All about risk
Link: https://burypensions.wordpress.com/2022/05/24/417e-barometer/
Excerpt:
The 417(e) segment rates for April, 2022 were just released and two takeaways:
Author(s): John Bury
Publication Date: 24 May 2022
Publication Site: Burypensions
Link: https://burypensions.wordpress.com/2022/03/22/the-labor-guide-to-retirement-plans-i/
Excerpt:
A book to educate labor people to argue for keeping their underfunded defined benefit plans with sprinklings of propaganda.
Yet pension plans cost governments less than 401(k)s for the same benefit amount. Most public pension plans are in sound financial shape despite media focus on the few that are not. (page 10)
At one point, I commented to a pension attorney that I didn’t think there were more than twenty-five people in the state who understood how the state employee pension plan worked. He agreed and then added that there were a lot more people who thought they did, especially politicians who were proposing reforms to it. (page 16)
Unless your doctor has told you you’re about to die, receiving a lump sum payment is almost always a terrible idea. (page 110)
Author(s): John Bury
Publication Date: 23 Mar 2022
Publication Site: Burypensions
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
Excerpt:
Best and Worst States for Pensions by Joel Anderson. In this article for Yahoo! Finance, Anderson ranks the “best” and “worst” states for public pensions based on their unfunded liabilities. As we’ve written before, judging states based on their funded status is highly misleading. An unfunded liability is merely the difference between “the total amount of benefits owed to ALL current employees & retirees and the value of the financial assets the pension plan manages.” A pension system never needs all of that money at once because a fund has a long time to earn investment returns from what employers and employees contribute. Furthermore, each pension plan provides a Comprehensive Annual Financial Report (CAFR) that shows the vast majority of retired public employees stay in the state they worked in during their career, which means they are reinvesting their pension benefits into their local economies. Stories like this are best viewed skeptically compared with the facts about public pensions.
Author(s): Tristan Fitzpatrick
Publication Date: 27 August 2021
Publication Site: National Public Pension Coalition
Graphic:
Excerpt:
The U.S. stock market is the largest in the world, with total U.S. stock ownership amounting to almost $40 trillion in 2019. But who owns all these equities?
In this Markets in a Minute from New York Life Investments, we show the percentage of U.S. stock owned by various groups, and how the proportions have changed over time.
Author(s): Jenna Ross
Publication Date: 31 March 2021
Publication Site: Visual Capitalism
Link: https://allisonschrager.substack.com/p/known-unknowns-0a3
Excerpt:
My colleague at Bloomberg writes we’ll have to pay teachers more to get them to return to work. Their pay has been stagnant for a decade. But their compensation has not been. A very large part of teachers’ compensation comes in the form of a massive risk-free asset—a defined benefit pension. The value of this pension increased as real interest rates fell. It not only took more resources for the states and municipalities to finance (assuming the pension funds were well funded—a big if) the pension when rates were low. The pension became more valuable.
So teachers really got large raises in the form of their more valuable pension. The problem is they don’t fully internalize how much more their pension is worth. Also, pensions are less valuable for young teachers who may change jobs one day. If we do want to increase teachers’ pay, we really need to reform the pensions. Reform would free up more money for salaries, and there’s evidence young teachers prefer more flexible compensation.
That probably won’t happen since the teachers’ union is very attached to its defined benefit plan. But you can’t have it all, even in this labor market.
Author(s): Allison Schrager
Publication Date: 7 June 2021
Publication Site: Known unknowns at substack
Full report link: https://www.nirsonline.org/wp-content/uploads/2021/05/Hybrid-Handbook-F8.pdf
Graphic:
Excerpt:
A new report provides a comprehensive overview of the many aspects of public sector hybrid retirement plan designs. The report finds that some shifts to hybrid designs were made without a proper evaluation of the long-term implications of the plan changes. In contrast, other hybrids are well-thought-out and more likely to provide retirement security to employees, enabling public employers to recruit and retain a qualified workforce.
…..
A hybrid is not one particular plan design, but instead is an umbrella term capturing a wide range of different plan designs. Some hybrids are defined benefit (DB) pensions with risk-sharing provisions, while others blend attributes of DB and defined contribution (DC) plans. Each of these plan designs offers tradeoffs in terms of retirement benefits, risks, and costs.
