Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Pension - Social Security
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions



Reply
 
Thread Tools Search this Thread Display Modes
  #651  
Old 02-23-2018, 06:37 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

UNITED STATES
AIRLINES

http://time.com/5167301/airlines-pilots-pensions/

Quote:
Airlines Are Making Tons of Money. Now Pilots Want Their Pensions Back

Spoiler:
Airline pilots, still resentful over pensions yanked away in a wave of industry bankruptcies, see growing company profits as a chance to reclaim some of those lost benefits.

Unions at American Airlines Group Inc. and Delta Air Lines Inc. are studying ways to reconstitute or replace retirement plans that were scrapped or frozen during the carriers’ past financial struggles.

The efforts suggest that pilots are ready to play hardball over the issue in the next round of labor talks, starting early next year at American. The three biggest U.S. carriers have reported combined adjusted profits of about $47 billion over the past five years. But reviving old retirement plans would be a big new expense for the companies just as other costs, such as fuel, are rising.

“This company is flush with money,” said Dan Carey, president of the Allied Pilots Association, which represents aviators at American. At the same time, “we have a high demographic of middle-age pilots and we’re approaching retirement age with insufficient pension security. This is an immediate problem.”

Discussions are in early stages, and any changes would require buy-in both by union members and the companies. Most airlines now have defined-contribution retirement plans like a 401(k). Those are less expensive and less risky for companies than defined-benefit pension plans that guarantee certain payouts but can become underfunded if investments don’t keep up with obligations.

Brainstorming Talks
Delta pilots have met with counterparts at FedEx Corp., where union leaders are evaluating possible remedies to a shortfall in retirement benefits for the company’s senior aviators. American is seeking its own meeting. A recent memo issued by the Delta union’s Atlanta chapter talks about considering a “defined benefit-like” plan.

Retirement benefits are especially critical for pilots because the law requires them to retire at 65.

“We don’t have an option to say I’m not prepared financially now, I’ll keep working until I get there,” said Chuck Dyer, chairman of the FedEx chapter of the Air Line Pilots Association.

FedEx’s pilot union is among those exploring variable pensions, which allow employers to raise or lower benefits based on how well a fund’s investments perform. Companies share risk with employees with the variable plans, which provide more flexibility in economic downturns.

Variable Solution
FedEx never filed for bankruptcy, but its current defined-benefit plan has limitations that have capped benefits well below pilots’ final earnings level, Dyer said. The union is exploring whether they should seek to replace it with a variable plan, while also keeping an existing retirement savings plan to help balance risk.


Pension plans frozen during airline bankruptcies that rocked the industry over the last decade and a half are a major hurdle to change. When a plan is frozen, it generally closes to new participants and benefits won’t grow. Some of these plans are overseen by the Pension Benefit Guaranty Corp., a quasi-governmental agency that insures U.S. defined-benefit pensions.

Fresh Start
Because American was created by the merger of several companies, some pilots there had pensions terminated or frozen, while others never even had a plan.

The company currently has a 401(k) program, and union chief Carey wants to find a way to reclaim retirement income pilots lost as a result of American’s 2011 bankruptcy filing. That’s in addition to seeking access to frozen pension funds now that the world’s largest carrier is churning out profits.


“They are making half a million dollars an hour, every hour of the day, every day of the year, every month, all year long,” Carey said.

A Standard & Poor’s index of the five biggest U.S. airlines was little changed at 2:38 p.m. Tuesday, leaving it down 6.1 percent this year.

Frozen pension plans can be re-activated if they are in compliance with funding and other requirements, and if both the airline and union agree, according to Josh Gotbaum, a former chief executive officer of the pension oversight agency. A fund has been “unfrozen” only once, during steelmaker LTV Corp.’s bankruptcy in the late 1980s, he said.

Retirement benefits at Fort Worth, Texas-based American will be high on the union’s list of priorities during 2019 labor negotiations, Carey said. A spokesman for American said the company “always welcomes discussions with our pilots and looks forward to hearing from APA about their priorities” when talks begin.


Hiring Consultants
Delta’s union leaders have taken “initial steps” to examine options and are looking to hire outside consultants who specialize in retirement plans, according to a memo sent to pilots. The carrier continues to pay into a frozen defined-benefit plan for pilots at Northwest Airlines, which it acquired. Delta pilots’ pension was terminated in a 2005 bankruptcy.

“Several hurdles remain in constructing retirement plan options,” Bill Bartels, chairman of the Air Line Pilots Association unit at Delta, said in a separate note to members. “But just saying ‘We can’t make changes that the group wants’ isn’t an acceptable answer.” A union spokeswoman declined to comment on the memos.

Delta, the second-biggest U.S. carrier, said it already has industry-leading retirement benefits, but wouldn’t comment specifically on pensions.


Retirement benefits at United Continental Holdings Inc., which is already in contract talks, have been and remain an issue for labor discussions, said Greg Everhard, a spokesman for the pilots union. But he downplayed any new emphasis.

United pilots’ pension was terminated in its 2002 bankruptcy and taken over by the pension oversight agency. Continental Airlines’ plan was frozen before it merged with United, which continues to administer that fund, the union said.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #652  
Old 02-24-2018, 01:17 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

PFIZER

http://www.pionline.com/article/2018...-pension-plans

Quote:
Pfizer makes $500 million contribution to U.S. pension plans

Spoiler:
Pfizer Inc., New York, made a $500 million contribution to its U.S. pension plans earlier this month, and it expects to make a $226 million contribution to its international pension plans this year, the company reported in its 10-K filing Thursday.

