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Pension and Benefits

InsurancePension and BenefitsRisk Management
December 13, 2023

Pension Risk Transfer Calculus: Costs, Benefits, Risks

Considering cost is crucial when evaluating the benefits of a pension risk transfer. The pension risk transfer (PRT) market stayed hot this year after setting a record in 2022 that included a $16 billion transfer by IBM. And there are signs—both qualitative and quantitative—that PRT volume will continue to grow as more companies with well-funded plans seek to remove pension liabilities from their balance sheets. “Anecdotally, treasurer-level members have indicated that doing a PRT transaction is likely,” said NeuGroup’s Scott Flieger, who leads NeuGroup for…
Justin Jones
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Pension and BenefitsRisk Management
December 8, 2022

Handoff: Tips for Playing the Pension Risk Transfer Game

The improved funded status of pensions, thanks partly to higher interest rates, make PRTs a play worth considering. The need for pension teams to foster strong partnerships with other groups, hire an experienced external advisor and, for some, find a separate, independent fiduciary to select insurance companies emerged as key takeaways from a presentation about pension risk transfer (PRT) transactions at a recent meeting of NeuGroup for Pensions and Benefits. The complexity of PRTs makes it essential that the finance team…
Justin Jones
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FXPension and Benefits
September 15, 2022

Avoiding a P&L Punch Packed by Nonqualified Deferred Comp Plans

Methods for hedging NQDC liability gains to avoid the pain of being hit by financial statement surprises. Nonqualified deferred compensation (NQDC) plans allow companies to offer executives the opportunity to defer taxes and earn market-based, notional returns on the deferred amounts while the company gets access to additional capital. That’s all good. The complication is that executives usually choose from a menu of market-based “notional” investments whose gains directly affect compensation expense and the P&L unless they are hedged. Depending…
Justin Jones
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CryptoPension and Benefits
August 25, 2022

Window Pain? Looking at the Risks of 401(k) Brokerage Windows

New DOL guidance on cryptocurrency investment options raises broader fiduciary questions for some plan sponsors. Guidance from the Department of Labor about offering cryptocurrency investment options in 401(k) plans, including through self-directed brokerage windows, sparked discussion about the pros and cons of the windows and the fiduciary duty of corporates at a recent meeting of NeuGroup for Pensions and Benefits. The DOL guidance issued March 10 warned plan fiduciaries to “exercise extreme care before they consider adding a cryptocurrency option” to a 401(k).…
Justin Jones
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Pension and Benefits
July 28, 2022

Pension Surpluses: Nice to Have Except for the Potential Tax Hit

Pension funds have recovered dramatically but the surpluses many face are a quandary. Pension plans have not been immune to financial market turmoil this year. The funded status of the 100 largest corporate defined benefit pension plans fell by $13 billion during June, according to the Milliman 100 Pension Funding Index. But stellar asset returns in the last several years—including from private equity investments—as well as rising interest rates that reduce a plan’s liabilities mean that many companies still have pension…
Justin Jones
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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…
Justin Jones
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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…
Justin Jones
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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…
Justin Jones
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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…
Justin Jones
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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…
Justin Jones
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