Administration November 18, 2011

Pension Risk Transfer Index Ticks Down in October

November 18, 2011 (PLANSPONSOR.com) - The Dietrich Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, declined in October 1.78 points from its prior value.  
Reported by

The index fell to 86.45 as of November 1, 2011, from 88.23.  The company indicated the change was driven by declining annuity interest rates and spreads, despite gains in pension funding levels. The indexes’ current annuity discount rate proxy of 3.36% represents a new low, despite still wide annuity spread levels which offer significant value relative to spot rate treasury and corporate bond yields.   

While conditions remain generally suboptimal, strategic annuity purchases for targeted groups of liabilities may be attractive for certain frozen pension sponsors who have shortened their investment horizon and/or reduced asset return assumptions, Dietrich said.   

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The Dietrich Pension Risk Transfer Index can be found at https://www.dietrichassociates.com.
Benefits November 18, 2011

Ky. Retirement Systems Call on State for Higher Contributions

November 18, 2011 (PLANSPONSOR.com) - The Kentucky Retirement Systems board is calling for higher state contributions in employee pension programs next year.
Reported by

The Louisville Courier-Journal reports that an independent actuary report to KRS trustees showed unfunded pension and insurance liabilities for the state have ballooned to more than $12 billion this fiscal year and that drastic increases in the state’s contribution rates are needed to fully fund retirement obligations in fiscal year 2012-13, which begins July 1.  

The actuary recommended that state contributions increase from 19.82% payroll this year to 44.55% next year for employees in non-hazardous positions — the state’s largest beneficiary pool, which fell from being 30% funded in 2010 to 27% funded this year. Other recommendations include raising the contribution for employees on hazardous duty from 28.98% to 35.89% and increasing the amount for state police from 52.13% to 103.41%. 

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According to the news report, board trustees voted unanimously to forward the recommendations on to the legislature, but legislators are expected to fund only a portion of those recommendations based on a 2008 reform known as House Bill 1 that seeks to ease the pension shortfall with gradual increases over the next 14 years.  

Under that schedule, the state would only pay 53% of the recommendations in 2012, and by 2025, agencies must begin to pay the recommended contribution amount in full.

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