The company also will make a $160 million contribution to non-qualified U.S. plans this year.

RELATED COVERAGE
United Continental charts $420 million contribution for pension plansAmerican Electric Power to wire $101 million to pension plansDuke Energy powers up $148 million contribution to pension plans
Last year, Pfizer contributed $1.1 billion to its qualified U.S. plans, $160 million to its international plans and $143 million to its non-qualified U.S. plans.

COMPARE EXPECTED U.S. COMPANY PENSION CONTRIBUTIONS WITH P&I'S CORPORATE PENSION CONTRIBUTION TRACKER
U.S. pension plans had $14.28 billion in assets as of Dec. 31 and liabilities of $16.7 billion, for a funding ratio of 85.5%. At year-end 2016, the plans had assets of $12.56 billion and liabilities of $15.55 billion, for a funding ratio of 80.8%.

International pension plans had $8.86 billion in assets as of year-end 2017 and liabilities of $10.61 billion, for a funding ratio of 83.5%, up from 79.3% the year before.

For U.S. pension plans, fixed-income securities accounted for 39.6% of total plan assets, while equity securities represented 37.5%. "Other" investments made up 18.3% of total plan assets, and cash and cash equivalents accounted for 4.6%. At the end of 2016, the asset allocation for U.S. plans was 40.1% equity, 34.9% fixed income, 19.7% other, and 5.3% cash and cash equivalents.

For international pension plans, fixed income accounted for 39.7% of total plan assets as of Dec. 31, equity represented 34.4%, other investments 21.9%, and cash and cash equivalents 4.3%. A year earlier, the asset allocation was 40.2% fixed income, 34.7% equity, 19.4% other, and 5.7% cash and cash equivalents.

The discount rate for U.S. plans was 3.8% last year vs. 4.3% in 2016. The discount rate for international plans was 2.3% last year vs. 2.4% in 2016.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #653  
Old 02-24-2018, 01:18 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

GENERAL ELECTRIC

https://www.bloomberg.com/news/artic...ension-deficit

Quote:
GE Cuts $2.4 Billion From Biggest Pension Deficit on S&P 500

Spoiler:
Shortfall of $28.7 billion is down 8 percent from 2016
Company closed 2017 with about $100 billion in obligations
General Electric Co. trimmed its pension deficit by $2.4 billion as the manufacturer tackles the worst shortfall in corporate America.


The $28.7 billion deficit is down about 8 percent from the prior year, according to a regulatory filing late Friday. The company closed 2017 with $100.3 billion in obligations across its pension plans and $71.6 billion in assets.

Pension funding has become a central issue for GE stakeholders concerned about how the beleaguered company will meet its obligations while dealing with severe cash-flow and earnings challenges. The sizable tab complicates Chief Executive Officer John Flannery’s efforts to turn GE around through changes to the structure of the Boston-based conglomerate.

While it’s not uncommon to have an underfunded pension, GE’s deficit at the end of 2016 was the biggest among S&P 500 companies and 50 percent greater than any other corporation in the U.S. GE’s rank for 2017 won’t be known until all companies release annual reports, but among those that have filed, the $28.7 billion shortfall still ranks as the largest.

Lagging Pensions
GE's pension remains the most underfunded in the S&P 500


Source: Bloomberg

Note: Biggest reported deficits of S&P 500 companies that have reported 2017 data as of Feb. 23.

The decrease in the deficit was due primarily to “investment performance, employer contributions and changes in mortality and salary assumptions,” GE said in the filing. That helped offset an increase in liabilities, which are affected by long-term interest rates. GE also said it’s reducing expectations for long-term investment returns to 6.75 percent from 7.5 percent.

GE was little changed after regular trading Friday. The shares have fallen 17 percent this year, the worst in the Dow Jones Industrial Average.


The pension details came in GE’s annual report, in which the company sought to enhance its disclosures as part of Flannery’s push for greater transparency. GE discussed the ongoing investigation of its former subsidiary WMC, saying the Department of Justice is “likely to assert” that the subprime-mortgage lender violated financial laws in connection with its activities in 2006 and 2007. GE said it would seek a settlement.

The company also detailed several recently filed shareholder lawsuits that allege that current and former top executives made false and misleading statements about GE’s financial health. GE said it believes “we have defenses to the claims and will respond accordingly.”

Pension Coverage
GE’s pension plans cover about 618,000 current and former employees. The primary plan, one of the biggest in the U.S., includes about 439,000 of those people.

The pension was well funded for many years, but the deficit grew over the past decade because of low interest rates and volatile financial markets. The pension trust also holds more than 30 million GE shares, which have declined by more than 50 percent in the last year.

Following a management overhaul in mid-2017, GE took steps to shore up the pension, including a move announced in November to borrow $6 billion to pre-fund the plan through 2020.

GE also benefits from rising interest rates: Every quarter-point increase cuts $2.4 billion from the amount the company will owe its pension plan participants, GE has said.

