Data and Research January 25, 2019

Survey Suggests Pension Risk Transfer Activity Will Increase in 2019

Sixty-seven percent of defined benefit (DB) plan sponsors polled say they will conduct an annuity buyout to de-risk, and the majority of them have already taken actions to prepare.

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While 2018 was another robust year for pension risk transfer (PRT), plan sponsors plan to increase their PRT efforts in 2019, a new poll of defined benefit (DB) plan sponsors by MetLife found.

According to the 2019 Pension Risk Transfer Poll, among DB plan sponsors with de-risking goals, 76% intend to completely divest all of their company’s liabilities at some point in the future.

“The poll findings indicate a trend in increased risk transfer activity as we anticipate plan sponsors will want to proactively deal with the cost and volatility of their plans,” says Wayne Daniel, senior vice president and head of U.S. pensions at MetLife. “As a result, many will begin to look more closely at the $3 trillion of DB plan liabilities that have not yet been de-risked and begin to evaluate how they can address this.”

Among the 67% of DB sponsors considering a risk transfer in the next two years, 77% have evaluated the financial impact of such a transfer, 74% have held discussions with key stakeholders, 65% reviewed and cleaned up their data, 59% have explored the solutions in the marketplace and/or quantified the cost of a pension risk transfer.

The majority, 79%, say they are more likely to consider an annuity buyout now that they have witnessed several large corporations taking this action. Sixty-seven percent say they will conduct an annuity buyout to de-risk, up from 57% in 2017 and 46% since 2015.

Fifty-four percent intend to tranche transactions by participant population. Retirees are identified as the most common population for which sponsors are considering purchasing annuities (54%), followed by terminated-vested participants (43%). Only one in three (30%) say they would secure a buyout for all participants.

Strategic Insight, parent company of PLANSPONSOR, conducted the survey for MetLife along with MMR Research Associates, in August and September. The full survey results may be downloaded from here.

Compliance January 25, 2019

Failure to Remit Contributions Cost Retirement Plan Fiduciaries Over $500,000

In addition, a federal district court has ordered the trustee of the plans not to serve in a fiduciary capacity to any Employee Retirement Income Security Act (ERISA) employee benefit plan.

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The U.S. District Court for the Southern District of Florida entered a consent judgment and order between the Department of Labor (DOL) and Kevin F. Kirkeide, a former chief financial officer for IOTC Financial Services LLC and Global Oil Financial Services LLC permanently enjoining him from violating the provisions of Title I of the Employee Retirement Income Security Act (ERISA) and from acting as a fiduciary, trustee, agent or representative in any capacity to any employee benefit plan as defined by ERISA.

The DOL’s Employee Benefits Security Administration (EBSA) determined that from January 2011 through December 2014, Kirkeide—serving as a trustee and fiduciary to the IOTC Financial Services LLC 401(k) Profit Sharing Plan and the Global Oil Financial Services LLC 401(k) Profit Sharing Plan—worked with IOTC and Global Oil owner Harry Sargeant to withhold tens of thousands of dollars from employees’ paychecks, but did not forward these employee contributions to the plans, or did not forward them in a timely manner. Kirkeide and Sargeant also failed to collect and remit required employer contributions to the plans.

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The complaint also alleged both individuals failed to administer the plans, leaving participants unable to gain information about their funds or gain access to their plan accounts.

Sargeant has agreed not to violate Title I of ERISA, and not to serve as a fiduciary to any employee benefit plan as defined by ERISA in the future. In addition, Kirkeide and Sargeant have paid $538,248 in restitution to the plans’ affected participants, which includes delinquent and unremitted employee and employer contributions from January 2011 through December 2014 and associated lost earnings. Both individuals agreed to terminate the plans using AMI Benefit Administrators Inc. as a successor fiduciary.

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