Benefits September 28, 2012

Public Pensions See Decreased Earnings in Q2

September 28, 2012 (PLANSPONSOR.com) – For the 100 largest public-employee retirement systems in the country, total holdings and investments decreased to $2.7 trillion in Q2 2012, according to U.S. Census Bureau data.
Reported by

This is a drop of 1.7% from $2.8 trillion last quarter and a year-to-year decrease of 2.1% from $2.8 trillion Q2 2011. Losses of investments totaled $14.2 billion.

Corporate stocks quarter-to-quarter decreased 3.1%, while corporate bonds fell 1.1%. International securities also saw a drop in the second quarter (7.9%). However, federal government securities increased 8.8%, reaching the highest level in over 10 years, since the first quarter of 2001.

Get more!  Sign up for PLANSPONSOR newsletters.

Employee contributions also increased (10.7%) from 9.3 billion to 10.3 billion in the second quarter of 2012. There was a year-to-year decrease of 5.7% from $10.9 billion in the second quarter of 2011. Government contributions comprised 67.5% and employee contributions comprised 32.5% of total contributions.

Asset Allocation 

Corporate stocks comprised more than one-third of the total cash and securities holdings of major public pension systems for the current quarter. Corporate bonds comprised more than one-eighth (13.5%), while international securities comprised nearly one-fifth (18.7%). Federal government securities comprised less than one-tenth (9%) for this quarter.

For more information, visit http://www2.census.gov/govs/qpr/2012/g12_qspp2.pdf.

Products September 28, 2012

Russell White Paper Explains Pension Risk Transfer

September 28, 2012 (PLANSPONSOR.com) – A white paper from Russell Investments describes pension risk transfer options and considerations for plan sponsors.
Reported by

According to the report, unlike liability-driven investment strategies, which assist in managing pension plan risk, transfer options can actually trim down the plan’s financial footprint on the corporation by shifting certain risks to plan participants or insurance companies. Risk transfer options vary, from the extreme option of full plan termination, to that of taking incremental steps of targeted lump sum options and annuity purchases. If plan termination is the ultimate goal, these smaller steps might simplify the termination process.  

The paper also notes that transferring risk can be expensive. “This is particularly true in the present economic environment of historically low interest rates and recent asset losses. In addition, a low funded status may prevent the plan from carrying out any of these solutions,” the authors wrote.  

Get more!  Sign up for PLANSPONSOR newsletters.

The paper can be downloaded from http://www.russell.com/us/institutional-investors/research/risk-transfer-options-for-db-plan-sponsors.page.

«