— With assistance by Katherine Chiglinsky


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #654  
Old 02-24-2018, 01:18 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

UNITED KINGDOM
UNIVERSITIES

https://www.timeshighereducation.com...ension-reforms

Quote:
Vice-chancellors ‘prepared to rethink’ USS pension reforms
Universities UK concedes that it might ‘have not considered every possible angle’, as strike action continues


Spoiler:
Universities UK has said that it is prepared to rethink its proposed reforms of the Universities Superannuation Scheme if the pension fund can be put on a sustainable footing.

Strike action over changes to the scheme, which unions say could cost the typical lecturer 10,000 a year in retirement, entered a second day on 23 February and was due to resume on 26 February, but pressure to reach a settlement is growing.

Strike placards
‘Very strong’ turnout on day one of UK university pensions strike
READ MORE
As staff at 65 universities walked out, more vice-chancellors called for fresh negotiations, with Chris Day, vice-chancellor of Newcastle University, saying that he “absolutely support[ed]” the strike.

In an open letter, Universities UK, which represents vice-chancellors, indicates that it is willing to shift its position, stating that “we have been and continue to ask for further talks with [the University and College Union] on the future of the scheme”.

A two-month consultation would begin at the end of March, say Janet Beer, the vice-chancellor of the University of Liverpool and the UUK president, and Alistair Jarvis, UUK’s chief executive.

“We would like to appeal to you to take the opportunity to put forward any proposals you feel may not have been sufficiently considered,” the letter says. “We have sought independent expert advice at each stage of this process, but we are open to the possibility that we have not considered every possible angle.”

Union members’ key concern is the proposal to end the defined-benefit element of the USS, which guarantees members a certain level of pension income in retirement. Under UUK’s proposals for a fully “defined contribution” model, returns for members would be dependent on the performance of the scheme on the stock market.

UUK says that it is “open to changing the scheme again to reintroduce defined benefits if economic and funding conditions improve”.

Other options, the letter says, could include “exploring alternative models for risk sharing”, for example, a “collective defined contribution” model, which is not currently possible under UK legislation but may be in future. UUK says that it is also willing to discuss exploring “how deficit recovery contributions can be kept as low as possible”, and options to reduce the risk of USS investments.

The letter warns that the USS faces a 6.1 billion deficit and that universities cannot afford to increase their contributions to the scheme any further.

In response, the UCU accused UUK of “spin and subterfuge”, adding that the association had given “no indication” over whether it was prepared to negotiate with members on their terms.

“Universities UK need to stop sending out mixed messages on whether it wants to talk or not,” said Sally Hunt, UCU’s general secretary. “If they want to talk to us without preconditions, as the universities minister has suggested, then let’s do it today.

“The sector is suffering from a serious image problem at the moment and staff and students deserve much better from their leaders than spin and subterfuge.”

Three days of strike action were due to get under way on 26 February, with walkouts of four and five days in subsequent weeks.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #655  
Old 02-26-2018, 06:41 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

UNITED KINGDOM
UNIVERSITIES

https://www.institutionalinvestor.co...pension-strike

Quote:
Talks Resume Over University Pension Strike
A week after lecturers at British universities walked out in a row over pensions, both sides are coming back to the table for discussion.
Spoiler:
The trade union representing U.K. lecturers and academics, who are striking over planned changes to their pension, has agreed to meet with employers again on Tuesday.

On Friday, the University and College Union said it would resume talks with Universities U.K., the body of universities sponsoring the Universities Superannuation Scheme (USS), over plans to switch the defined benefit plan to a defined contribution model.

Academics had begun a month-long series of walkouts last week over plans to change the structure of the 60 billion ($84 billion) pension scheme due to concerns over the size of its deficit.

Universities U.K. estimated the deficit at 6.1 billion in a statement on Friday, whereas USS estimated the deficit at between 12.6 billion and 17.5 billion in its 2017 annual report. The UCU trade union disputes all of these estimates.

[II Deep Dive: Universities to Suffer Strikes Over Pension Concerns]

SPONSORED

The Great Credit Market Makeover
In a statement released on Friday, UCU general secretary Sally Hunt said that while the union was happy to meet with the employer body once more, she asked that the UUK consider revisiting the decision to change the structure of the pension scheme.

“Because this is so serious for students and for staff we will of course attend,” she said. “I am, however, very concerned that UUK has explicitly ruled out discussing the imposed changes that have caused the strikes.”

In a separate statement, Universities U.K. reiterated that it was “open to changing the scheme” back and reintroducing defined benefits, should economic conditions become more favorable.

“Universities UK has never refused to continue to try to find an affordable, mutually acceptable solution,” a spokesman said in the statement. “We would be willing to discuss a credible proposal that addresses the significant financial issues the scheme is facing.​ It is of paramount importance that both sides make every effort to meet – despite the ongoing industrial action – to stop any impact and disruption to students.”

The UCU general secretary said the trade union is also committed to serious negotiations with the aim at resolving the dispute, but added that the union was disappointed UUK had “ignored the wishes” of the U.K.’s universities minister, who had called for preconditions to be set prior to any further talks.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #656  
Old 02-28-2018, 05:22 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

https://www.bloombergquint.com/marke...ng-bond-market

Quote:
Quirky Tax Break That Will Soon Vanish Seen Jolting Bonds
Spoiler:
(Bloomberg) -- U.S. companies including FedEx Corp. and Motorola Solutions Inc. are seizing an opportunity to borrow money and top up their pensions, before a tax benefit shrinks.

