Opinions January 13, 2014

A Reason to Fund, A Reason to Run: Increased Expenses for Private Pensions

January 13, 2014 (PLANPSONSOR.com) – ‘Twas the night after Christmas and President Obama delivered one last holiday gift to private defined benefit plans when he signed the Bipartisan Budget Act of 2013.
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The legislation will increase the fixed rate that all covered plans are required to contribute, as well as the variable rate for those plans whose funding level is below 100% on a Pension Benefit Guaranty Corporation basis.  The following chart outlines the premiums going forward:

Geoff Dietrich byline chart

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Dealing another significant blow to plans that spent most of 2013 on the rebound; sponsors would be remiss not to consider funding their deficits and liability exit strategies to reduce the number of plan participants.  

Following the lead of 2012’s Moving Ahead for Progress in the 21st Century Act (MAP-21), this appears to be another attempt to fund the ailing Pension Benefit Guaranty Corporation.  In reality, skeptics see it for what it is—an offset to Washington’s spending increases at the expense of the private pension marketplace.  The increase is expected to raise $8 billion in additional premiums, but even the PBGC feels the action missed the mark.   

2013 was a good year for private pensions and their sponsors.  Most plans saw double digit funding level increases thanks to strong equity markets and rising interest rates.  Accordingly, many plan sponsors turned to pension risk transfer (via lump sum offerings and annuitization) as a means for derisking and downsizing liabilities.  With the new legislation projected to add 3% to 5% to a plan’s ongoing liability; expect to see more plans offset the increase by reducing their level of underfunding and their participant count.    

Plan sponsors looking to avoid the increases are advised to weigh the cost of funding options (cash reserves, borrowing, and debt issuance) versus their current operating expenses plus the PBGC’s current variable and fixed premium levels—taking into account future increases. Sponsors should also consider the cost-savings generated by reducing the number of participants in the plan (reduced PBGC premiums, audit fees and administration) not to mention the risk reduction benefits of these measures.  

 

Geoff Dietrich, vice president and pension risk transfer specialist at Dietrich Associates  

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

© 2014 Dietrich & Associates, Inc.
Products January 13, 2014

ING U.S. Will Become Voya Financial

January 13, 2014 (PLANSPONSOR.com) – ING U.S. Inc. will continue its rebranding process during 2014.
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Stakeholders of ING U.S. will begin to see the new Voya Financial name in use during the second quarter, according to an announcement from the company. The various ING U.S. businesses and legal entities plan to complete their transition to Voya throughout the year as per the following schedule:

  • April 7: ING U.S., Inc., ING U.S.’s publicly listed holding company, will change its name to Voya Financial, Inc.;
  • May 1: ING U.S. Investment Management will rebrand to Voya Investment Management and the employee benefits business will begin using the Voya Financial brand; and
  • September 1: All other ING U.S. businesses will begin using the Voya Financial brand and all remaining ING U.S. legal entities that currently have names incorporating the ING brand will change their names to reflect the Voya brand.

Until rebranding begins in April, ING U.S. will operate using its current name and logo. As the rebranding process advances between April and September, both the ING U.S. and Voya Financial names will be in use.

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“The 7,000 ING U.S. employees who live and breathe our values each day will soon embrace their new roles as ambassadors of Voya,” says Rodney O. Martin Jr., the New York-based chairman and CEO of ING U.S. “Even though our name and logo will be different, our commitment to helping customers advance their retirement readiness remains the same.”

‘Voya’ is an abstract name coined from the word ‘voyage,’ according to Ann Glover, chief marketing officer of ING U.S. “The name also reminds us that a secure financial future is more than simply reaching a destination. It’s about a journey to financial empowerment and taking control along the way in order to create positive experiences,” she says.

ING’s transition to Voya Financial has been an ongoing process (see “ING US Plans to Rebrand”).

More information, including the new Voya logo, can be found here.

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