Investing August 9, 2022

401(k) Trading Light in July Despite Market Gains

Stable value funds topped inflows, while most outflows were from target-date funds, according to Alight Solutions data.

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Alight Solutions has published the July update of its 401(k) Index, which notes that it was a light trading month for investors.

There were no above-normal trading days this month, even as Wall Street posted its best month since November 2020, Alight’s update says. Stable value funds topped inflows at 59%, while 54% of outflows were from target-date funds.

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On average, 0.008% of 401(k) balances were traded daily, compared to an average of 0.015% last month. Investors favored moving assets into fixed-income funds during 13 out of 20 trading days. Trading inflows mainly went to stable value, money market and large U.S. equity funds, while outflows were primarily from target-date, bond and company stock funds, the update says.

After reflecting market movements and trading activity, average asset allocation in equities increased from 67.7% in June to 68.6% in July. New contributions to equities decreased from 68.7% in June to 68.5% in July.

According to the index, a “normal” level of relative transfer activity is when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months. A “high” relative transfer activity day is when the net daily movement exceeds two times the average daily net activity. A “moderate” relative transfer activity day is when the net daily movement is between 1.5 and two times the average daily net activity of the preceding 12 months.

Benefits August 9, 2022

PBGC to Provide Nearly $800 Million to Rescue 2 Pension Plans

The agency has so far approved $7.4 billion under the Special Financial Assistance Program to pension funds covering more than 149,000 participants.

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The Pension Benefit Guaranty Corporation has agreed to provide more than $800 million under its Special Financial Assistance Program to two pension funds covering over 22,000 participants. 

 

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The lion’s share of that amount, $715 million, will go to Pittsburgh’s Western Pennsylvania Teamsters and Employers Pension Plan, which covers over 21,000 participants in the transportation industry.

 

The plan had implemented a benefit suspension under the terms of the Multiemployer Pension Reform Act of 2014 in August of 2019, which reduced the benefits of approximately 15,000 plan participants by an average of 20%. The PBGC’s approval of the SFA application will allow the pension plan to restore all benefits suspended under the terms of MPRA and to make payments to retirees to cover previous benefit suspensions.

 

“The Special Financial Assistance approved today means that these 21,110 transportation workers and retirees will receive the full retirement benefits they earned,” Secretary of Labor Marty Walsh, who is also chair of the PBGC’s board of directors, said in a statement. “Since 2019, they have been receiving reduced pension payments through no fault of their own.”

 

The PBGC also approved the application of the Pension Plan of the Printers League – Graphic Communications International Union Local 119B. The plan, which is based in East Farmingdale, New York, covers over 1,200 participants in the printing industry and will receive $85.2 million from the agency.

 

The PBGC has been providing financial assistance to the GCIU Local 119B Plan since it became insolvent in August of 2021. As required by law, the plan reduced its participants’ benefits to the PBGC guarantee levels, which was approximately 31% below the benefits payable under the terms of the plan. The SFA approval means the plan will be able to restore benefit reductions caused by its insolvency and to repay retirees for prior benefit reductions.

 

The SFA Program was enacted under the American Rescue Plan Act of 2021, and is intended to provide funding to severely underfunded multiemployer pension plans. As of July 29, the PBGC has approved over $7.4 billion to plans that cover more than 149,000 workers and retirees.

 

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