Administration April 15, 2014

2014 to Be a Good Year for Multiemployer Plan Funding

April 15, 2014 (PLANSPONSOR.com) – More multiemployer pension plans have a favorable projected funding status for 2014.
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The preliminary results of the “Survey of Calendar-Year Plans’ 2014 Zone Status,” released by Segal Consulting, indicate the percentage of calendar-year multiemployer pension plans in the “green zone” in 2014 is 65%, an increase of 4 percentage points from 2013.

In addition, the percentage of plans in the yellow and red zones are down from last year, with those in the yellow zone at 8% (compared to 11% last year) while those in the red zone declined to 27% (compared to 28% the prior year).

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The survey, which reflects data from more than 215 calendar-year plans, also revealed that for the fifth consecutive year, more than half the surveyed plans are in the green zone. Further, both the construction and service industries have the greatest percentage of plans in the green zone, both at 73%.

Data shows that between 2013 and 2014, the surveyed plans’ average Pension Protection Act (PPA) funded percentage increased by 3 percentage points to reach 88% from 85% in 2013.

Segal says factors contributing to the recent improvement include:

  • Very strong investment performance—for 2013, the return for multiemployer pension funds with a 40% to 70% allocation to equities ranged from 11.5% to 21.4%;
  • Trustees have taken steps to strengthen their plans, including making plan design changes and negotiating contribution rates; and
  • There are higher levels of employment in many industries.

The term “green zone” refers to multiemployer pension plans that have an actuarial certification of their projected funding status that is neither endangered (the yellow zone) nor critical (the red zone) under the funding provisions of the PPA. Plans in the green zone are not subject to special rules put into place by the PPA. In contrast, trustees of plans in the yellow and red zones are required to take specific actions to improve their plans’ financial status by adopting a funding improvement plan or rehabilitation plan, respectively.

Zone status is determined by an actuarial certification based on a projection of estimated assets and liabilities, according to the survey. For calendar-year plans, the projection is based on January 1, 2014, assets (reflecting investment performance for 2013) and liabilities.

A full report of the survey results will be released in May. An infographic featuring survey data is here.
Products April 15, 2014

Firms Offer Pension Risk Transfer Advisory Services

April 15, 2014(PLANSPONSOR.com) – Deloitte and Penbridge Advisors have established a strategic alliance to provide sponsors of U.S. defined benefit pension plans with pension risk transfer (PRT) advisory services.
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According to Steve Keating, co-founder and principal of Penbridge Advisors, the collaborative adviser offering will deliver highly coordinated advice at each step of the PRT transaction process.

“By combining the complementary, deep PRT experience of our two organizations, the alliance of Penbridge Advisors and Deloitte is well positioned to help plan sponsors objectively address whether and how to pursue PRT,” says Jason Flynn, principal, Deloitte Consulting LLP and national leader of Deloitte’s human capital rewards practice, based in New York. Flynn notes that about $100 billion of corporate pension liabilities was transferred to insurers in the last 30 years, but that a significant portion of the remaining $3 trillion in pension plans is expected to be transferred at a much faster pace over the next five to 10 years.

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The alliance coordinates advisory responsibilities as follows:

  • Penbridge Advisors primarily helps plan sponsors evaluate the cost-effectiveness of annuity buyouts relative to other pension de-risking strategies. Its services include PRT pricing and underwriting assessments, executive and board education, ongoing monitoring of buy-out pricing, and the evaluation and comparison of various insurance products and other de-risking alternatives such as lump sum payouts and liability-driven investing solutions.
  • Deloitte works closely with plan sponsors throughout the annuity placement process, providing comprehensive implementation support. Its services include assistance to plan sponsors with data analysis and cleansing; lump sum payment solicitations; preparation and distribution of annuity provider RFPs and RFIs; analysis of insurers and their offerings; competitive bidding process outsourcing; finalization of annuity contracts and data reconciliation; transition of administration responsibilities; and participant education and communication.

Brad Howard, a senior manager at Deloitte and leader in the firm’s PRT practice, says the combined offering should be a compelling option for plan sponsors of all sizes. 

Deloitte provides a broad range of consulting capabilities across human capital, strategy, operations, innovation and technology.

Penbridge Advisors provides pension plans with information and advisory services on the U.S. pension risk transfer (PRT) market and products. Penbridge provides free access to the industry’s only PRT database, currently used by more than 300 plan sponsors and advisory firms. More information about this database can be found here.

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