Tax laws passed in December and a quirk in accounting rules are giving corporations an unusual incentive to take care of the massive pension obligations that have weighed on balance sheets for at least a decade. Companies that are selling bonds to fund the contributions and injecting the money into retirement plans now can save tens, or even hundreds, of millions of dollars on taxes.

“This is their last chance,” said Pierre Couture, who advises pension plans on their investment strategies at Voya Investment Management. “Companies are thinking they need to fund their plans sooner rather than later.”

If enough companies make contributions to their pensions, this year may mark a real turning point for retirement plans, which according to estimates from Willis Towers Watson Plc as of the end of 2017 have just 83 percent of the funds they’ll eventually need to meet future obligations. The impact on markets may be far-reaching. Company pensions control $1.95 trillion of assets in the U.S., and as the plans move closer to being fully funded, they usually sell stocks and buy longer-term corporate bonds and Treasuries. That shift is already showing some signs of taking place.


Motorola Solutions, a communications equipment manager, sold $500 million of notes last week to help fund its U.S. pension, which was about 69 percent funded as of Dec. 31. FedEx borrowed $1.5 billion last month to make new contributions.

Companies like AbbVie Inc., 3M Co. and Lockheed Martin Corp. have also recently said they were boosting their pension contributions without specifying a source of the money. General Electric Co. said last year it would borrow $6 billion in 2018 to fund its pension shortfall, which stood at $31 billion as of the end of 2016, the largest among S&P 500 companies.

A majority of these will probably be funded with debt, said Hans Mikkelsen, head of U.S. high grade credit strategy at Bank of America Corp.

“Most companies want to deal with this problem sooner rather than later,” Mikkelsen said. “The way you deal with it is a combination of issuance and tax savings, but first and foremost it’s going to be issuance.”

Cutting Rates
In December, lawmakers slashed corporate rates to 21 percent from 35 percent effective this year, reducing the value of any deductions that companies take. But under a decades-old law, corporations that make voluntary pension contributions now can deduct them on their 2017 tax return, any time until the due date of the return, including extensions. For most companies, that’s sometime before mid-September.

If a company acts now, a $1 billion contribution would only cost $650 million after taxes, based on 2017 rates. But once the corporation has passed the due date of its 2017 return, including extensions, the $1 billion contribution would cost $790 million after taxes.

On top of that, the cost of government insurance on unfunded pension obligations has jumped in recent years-- the fees now are more than four times their level in 2013. That’s part of the reason employers increased their contributions about 19 percent to an estimated $51 billion last year, according to Willis Towers Watson’s Beth Ashmore.

“It’s starting to become more and more expensive to make the decision not to fund,” said Ashmore, who’s a senior consultant.

Other factors may also move companies’ pensions closer to being fully funded this year. The U.S. stock market has risen more than 385 percent since March 2009 after accounting for dividends, boosting investment returns for pensions that own equities. Longer-term Treasury yields have been rising this year, which can help reduce the accounting value of future obligations. And companies have been contributing more to their plans -- last year’s estimated $51 billion was up from $43 billion the year before, according to Willis Towers Watson.


Once pensions are around 80 percent funded, they tend to sell stocks and buy bonds to lock in gains and better match the duration of their assets and liabilities, a strategy known as de-risking. Much of that demand will be for longer-term corporate bonds, which pay higher yields than Treasuries, said Bank of America’s Mikkelsen. The extra yield that investors demand for 30-year corporate bonds could shrink by another 0.20 percentage point this year compared with Treasuries, he said.

There’s as much as $1 trillion of potential demand for long bonds from pensions, and plan sponsors will look to take advantage of rising rates to cut risk in their equities holdings and lock in returns with fixed income securities, said Dave Wilson, head of the institutional solutions group at Nuveen Asset Management, which advises on pension plans.

A yield closer to 4 percent with an additional percentage point in credit spread premium will draw “some real action” from pension plans, he said.

Demand from pensions may already be evident in how longer-term corporate bonds have performed this year. Risk premiums for the securities have narrowed, to an average of around 1.33 percentage point as of Friday, compared with 1.37 percentage point at the end of last year, according to Bloomberg Barclays index data. The average spread for the broader corporate bond index went in the opposite direction, widening two hundredths of a percentage point to 0.95 percentage point over that time.

“You’re now at this inflection point, which is building because of tax reform,” said Jason Shoup, a money manager at Legal & General Investment Management America, which oversees more than $150 billion for clients including pension plans.


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #657  
Old 03-05-2018, 10:12 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

https://www.plansponsor.com/db-plans...500-companies/

Quote:
DB Plans a Thing of the Past for Most Fortune 500 Companies
A mere 16% currently offer a pension plan to new hires.
Spoiler:

In a new report, “Retirement Offerings in the Fortune 500: A Retrospective,” Willis Towers Watson reveals that among these companies, only 16% offered a defined benefit (DB) plan to new hires in 2017, down from 59% in 1998.

Nonetheless, 51% of Fortune 500 companies still employ workers who are actively accruing pension benefits, and 93% of those that sponsored a pension in 1998 still manage plan obligations and assets.

