Deals and People July 9, 2021

Retirement Industry People Moves

Principal announces new chief information officer of retirement and income solutions, BPAS acquires retirement plan services provider, Groom Law Group announces new principal; and more.

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Art by Subin Yang
Art by Subin Yang
Art by Subin Yang

Principal Announces New Chief Information Officer of Retirement and Income Solutions 

Principal Financial Group has announced that Shawn Johnson will be the new chief information officer of the company’s Retirement and Income Solutions (RIS) business.

“Shawn brings a wealth of digital and IT [information technology] experience to Principal that’s critical in ensuring our Retirement and Income Solutions business is on the leading edge of recordkeeping technology and digitization,” says Renee Schaaf, president of Principal RIS. “Shawn’s hands-on experience in technology modernization and digital transformation within the retirement recordkeeping industry will be invaluable as we continue strengthening our top-tier provider status.”  

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As chief information officer, Johnson will have responsibility for the technology and digital strategies for the RIS business and report to Schaaf. In this role he will continue to evolve the company’s retirement savings and analysis platforms for small, medium and large plan sponsors, as well as participants.

Following a strategic review, a Principal spokesperson recently told PLANSPONSOR: “We will also pursue digital solutions, such as Principal SimpleInvest, our digital IRA [individual retirement account] and advice offering, and our mobile apps that make it easier for customers to do business with us on their terms.”

Johnson succeeds Chief Information Officer Susie Thomann, who will be retiring after leading the technology group within RIS.

Prior to Principal, Johnson spent the past 15 years in leadership positions within the energy, health care and financial services industries, where he drove IT innovation and developed and executed cloud initiatives. In his most recent role at Empower Retirement, Johnson oversaw the support of mission-critical systems while focusing on the modernization and execution of its cloud strategy and upskilling of IT talent.

Johnson earned his bachelor’s degree in mechanical engineering from Colorado State University. He will be based out of the Principal headquarters in Des Moines, Iowa.  

Cobbs Allen Expands Into 401(k) Business With New Hire

Cobbs Allen, a national independent agency, is expanding its health and welfare practice to include 401(k) consulting with the addition of John Wilhoit.

“John brings extensive knowledge and industry-leading experience in the retirement space to Cobbs Allen,” says Bruce Denson Jr., president of CAC Specialty, a specialty insurance brokerage and investment banking platform and part of Cobbs Allen. “He is an accomplished leader and will be an instrumental piece to growing and establishing our 401(k) and corporate retirement plans consultant team.”

Prior to joining Cobbs Allen, Wilhoit worked at Willis Towers Watson as a director and created and led the mid-market retirement practice. At Willis Tower Watson, Wilhoit was responsible for the strategic development of clients’ retirement plans and provided them with investment advisement, analysis, communication and education.

BPAS Acquires Retirement Plan Services Provider

BPAS, a national provider of retirement plans, benefit plans, fund administration and collective investment trusts (CITs) is acquiring Fringe Benefit Design of Minnesota Inc. (FBD), a provider of retirement plan administration, actuarial and benefit consulting services with offices in Minnesota and South Dakota.

“We are very excited about joining forces with BPAS,” says Kevin Miller, FBD president and CEO. “We feel that combining our highly skilled administrative team, industry-leading technology and operating efficiencies provided by BPAS, and the investment selection/monitoring provided by The E-Valuator software will make this an industry-leading package that will compete extremely well in the retirement plan industry.”

The acquisition will give BPAS, a subsidiary of Community Bank System Inc., a profile of revenues of approximately $110 million, administration of more than 510,000 retirement plan participant accounts, 4,200 employer clients, approximately $13 billion in defined contribution (DC) plan assets on its daily valuation system and some $110 billion of total assets in trust.

“This transaction represents a very attractive opportunity for us,” says Community Bank System President and Chief Executive Officer Mark E. Tryniski. “Our employee benefits and trust business is the largest of our non-banking businesses and plays a significant role in our overall growth strategy for our financial services businesses on a national level.”  

“This affiliation adds exceptional depth and breadth for the benefit of our current and prospective clients,” adds Maryann Geary, president of BPAS. “With this acquisition, we significantly expand our retirement offerings on a national level, including the association and group plan space. We are excited to combine with FBD and committed to growing our capabilities in the region and nationally.”

MetLife Hires Government Relations VP

MetLife Inc. has announced that Frederick Mitchell will join the company as vice president, U.S. government relations, effective July 26. He will serve as a senior member of the U.S. government relations team and lead the company’s advocacy efforts on retirement and financial services policies. Mitchell will be based in Washington, D.C., and report to Maggie Gage, head of U.S. government relations.

Mitchell joins MetLife from the American Bankers Association, where he most recently served as vice president of congressional relations, advising member companies and developing legislative strategies on securities, banking and investments issues.

Previously, Mitchell worked in the office of Government, Regulatory Affairs and Public Policy for PricewaterhouseCoopers (PwC). He also held government relations and paralegal positions with Jones Walker LLP and Williams & Connolly LLP and spent time on the House Ways and Means Committee.

Mitchell received his bachelor’s and master’s degrees from George Mason University and studied at the University of Oxford.

Groom Law Group Announces New Principal 

Groom Law Group, Chartered, has hired principal Elizabeth F. Drake.

