Campbell

Link:https://www.plansponsor.com/san-diego-retroactively-replace-thousands-employees-dc-plans-pensions/

Excerpt:

The city of San Diego will be offering retroactive defined benefit (DB) pension benefits to thousands of city employees who were previously only offered defined contribution (DC) plans.

The decision comes after the California Supreme Court overturned 2012’s Proposition B, a law that was passed after being voted on by the public. Proposition B shifted all city employees except police officers away from pensions to DC plans. The law was in effect from July 2012 through July 2021.

Proposition B was controversial and was ultimately deemed to have been illegally placed on the public ballot. The total amount of funds owed to city employees will be approximately $73 million in retroactive pension accruements. The payments will go to approximately 3,850 workers who began working for the city after July 2012.

Author(s): Anna Gordon

Publication Date: 4 Feb 2022

Publication Site: Plan Sponsor

Pension Plan Actuarial Assumption Litigation: The End is Not Yet in Sight

Mary Pat Campbell

Link:https://www.jdsupra.com/legalnews/pension-plan-actuarial-assumption-5162449/

Excerpt:

One recent line of ERISA litigation involves the actuarial equivalence factors used by defined benefit pension plans.  The lawsuits apply both to active defined benefit pension plans and pension plans that have been “frozen” as to future benefit accruals.

….

Basically, the lawsuits allege that the plan, through the use of out-of-date and “unreasonable” actuarial assumptions and conversion factors, has “overcharged” participants when converting from the Life Annuity Benefit to payment in an alternate payment form. 

….

In many of the cases, the challenge focuses on allegedly outdated mortality tables that do not take improved life expectancy into account.  In some situations, the actuarial factors (including mortality table assumption) were established decades ago and have never been updated.  In essence, the lawsuits allege that the plan (by not using updated factors and tables) is not paying out the full value of the participant’s benefit when the participant has elected payment in an alternate payment form.

Author(s): Gregg Dooge

Publication Date: 20 Jan 2022

Publication Site: JD Supra