Capital MarketsPension and Benefits
February 17, 2022

Supreme Court Decision Sparks Fiduciary Concerns for 401(k) Plans

NeuGroup members in charge of DC plans discuss implications for ESG investment options and record-keeping.NeuGroup members who oversee corporate 401(k) plans are weighing the fiduciary implications of a recent Supreme Court ruling in favor of employees of Northwestern University who claimed their defined contribution (DC) plan charged excessive fees and offered confusing investment options. The unanimous decision said a lower court erred in ruling that because Northwestern’s plan included diverse investments, the workers could not sue over fees tied to…
Capital MarketsPension and Benefits
January 26, 2022

Bears in Winter: Well-Funded Pension Plans Warm to Hibernation

As more pension plans enjoy surpluses, they consider derisking strategies including hibernation vs. termination.Participants at a recent meeting of NeuGroup for Pensions and Benefits sponsored by Insight Investment voiced concerns about pursuing buyouts of their pension plans by insurers and leaned more toward hibernating plans, although they left room for exceptions. Hibernation occurs with so-called frozen plans that are no longer accruing future benefits and are usually well-funded or overfunded. It involves managing risk to reduce volatility by adopting a…
Investment ManagementPension and Benefits
July 15, 2021

Offering Retirement Income Solutions in DC Plans: Yes, but Not Yet

Using annuities to make 401(k) plans resemble pensions is compelling—but so far, most corporates aren’t doing it. The vast majority of members of NeuGroup for Pensions and Benefits who also oversee defined benefit (DC) plans say their companies should consider solutions that help employees receive lifetime income after they retire. But few corporates are actually implementing so-called retirement income solutions. At least not yet. That key takeaway emerged at a recent meeting sponsored by Insight Investment and BNY Mellon that featured…
InsurancePension and Benefits
June 3, 2021

Bridge the Gap or Vive la Différence: Insurers vs. Pension Plans

Can corporate pension managers learn from how insurance companies invest their pension-related assets?So-called pension risk transfers (PRTs) allow corporates to negotiate with insurance companies to take on a pension plan’s liabilities and remove interest rate and longevity risk from the company’s balance sheet. In the US, PRT transactions totaled about $25 billion in 2020, with $14 billion of that coming in Q4, the highest quarterly volume since 2012.That context formed the backdrop for a recent meeting of NeuGroup for Pensions…
Pension and BenefitsRisk Management
March 25, 2021

Spring and Derisking in the Air for Defined Benefit Pension Plans

A strong stock market and higher interest rates plus regulatory relief bring smiles to some DB plan managers.An upbeat mood befitting the beginning of spring prevailed at this week’s meeting of NeuGroup for Pensions and Benefits. With the yield on the 10-year US Treasury note rebounding to pre-Covid levels and equities trading in the vicinity of all-time highs, a summer of full funding is within sight for many plans. Below are takeaways distilled by NeuGroup executive advisor Roger Heine, who helped…
Pension and BenefitsRisk Management
January 26, 2021

Pension Endgames: Insights for Managers Mulling Moves

A session sponsored by Insight Investment probes pros, cons and timing of transferring liabilities to insurers.A key consideration for corporates with traditional defined benefit plans is whether to transfer pension liabilities to insurance companies as funding deficits narrow or plans go into surplus. The primary benefits of risk transfer are eliminating PBGC fees, which have escalated substantially in the last few years, and removing all risk from the company’s balance sheet—both interest rate and longevity risk. Half of the members…
Capital MarketsPension and Benefits
December 17, 2020

Dial It Down: Pension Fund Managers Cope With Lower EROAs

Key takeaways from a NeuGroup for Pension and Benefits meeting sponsored by Insight Investment and BNY Mellon.Pension fund managers discussed best practices in selecting and evaluating investment managers, asset allocation and the impact of lower estimated return on assets (EROA) among other topics at a virtual meeting sponsored by Investment Insight and BNY Mellon. Here are takeaways from the gathering compiled by Roger Heine, senior executive advisor at NeuGroup. EROA expectations. Two-thirds of members are facing the reality that low interest…
Pension and BenefitsRisk Management
November 24, 2020

Pension Puzzle: Insights for Managers Putting the Pieces Together

Willis Towers Watson weighs in on WACC, the efficient frontier and pension financing alternatives.Pension fund managers evaluating alternative funding strategies should not necessarily use their companies’ weighted average cost of capital (WAAC) as a discount rate; the risks of the pension should be viewed differently than a normal project investment considered by the company. That was among the key takeaways from a recent NeuGroup Virtual Interactive Session sponsored by Willis Towers Watson, “Relative Value: Pension De-risking in a Post-Covid World.”…
Investment ManagementPension and BenefitsRisk Management
November 3, 2020

Walk Before You Run: Using Derivatives in Pension Funds

The value of educating stakeholders on why using derivatives can make sense.During a recent NeuGroup for Pension and Benefits session sponsored by Insight Investment and BNY Mellon, a pair of members shared their knowledge and experience using derivatives in managing corporate pension plans. Two highlights: “Walk before you run” emerged as a key piece of advice to members, most of whom do not make extensive use of derivatives.Educating stakeholders including finance committees, C-Suite executives and accountants on derivatives and their…
ESGPension and BenefitsTalking Shop
November 3, 2020

Talking Shop: How to Respond to a New Rule on ESG Funds in 401(k) Plans?

Context:  On Friday, Oct. 30, the Department of Labor (DOL) issued a final rule clarifying the use by fiduciaries of investments in environmental, social and governance (ESG) funds. The regulation, according to some analysts, will end up limiting the use of ESG funds by some 401(k) and pension plans. Proposed in June, the change was opposed by many asset managers and investment advisors; DOL says the final rule was changed in response to comments. Member question: “Has anyone thought about…