Since the Great Recession of 2008, there has been an uptick in plan freezes. In 2008, 20% of companies froze their DB plan, and 19% closed it to new hires. By 2017, 42% sponsored a frozen plan, and 24% had closed the plan.

After having eliminated a DB plan for new hires, most employers contribute more to the defined contribution (DC) plan.

In 1998, only 41% of these companies offered a DC plan, but by 2017, that had risen to 84%. Ten percent amended their traditional DB plan to a hybrid design and were still offering these plans in 2017. Only 6% of Fortune 500 employers retained the same DB structure from 1998 to 2017.

Thirty-four percent of employers that offered hybrid plans to workers in 1998 were still offering them in 2017, and 51% of employers that converted their DB plans to hybrid plans after 1997 still offered them to new hires.

Willis Towers Watson also learned that certain industries, most notably insurance and utilities, are more likely to offer DB plans. In fact, nearly half of companies in these sectors still offered DB plans to newly hired employees in 2017.

Willis Towers Watson’s full report can be downloaded here.
https://www.towerswatson.com/en-US/I...-500-companies

Quote:
Retirement offerings in the Fortune 500: A retrospective
Spoiler:
The last two decades have witnessed a sweeping shift in retirement offerings from large employers, most of whom now provide only defined contribution (DC) and other account-based plans to newly hired employees. The shift away from traditional defined benefit (DB) to account balance plans gives today’s increasingly mobile workforce more choices, flexibility and transparency, and helps employers manage the ongoing costs and risks/opportunities of providing retirement benefits.

Companies have made the transition to account-based plans in a variety of ways. Some closed or froze their traditional DB plans and then moved workers into hybrid pensions, while others transitioned workers to a DC-only environment, sometimes offering a hybrid pension to some workers along the way.

This study takes a historical look at the primary retirement plans offered by current Fortune 500 companies between 1998 and 2017, thus showing how their retirement programs have evolved over the last 20 years.

Evolution of DB plan sponsorship for Fortune 500 companies, 1998 – 2017
Evolution of DB plan sponsorship for Fortune 500 companies, 1998 – 2017
Click to enlarge

Key findings:

In 2017, only 16% of Fortune 500 companies offered a DB plan (traditional or hybrid) to new hires, down from 59% among the same employers back in 1998.
51% of these companies still employ workers who are actively accruing pension benefits, and 93% of those who sponsored a DB plan in 1998 still manage plan obligations and assets.
There has been an uptick in plan freezes since the 2008 financial crisis among plans that were already closed to new hires. In 2008, 20% of companies that had offered a DB plan in 1998 had frozen their pensions and 19% had closed their primary plan to new entrants. By 2017, 42% sponsored a frozen plan and 24% had closed their primary plan.
More than half the pension sponsors in this analysis had a hybrid DB plan at some point, and 44% of them were still offering the same plan to new hires in 2017.
Certain industry sectors, as well as employers whose pensions are relatively small (as compared with their market capitalization) and/or well funded, are more likely to offer a traditional pension plan to new hires.
After eliminating a DB plan for new hires, most employers contribute more to the DC plan.

__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #658  
Old 03-05-2018, 03:22 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

UNITED KINGDOM
CARILLION

https://www.theguardian.com/business...pension-scheme

Quote:
Carillion directors dismissed plan to secure 218m for pension scheme
Board rejected proposal to break up company and sell profitable assets prior to liquidation, accountants say
Spoiler:
The board of Carillion dismissed a proposal that could have poured 218m into the government contractor’s ailing pension scheme, believing a month before the company’s collapse that they could still revive its fortunes.

Details of a plan drawn up by accountancy firm EY, but rejected by directors, emerged as MPs conducting an inquiry into Carillion’s failure released evidence they said proved “pervasive institutional failings” at the company.

They published extracts from a presentation made by EY to the board in August 2017 as part of an exercise called “Project Ray”, which they said cast doubt on directors’ claims of a sudden descent caused by several external factors.

The presentation highlighted longstanding company-wide failings including a shortage of expertise and transparency, inefficient corporate structures and a lack of “commercial acumen”.


Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
After presenting its findings, EY monitored Carillion’s cashflow on a month-by-month basis, warning in October that the company was in danger of insolvency by March 2018.

The accounting firm produced two scenarios, one of which was an unplanned insolvency that would see just 49.6m recovered from the business, including 12.6m for pensioners.

It also offered a second option that could have raised 364m by breaking up the company and selling profitable assets prior to liquidation, securing 218m for a retirement scheme now estimated to be nearly 1bn in deficit.

MPs on the work and pensions committee and business committee said the board “dismissed a break-up as not practical, instead choosing to believe they could successfully restructure [the business].”

Advertisement

A spokesperson for the company’s former executives said: “The recommendation of the company’s advisers was to start to progress a debt for equity transaction with financial stakeholders and this was supported by the board.”

Documents released by the committee detailed EY’s many concerns about Carillion’s corporate culture after completing Project Ray.

The accountants flagged up a “lack of professionalisation and expertise”, as well as the “consistent use of quantity of people to compensate for limitations in quality or skill set (particularly commercial acumen).”

There were also too many layers of management, according to EY, while short-term benefit was prioritised over sustainable performance amid a “culture of non-compliance”.