Drake was previously at another law firm where she led its Employee Benefits Practice Group.

“We are excited to have Elizabeth join us and bring her wide-ranging command of ERISA [the Employee Retirement Income Security Act] and tax issues that apply to employee benefit plans, particularly with respect to qualified retirement plans, to the firm,” says David Levine, co-chair of the firm’s plan sponsor practice. “Elizabeth will be yet another incredible resource for our clients who depend on us for our meaningful sub-specialization in these areas.”

Drake devotes a large portion of her practice to assisting Fortune 150 companies on day-to-day plan administration matters, as well as assisting clients with nondiscrimination testing matters, pension plan de-risking activities, plan mergers and plan terminations. She also represents clients with regard to IRS filings, including with respect to letter ruling requests and corrections. Her history of handling a variety of sophisticated matters on behalf of plan sponsors has earned Drake recognition as a leader in the employee benefits, executive compensation and retirement plan fields by Chambers USA and U.S. Legal 500.

Data and Research July 9, 2021

June Marks First Decline in DB Plan Funded Status in Eight Months

Consultants and asset managers say time will tell whether changes in the economy will boost corporate pensions’ funded status for the rest of the year.

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The funded status of U.S. corporate defined benefit (DB) plans declined in June, with Insight Investment measuring it at 94%.

The firm says liabilities increased by 2.3% as discount rates fell approximately 21 basis points (bps)—largely due to a decline in Treasury rates. Assets increased by 1.2% due to positive equity and fixed-income performance.

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According to Wilshire’s estimates, the aggregate funded ratio for corporate DB plans decreased 1.8 percentage points month-over-month to 92.7% as of June 30. Ned McGuire, managing director at Wilshire, noted that June marked the first decrease in DB plan funded status since October.

Both Wilshire and LGIM America calculated a decrease of 20 bps in Treasury yields for the month, which increased pension plan liabilities. LGIM America estimates that pension funding ratios decreased approximately 1.5% throughout June to 89.9%. Overall, liabilities for the average plan increased 2.8%, while plan assets with a traditional 60/40 asset allocation rose approximately 1.1%, according to LGIM America’s Pension Solutions Monitor.

The average funded ratio of corporate pension plans declined in June from 95% to 93.4%, according to Northern Trust Asset Management (NTAM). Higher liabilities due to lower discount rates have offset the positive equity returns. NTAM says global equity market returns were up approximately 1.3% during the month, and the average discount rate decreased from 2.73% to 2.49% during the month, leading to higher liabilities.

Estimates differ among firms because of differences in the sampling of companies and modeling assumptions used.

DB plans could also see differences in funded status changes depending on their portfolio strategies and open or closed status. “A typical pension plan may see little change in funded status for the month of June, given positive asset returns will largely be offset by declining discount rates. However, pension funded status performance for June will vary depending on the type of equity and fixed-income holdings. Plans with equity holdings that outperformed the liability growth over the month will have fared better. Plans that are underfunded or have few liability-matching bonds will have fared worse,” River and Mercantile says in its “US Pension Briefing – June 2021.”

The model plans October Three tracks were steady to down in June, according to its Pension Finance Update. However, Plan A dropped 1% last month, and the more conservative Plan B was flat last month. Plan A is a traditional plan (duration 12 at 5.5%) with a 60/40 asset allocation, while Plan B is a largely retired plan (duration 9 at 5.5%) with a 20/80 allocation and a greater emphasis on corporate and long-duration bonds.

Funded status news is more positive for the second quarter and the year. Barrow Hanley Global Investors estimates that corporate pension plan funded ratios increased to 97.3% as of June 30, up from 95.4% as of March 31. It says this is because strong asset returns more than offset increases in liabilities. 

Jeff Passmore, liability-driven investment (LDI) strategist at Barrow Hanley, says, “Funded status continues to improve, despite liability increases driven by lower discount rates. This quarter saw gains across all monitored asset classes with the strongest performance in equities and real estate. Many plan sponsors have crossed funded ratio thresholds that will drive incremental pension de-risking.”

According to NEPC’s Pension Monitor, U.S. corporate pension plans focused on hedging interest rate risk experienced modest gains in funded status in the second quarter. With Treasury yields falling over the quarter, plan liabilities increased, likely outpacing gains from the robust equity market for plans focused on a total-return asset policy. During the second quarter, the funded status of a total-return plan declined by 1.9 percentage points, underperforming the LDI-focused plan, which improved by 2 percentage points.

Both model plans October Three tracks remained in the black for the year, with Plan A up more than 10% and the more conservative Plan B up nearly 3%.

Jessica Hart, head of the outsourced chief investment officer (OCIO) retirement practice at NTAM, says the year-to-date increase in funded ratio her firm measured—from 87% to 93%—is significant. “As the economy continues to re-open, one of the main challenges facing the market is the successful passing of the baton to shift from government stimulus to rising private sector demand,” she says.

Michael Clark, managing director and consulting actuary with River and Mercantile, says, “Even though rates have come down over Q2, there is still a strong likelihood that we’ll see them reverse course and increase again before year-end. It will be telling when companies release Q2 quarterly earnings. If those reports prove strong, watch for rates to pop back up sooner rather than later. Strong equity performance coupled with increasing rates could provide additional funded status increases in 2021 for plan sponsors.”

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