Administration September 6, 2011

Pension Funding Levels Take a Dive in August

September 6, 2011 (PLANSPONSOR.com) - The aggregate deficit in pension plans sponsored by S&P 1500 companies increased by $73 billion during August, from a deficit of approximately $305 billion as of July 31, 2011, to $378 billion as of August 31, according to new figures from Mercer.
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This deficit corresponds to an aggregate funded ratio of 79% as of August 31, compared to a funded ratio of 83% at July 31, 2011, and 81% at December 31, 2010.   

Mercer said the decline in funded status was driven by a 5.4% drop in equities, and a fall in yields on high quality corporate bonds during the month. Discount rates for the typical U.S. pension plan decreased approximately 7-9 basis points during the month. Mercer’s analysis indicates the S&P 1500 funded status peaked at 88% at the end of April, and has since seen a 9% decline.  

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Despite what seems to be unprecedented market volatility, Mercer’s analysis indicates that funded status swings like this are not as unlikely as one might think, and plan sponsors should be prepared for continued volatility going forward.  “For the typical pension plan invested 60% in equities and 40% in aggregate fixed income, the monthly volatility of funded status is between 3% and 4%. The decline in August shouldn’t be seen as an outlier and there is the potential for even more volatility prior to the end of the year,” said Kevin Armant, a principal in Mercer’s Financial Strategy Group, in a news release.  

“After the market downturn in 2008, Congress passed a version of funding relief that helped plan sponsors reduce their required contributions to plans in 2009 and 2010.” said Jonathan Barry, a Partner with Mercer’s Retirement Risk and Finance Group. “For the most part, those techniques that were used to lower contributions are no longer available, and plan sponsors will likely face significant funding increases in 2012 and beyond, especially if the conditions from August continue through year-end.”
Deals and People September 6, 2011

Russell Investments Creates New Position – Director, Retirement Income

September 6, 2011 (PLANSPONSOR.com) – Russell Investments has appointed Jeff Eng to the newly created position of Director, Retirement Income, for the firm’s Americas Institutional business. 

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Based in New York, Eng will oversee solutions for institutional DC plan sponsors, who are increasingly looking to provide in-plan options for participants who are currently at or in retirement. Eng reports to Dick Davies, Managing Director, Defined Contribution, Americas Institutional. 

In conjunction with Russell’s team of DC consultants and investment management experts, Eng will work with DC plan sponsors to help them incorporate distribution strategies into target date fund solutions and to manage operational and compliance-related implementation challenges. This includes working with institutional clients on custom target date fund solutions. He will be an active contributor to Russell’s retirement income-focused research—developed for the firm’s institutional and adviser clients—on the efficacy of various annuitization and managed distribution approaches.

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According to a press release, Eng brings to Russell an in-depth understanding of annuity product design; expert knowledge of insurer investment preferences and risk management practices; and a strong background in navigating the operational issues and legal/regulatory requirements for in-plan guarantees. Most recently, Eng worked at AllianceBernstein, where he served as Vice President and Product Director of Defined Contribution Investments. Prior to that role, he was a Principal Consultant at Context Integration and a Project Manager and Business Analyst supporting J.P. Morgan’s credit derivatives trading desk.

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