Administration September 7, 2011

Pension Funded Status Declines Again in August

September 7, 2011 (PLANSPONSOR.com) - The funded status of the typical U.S. corporate pension plan in August fell 5.6 percentage points to 78% as pension plans were affected by both falling assets and increasing liabilities for the second month in a row, according to monthly statistics published by BNY Mellon Asset Management.
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The typical plan is now at its lowest funding level since September 2010, the BNY Mellon Pension Summary Report for August shows. 


Assets for the typical plan fell 3.3%, reflecting declines in U.S. and global equities. Liabilities rose 3.6%, as the Aa corporate discount rate decreased 23 basis points to 4.94%, the report said. Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Lower yields on these bonds result in higher liabilities.

“Growing concerns over the government’s ability to stimulate the economy and deal with the deficit in the U.S. and the sovereign debt issues in Europe have both contributed to a tough situation for sponsors of U.S. corporate pension plans,” said Peter Austin, Executive Director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management, in a press release.  “Growing pessimism about the ability to surmount these challenges in August led investors from equities to Treasuries and other asset classes believed to be less risky. Fortunately, spreads between corporate bonds and Treasuries widened by 35 basis points, saving plan sponsors from an even worse decline.”

However, Austin noted the extreme pessimism appears to have abated somewhat during the second half of August, as equities mounted a tepid recovery. He said, “It remains to be seen whether concerns about the global economic malaise and the effectiveness of government policy will diminish sufficiently to allow the funded status of U.S. corporate pension plans to recover. Given the prospect of lower interest rates, recovery likely will need to come from asset returns.”
Products September 7, 2011

SPARK Releases Final Data Standards for Fee Disclosures

September 7, 2011 (PLANSPONSOR.com) - The SPARK Institute has released the final version of its data layouts for sharing investment specific information for non-registered investment products that retirement plan administrators must disclose to participants under the Department of Labor’s participant disclosure regulations.
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Larry Goldbrum, General Counsel, noted a draft version was released in July for public comment (see SPARK Creates Data Standards for Participant Fee Disclosure) and a number of meaningful changes have been made as a result of comments received.  

The data layouts are designed for use by non-registered investment product providers (e.g., bank collective investment funds, non-registered “fund of funds,” separately managed accounts and annuities) because no standards or mechanism currently exist for these investment providers to transmit the required information to retirement plan recordkeepers, investment fund aggregators, and other parties who may assist plan administrators with disclosure of the information to plan participants, according to a news release.  

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“A significant amount of information must be shared by investment providers on potentially thousands of non-registered investments in order for plan administrators to be able to comply with the participant disclosure rules. Sharing the required information electronically through recordkeepers and data aggregators using the Data Layouts will be particularly helpful to plan administrators because it will be the most reliable and cost efficient means of doing so,” Goldbrum said. “We are releasing a final version now so that potential users can begin preparing and programming to use it well in advance of the participant disclosure rules compliance date of April 1, 2012.”    

The data layouts document, “Data Layouts for Non-Registered Investment Product Disclosures to Retirement Plan Participants,” is posted at http://www.sparkinstitute.org/comments-and-materials.php.

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