Guardian Today: the headlines, the analysis, the debate - sent direct to you
Read more
Work and pensions committee chair Frank Field said the papers “reveal a wholly deficient corporate culture, studded with low-quality management”.

“They reveal also pervasive institutional failings of the kind that don’t appear overnight; long-term failings that management must have been well aware of,” he added.

Minutes of an August 2017 board meeting show that Carillion directors admitted the possibility that the longevity of some of its staff had led to “wilful blindness” about the firm’s shortcomings.

Business committee chair Rachel Reeves said directors “either took their eye off the ball or they failed to see the warning signs that investors, Carillion staff and [...] EY flagged to them.

“Directors didn’t just drop the ball once, they made a habit of it, giving every indication that it was the long-term failings in the management and corporate governance at Carillion which finally sank the company.”

Separately, former Carillion chair Philip Green has stepped down from his role as chair of Sentebale, Prince Harry’s charity dedicated to supporting children in southern Africa affected by HIV.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #659  
Old 03-06-2018, 12:28 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

DB v. DC

https://www.planadviser.com/dc-plans...nce-advantage/

Quote:
DC Plans Slowly Close Pension Performance Advantage
According to data from CEM Benchmarking, defined benefit pensions have outperformed defined contribution plans by less than half a percentage point over the last decade—described as a “huge improvement” for DC plan sponsors.
Spoiler:
Data collected by CEM Benchmarking from close to 2,000 defined benefit (DB) pension funds and over 1,600 defined contribution (DC) plans over the last 10 years suggests DB plans outperformed DC plans after fees by only 0.46%.

As researchers note, this is “a massive improvement” from the previous comparison reviewing the 1998 to 2005 time period, where the net return difference was 1.8%. According to the independent provider of cost and performance analysis for pension funds, DC plans, sovereign wealth funds and other large institutional investors, “this is simply great news for DC plan participants.”

“Our first study was all doom and gloom,” observes Sandy Halim, lead author of the study at CEM Benchmarking. “The warning message was, in 25 years, DC account value would be 34% smaller than DB plans if they both started with the same dollar amount. Thankfully, our updated research shows that’s no longer the case since plan sponsors made substantial improvements to their plans during the past 11 years. This translates to a much smaller 12% difference in account balance over 25 years.”

The first source for the improved DC plan performance, Halim says, is a significantly improved asset mix. In 1998, company stock, stable value and cash represented 44% of all of DC plans’ holdings, whereas by 2016, these holdings had decreased to 25%.

“The assets have mainly moved to target-date funds and balanced funds,” Halim confirms. “In 1998, 15% of assets were in target-date funds and balanced funds, compared to 26% by 2016. Target-date funds, in particular, have exploded in popularity. In 2007, 46% of plans in our DC database offered a target-date fund, compared to 87% in 2016.”

And the asset mix is not the only plan design element to show massive improvements, CEM researchers find. There is clear evidence of much greater use of automatic enrollment, and greater use of a sensible default options as qualified default investment alternatives. Beyond this, Halim says, there were “many lessons learned from behavioral economics” in the early 2000’s that are now paying real dividends. Some of the most impressive gains include the following:

Automatic enrollment in primary retirement plan now in place for 80% of all sponsors surveyed, up from 62% in 2007. Additionally, 70% of supplemental plans featured auto-enrollment in 2016, up from 51% in 2007.
Fully 95% of plans now have a default option, up from 79% in 2007.
As of 2016, 84% of sponsors have a target-date fund as their default option, up from 30% in 2007.
The biggest asset mix improvement has been realized within DC plans that no longer used a GIC/stable value/cash investment option as their default option. This represents just 1% of plans in 2016, down from 21% in 2007.
“Many plan sponsors took these lessons to heart and made plan design changes that resulted in higher participation and a better DC asset mix,” Halim adds.

Since the last study, average DB fund costs have increased from 0.40% to 0.60%, whereas DC plan costs have remained constant at 0.39%. This cost saving of 0.21% has also contributed to the lower net return difference, Halim says.

“DB plan costs have increased because DB plans are embracing more, higher cost, alternative assets (23% in 2016 for combined policy weight in real assets, private equity and hedge funds up from 14% in 2007),” the research shows. “DC plan costs have remained the same despite their improved asset mix, as they have also embraced low cost indexed options (58% of the indexable assets were in passive options in 2016, up from 40% in 1998).”

The full white paper is available for download here.


http://www.cembenchmarking.com/Files...a_long_way.pdf
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #660  
Old 03-08-2018, 10:16 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 84,208
Blog Entries: 6
Default

UNITED KINGDOM
UNIVERSITIES

https://www.theguardian.com/uk-news/...rsities-strike
Quote:
Oxford University blocks staff attempts to challenge pension cuts
Arcane procedures used to halt move to debate proposals that sparked universities strike


Spoiler:
The University of Oxford has blocked attempts by staff to debate pension proposals that have sparked industrial action on campuses across the UK, to cries of “Shame!” from academics.

As the strike by members of the University and College Union (UCU) entered its eighth day, Oxford’s arcane procedures were used to halts efforts to force a resolution on the proposals to downgrade staff pensions that have provoked action at more than 60 campuses.

Staff backing the strikes wanted to suspend standing orders at Oxford’s congregation – a university-wide meeting of staff – held on Tuesday afternoon, and debate the university’s response to a changes proposed to the universities superannuation scheme (USS).