Author(s): Dan Doonan, Elizabeth Wiley
Publication Date: 10 May 2021
Publication Site: National Institute on Retirement Security
Excerpt:
Only in the event of a tragic Covid-19 scenario, seeing continued substantial additional deaths for many years would there be a significant reduction in UK DB scheme liabilities, according to a new report from LCP.
While LCP believes that the financial impact on DB schemes of direct deaths from the first two Covid-19 waves is likely to be marginal, it outlines several other scenarios around the pandemic’s longer-term impact on mortality rates and scheme labilities. The range of outcomes illustrates the challenges of choosing an appropriate mortality assumption at the current time, with much uncertainty over how Covid-19 will play out.
Author(s): Chris Tavener
Date Accessed: 20 April 2021
Publication Site: Actuarial Post (UK)
Link: https://www.ai-cio.com/news/funded-levels-canadian-db-plans-climb-20-year-high/
Excerpt:
Thanks to surging bond prices, Canadian defined benefit (DB) pension plans ended the first quarter of this year at their highest funded levels in more than 20 years, according to Mercer. However, the asset manager and consulting firm warns that the lofty funded positions might not last, depending on the trajectory of interest rates, inflation expectations, and equity market performance.
Mercer’s Pension Health Index, which tracks the solvency ratio of a hypothetical DB pension plan, increased to 124% at the end of March from 114% at the end of 2020. That is the index’s highest level since it was launched in 1999. Meanwhile, the median solvency ratio of the pension plans of Mercer clients was 104% as of the end of March, up from 96% at the end of December.
Long bond yields jumped 77 basis points (bps) during the quarter to lower the plans’ liabilities and more than offset the negative returns reported by many pension funds during the period.
Author(s): Michael Katz
Publication Date: 12 April 2021
Publication Site: ai-CIO
Link: https://www.ai-cio.com/news/kentucky-lawmakers-override-pension-bill-veto/
Excerpt:
The GOP-run Kentucky state legislature has overridden Democratic Gov. Andy Beshear’s veto of a pension reform bill that will place new teachers in a hybrid pension plan that incorporates aspects of a defined contribution (DC) and a defined benefit (DB) plan.
Under House Bill 258, new teachers are required to contribute more to their retirement plans than current teachers do, and they will have to work for 30 years instead of 27 to earn their maximum benefits. The new rules will become effective at the beginning of 2022.
The bill had been passed by large majority of both chambers of the legislature earlier this year, with the House passing it by a vote of 68 to 28 and the Senate passing it by a count of 63 to 34. Because the state’s Republicans have a supermajority in both the House and Senate, they didn’t have much difficulty in overriding the veto, which was one of 24 vetoes passed down by Beshear, a Democrat, that were overridden in one day.
Author(s): Michael Katz
Publication Date: 1 April 2021
Publication Site: ai-CIO
Link: https://www.thinkadvisor.com/2021/03/09/grim-covid-19-scenario-could-slash-pension-liabilities/
Excerpt:
The pandemic could also slash pension plan sponsors’ liabilities, by making ordinary health care an expensive luxury — and driving up the U.S. death rate for decades to come.
Analysts at Club Vita US LLC have presented those scenarios in a look at the possible effects of the COVID-19 pandemic on three types of U.S. pension plans: defined benefit plans sponsored by single employers; defined benefit plans sponsored by multiple private-sector employers; and defined benefit plans sponsored by government employers.
The analysts’ work reflects the same kinds of effects that might affect blocks of life insurance policies, blocks of annuities, and life settlement portfolios.
Author(s): Allison Bell
Publication Date: 9 March 2021
Publication Site: Think Advisor
Link: https://www.thinkadvisor.com/2021/02/22/saving-social-security-is-a-bipartisan-issue-survey/
Excerpt:
Most Americans of both political parties agree there Is a retirement crisis ahead.
A majority of those surveyed say COVID-19 has delayed their retirement plans.
Many stated that pension plans are better than 401(k) plans.
Author(s): Ginger Szala
Publication Date: 22 February 2021
Publication Site: Think Advisor