Quick guide
Why are university staff striking?

Show
But their efforts were thwarted when more than 20 members objected, to a chorus of boos from the hundreds in the Sheldonian theatre who wanted to proceed.

In an email to staff, Louise Richardson, Oxford’s vice chancellor, said she endorsed the tactics that effectively killed off a wider debate at the meeting.


University staff pension dispute moves to Acas
Read more
“I fully understand the depth of feeling on this issue but I have to say that I have been disheartened these past few days by the tenor of some of the debate,” she said. “As a university we take pride in our defence of freedom of speech, in reasoned argument, and evidence based decisions.

“If we are to impart these qualities to our students, we should, at a minimum, practise them among ourselves.”

Advertisement

The academics rejected an offer from Richardson for a non-binding “town hall” discussion instead – amid signs that the employers’ unity is crumbling as vice-chancellors at Sheffield and Loughborough universities visited picket lines at their campuses.

The strikes over controversial changes to the pension scheme for librarians, technicians and researchers have spread across three weeks, with UCU and the employers group Universities UK holding a second day of talks at the industrial conciliation service Acas.

The UUK had said it was not prepared for further talks until later in the week but after a change of heart on Monday evening notified the union via Twitter.

The UCU will continue with strike action later in the year, which increases the chances of interfering with undergraduates’ final-year results and possibly delaying their graduation.

At Sheffield, its vice-chancellor, Sir Keith Burnett, met with staff on a UCU picket line, while his counterpart at Loughborough, Prof Robert Allison, did the same.

Burnett also issued a statement calling on the UUK to hold “genuine negotiations” with the UCU. “I am not the only vice-chancellor who is urging action to this end, and I will continue to press for this to happen both in public and in private,” he said.

Imperial College London has also broken with the UUK by writing directly to the Pensions Regulator, asking for time to allow an expert group to examine the state of the pension scheme.

“We appreciate this is an extraordinary request and we are prepared to carry our share of the risk in staying part of the scheme on the current terms, until the work is complete,” Alice Gast, Imperial’s president, wrote.

At City University’s Cass business school, the Liberal Democrat leader, Vince Cable, was asked by striking staff not to cross the picket line. Cable later cancelled an appearance at a conference the school was holding.

The university pension strike will only end when we’re listened to
Sally Hunt
Read more
The strike was provoked by the desire of the UUK to shift staff pensions from offering fixed benefits after retirement to defined contributions, after the Pensions Regulator said the USS was more risky than previously estimated.

The role of Oxford and Cambridge colleges has been particularly controversial, after it was revealed they made up a high proportion of institutions backing a lower risk of pensions losses.

But even within Oxbridge, support has weakened for the low-risk position that provoked the strikes. King’s College, Cambridge, said in a statement that its submission to the UUK’s survey of members “was not, and should not have been taken as, considered view of the college”.

St Catharine’s College, Cambridge, also voided its survey response, saying that it had “no institutional view”.


https://www.theguardian.com/educatio...nsions-dispute
Quote:
Oxford University backs down in pensions dispute
Oxford is latest institution to break with Universities UK stance on pension reform


Spoiler:
The dispute between universities and their staff may be closer to a resolution after the University of Oxford said it would seek to reverse its stance on pensions changes that unions say would cost retirees up to 10,000 a year.

The about-turn means Oxford joins an increasing number of universities that have broken ranks with the position taken by Universities UK (UUK), which claims the staff pension scheme needs dramatic reform in order to continue.

Cambridge, Manchester, St Andrews and Warwick universities have distanced themselves from the UUK’s stance, and Imperial College’s leadership has made a direct appeal to the pensions regulator asking for the issue to be resolved by an independent panel of experts.


University staff pension dispute moves to Acas
Read more
In an email to staff on Wednesday, Oxford’s vice-chancellor Louise Richardson said the university’s council would heed the mood of staff at a meeting – known as a congregation – on Tuesday and reconsider its position.

“In light of the depth of feeling of so many colleagues we will convene a special meeting of council today at noon and will be recommending that council reverse its response to the UUK survey in line with congregation’s resolution,” said Richardson.

“The future of our pensions is a shared interest for so many members of this university that we must try to find common ground. In the coming days we will look for ways to improve our engagement with staff so that all members of our community are able to speak and be heard on this very important issue.”

At Tuesday’s congregation, staff sought to debate a resolution on pensions downgrades that have provoked strike action at more than 60 universities.

After the debate was blocked, hundreds of staff elected to carry on with the meeting outside the Sheldonian Theatre, and organisers said the resolution to change Oxford’s position was carried by 442 votes to two in a staff ballot.

Advertisement

On Wednesday the group behind the resolution said they “warmly welcomed” Richardson’s email.

“We are overjoyed. The vice-chancellor recognised that congregation expressed the general will of the university, and we warmly welcome her recommendation to council,” said Kate Tunstall, a fellow of Worcester College who returned from a sabbatical to help organise the opposition.

Meanwhile, more than 100 senior academics at Cambridge have written to their vice-chancellor, Stephen Toope, urging him to join Imperial’s call for an independent panel of pensions experts.

The dispute centres on the future of the universities superannuation scheme (USS) after the pensions regulator issued a warning last year about the level of risk carried by the scheme, which covers staff including librarians, researchers, administrators and technicians at many British universities.

UUK, which says it represents 350 employers in the sector, said results from a survey it had conducted showed that a significant number wanted less risk, meaning the scheme should switch its investments to safer but less remunerative assets such as bonds.


Universities threaten to punish striking staff over cancelled lectures
Read more
UUK claimed the change would cause a huge deficit and backed a switch from fixed benefits at retirement to variable payouts based on market performance, a move now widespread in the private sector.

The University and College Union (UCU) has disputed the UUK projections and argues that fixed benefits can be retained if universities are prepared to make higher contributions.

Strikes have been held at more than 60 universities and colleges on eight days over a period of three weeks, and the UCU plans further walkouts if the dispute is not settled.

Last week UUK and UCU agreed to talks at the conciliation service Acas, which are scheduled to continue on Wednesday.


https://www.economist.com/blogs/butt...g-cost-old-age
Quote:
The soaring cost of old age
The real problem with pensions
The big problem with DC schemes is that contributions aren’t high enough


Spoiler:
PAYING for pensions is like one of those never-ending historical wars; a confusing series of small battles and skirmishes that can obscure the long-term trend. The latest conflict is in Britain where university lecturers are indulging in strike action over changes to their future benefits.

Let us start by making the long-term trends clear.

Get our daily newsletter
Upgrade your inbox and get our Daily Dispatch and Editor's Picks.


Email address
Latest stories
For Dutch Jews, an overdue reassurance and an ancient dilemma
ERASMUS
Retail sales, producer prices, wages and exchange rates
Foreign reserves
Why Iranian women are taking off their veils
THE ECONOMIST EXPLAINS
A Democratic war in Texas’s seventh district
DEMOCRACY IN AMERICA
America’s public-school teachers are fired up about pay
GRAPHIC DETAIL
See more
1. People are living longer and retirement ages have not kept pace. This increases the cost of paying pensions

2 Interest rates and bond yields have fallen. This increases the cost of generating an income from a given pension pot

3. Private sector employers have reacted to this cost by closing their defined benefit (DB) schemes (which link pensions to salaries) and switching to defined contribution (DC) schemes (which simply generate a savings pot)

British universities have reacted in a similar way; they are proposing switching future benefits to a DC basis. To avoid confusion, this means that past benefits will be unaltered; if you are 50, and have worked for 25 years, you will still have 25 years of DB benefits. But since pensions are deferred pay, it does mean that the total benefits of academics are being cut so one can see why they are upset.

But there is still plenty of confusion, as this piece in the Independent illustrates all too well (to cite just one example, in a piece about workplace benefits, it quotes OECD numbers on state-pension replacement rates). There are three big areas where the debate gets muddled.

1. Investment risk. If there is a pension fund, then there is investment risk regardless of whether this is a DB or a DC scheme. The difference is on whom the risk falls. In a DC scheme, it does fall on the employee. In a DB scheme, it rests largely on the employer. But in a sector heavily funded by the public sector that could mean the taxpayer.

2. Accounting. The real cost of pensions can't be measured in cash flow terms: how much is being paid out this year, as opposed to the contributions being put in. They are a long-term commitment in which one must work out the cost of future benefits, allowing for longevity, inflation etc. These future payments must then be discounted at some rate to get to a present value.

This column has always argued for the use of a bond yield as the discount rate. That is because pensions are a debt which must be paid. The problem is that low bond yields have forced up the present value of future benefits and widened deficits. The unions in the university case argue this is too conservative and that one can reasonably expect higher investment returns. But this rather contradicts another element of their case. On the one hand, they are saying that DC pensions are too risky for employees because the markets might not deliver; on the other hand, they are saying the markets will be fine so the employer should keep promising DB.

In the US, public pension schemes do assume a high rate of return on their investments and they are in a mess, with a $4trn deficit. In one school district I visited, the entire budget increase was eaten up by higher pensions payments.

The true test of a pension cost is "what would it cost to get rid of it". Insurance companies will take over pension schemes but when they do, they use a bond yield as their discount rate. This buyout basis makes deficits look bigger.

3. With public pensions, the rich tend to subsidise the poor. They are also run on a pay-as-you-go basis with today's workers paying the pensions of current retirees. What you put in is not what you get out. With public pensions, the rich tend to subsidise the poor. They are also run on a pay-as-you-go basis with today's workers paying the pensions of current retirees. But in a DC scheme, contributions are very important. Yes, returns matter a lot. But the real reason that DC pensions are lower is that total contributions are smaller; that is why employers are switching after all. In the US, some employers make no contribution at all. In Britain, matching is fairly common. still, the ONS reckons that total contributions averaged 21% of payroll in British DB schemes and just 4% in DC.

That is the big issue; not investment risk and not management costs. As it happens, the university scheme is offering a fairly generous 13.25% from the employers. But that is still a lot less than they might be expected to contribute to bring the DB scheme back into balance.

So the real issue for workers is this; how much is the employer contributing? And the same is true in a sector heavily funded by taxpayers? If the scheme requires more money where will it come from? Higher taxpayer grants? Higher student fees (which will lead to more taxpayer support if the fees are ulitmately unpaid)? Or worse services?


__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 06:19 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.37055 seconds with 10 queries