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  #751  
Old 10-16-2018, 06:04 PM
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SEARS

https://www.wsj.com/articles/bankrup...ans-1539651491
Quote:
Bankruptcy Filing Shifts Spotlight to Sears’s Pension Plans
Pension Benefit Guaranty Corp. may need to step in if retailer unable to pay pension benefits

Spoiler:
Sears Holdings Corp. ’s SHLD 29.03% decision to seek bankruptcy protection has brought new scrutiny to its underfunded pension plans. It is unclear whether the retailer has the means to pay its 90,000 workers and retirees who stand to benefit from them—and if not, the government may have to step in.

Sears’s bankruptcy includes a tangle of arrangements that put liens on the company’s real estate and intellectual property as protection against spurning its pension debts, and illustrates how much contributions to the plans have weighed on the company’s operations.

Sears, which filed for chapter 11 bankruptcy protection on Monday, has two pension plans that held a combined $2.5 billion in assets and had a funding hole of $1.5 billion at the end of 2017, suggesting that Sears’s plans are roughly 63% funded.

For comparison, the typical pension was 87.6% funded at the end of 2017, according to the Milliman 100 Pension Funding Index, which tracks the funded status of the 100 largest corporate defined-benefit pension plans.

The Pension Benefit Guaranty Corp., the government’s pension insurer, said Monday it expects its guarantees would cover the vast majority of benefits under Sears’s plans. The plans have been frozen for benefit accruals in 1996 for former Kmart participants and in 2005 for Sears’s employees, the agency said. The PBGC, which acts as a backstop to corporate pension funds, receives no taxpayer funding and instead is financed by insurance premiums paid by pension plans.

For now, though, Sears is still on the hook. Its bankruptcy filing didn’t terminate the plans, and the retailer retains responsibility for paying its retirees.

The company has been paying into the plans this year. It made $343 million in contributions during the 26 weeks ended Aug. 4, according to regulatory filings. The plans’ assets likely have increased in value due to a run up in interest rates and stock prices.

Terminating the plans would free up cash for the company to invest in the business, and pension experts say the company may seek to do so.

Last month, Edward Lampert, who at the time was Sears’s chief executive and chairman, blamed pension payments for holding back the company, which had contributed almost $2 billion to its pension plans over the past five years. “Had the company been able to employ those billions of dollars in its operations, we would have been in a better position to compete with other large retail companies, many of which don’t have large pension plans,” Mr. Lampert wrote.

With the bankruptcy, Mr. Lampert stepped down as CEO but remains the company’s chairman.

To terminate the plans, Sears would need to demonstrate to the court it can no longer afford them. The most likely way for Sears to gain court approval would be to show it cannot stay in business or reorganize while funding the plans.

“The PBGC won’t just take over the pension plan because you want them to, said Peggy McDonald, senior vice president and actuary at Prudential Retirement. “You have to be so precariously unable to meet your obligations that the PBGC needs to step in for the benefit of plan participants.”

The vast majority of people covered by the Sears pension plans aren’t expected to see their monthly benefits reduced if the PBGC takes over the plans.

The agency has legal limits on how much it can pay out per beneficiary, but the size and scope of Sears’s plans suggest that most plan participants are below the threshold.

“The people who will be protected the most will be the rank and file,” said Eric Hananel, tax principal at accounting and consulting firm UHY Advisors Inc. Ordinary workers typically receive less of a haircut on benefits following a bankruptcy proceeding than higher-ranked executives who are due a larger pension payout.

Sears lists the PBGC as its biggest unsecured creditor in court documents, with a claim described as “unknown.” Pension experts said the agency’s claim is contingent on the company terminating the pension plans.

PBGC has additional levers to pull in a negotiation before assuming control over the pension plan. Sears had struck a pension plan protection and forbearance agreement with the PBGC in 2016 that granted the agency so-called “springing liens” on the intellectual property tied to Sears’s Kenmore and DieHard brands. Those liens would be triggered only under certain conditions, such as if Sears failed to make payments to its pension plans.

PBGC can initiate an involuntary plan term, based on factors such as a failure to meet minimum statutory funding requirements or an expectation the PBGC’s long-run loss with respect to the plan will increase unreasonably. In this case, the agency would need to decide that this scenario is the best way forward for the beneficiaries.

For now, however, the future of the plans remains unclear, industry experts said, as Sears has yet to indicate whether it will seek approval to terminate the pension plans.


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  #752  
Old 10-17-2018, 07:55 AM
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ESG

https://www.bloomberg.com/news/artic...h-green-energy

Quote:
HSBC Pension Pledges $329 Million Investment in Green Energy
By Jeremy Hodges
October 15, 2018, 7:01 PM EDT
Amazon to install 20 megawatts of solar at depots across U.K.
Thirty firms make climate commitments for ‘Green GB Week’

Spoiler:
HSBC Holdings Plc’s pension manager plans to invest 250 million pounds ($329 million) of its pension scheme into renewable energy infrastructure for wind and solar in the U.K., joining around 30 other firms making similar climate change pledges.

Amazon.com Inc. also committed to installing 20 megawatts of solar power at depots around the country, while EDF Energy Plc said it will electrify 1,500 of its vehicles by 2030 as part of the U.K. government-led “Green GB Week”.

“Renewable energy infrastructure can provide attractive risk adjusted returns for investors seeking predictable cash flows derived from real assets over the long term,” said Russell Picot, chair of the Trustee Board at the HSBC Bank Pension Trust.

Cleaning Up
U.K. carbon dioxide emissions have fallen 28% since 1990


Source: International Energy Agency

The latest climate push from the Department of Business, Energy and Industrial Strategy has also seen the government ask climate change advisers whether it should set a date for a net zero emissions target. The announcements come in the wake of a United Nations climate report that called for urgent global action to slow the rate of global warming or face catastrophic consequences.

Read more about the United Nations report here

John Lewis Partnership Plc pledged to switch its 500 diesel trucks into bio-methane vehicles by 2028, while accounting firm KPMG LLP plans to ban single use plastic cups in all its hot drinks dispensers.

It’s now a decade since the publication of the pioneering U.K. Climate Change Act, one of the first pieces of legislation to tackle climate issues put in place by a developed nation, and the British government called on more businesses to help out in the fight to stop global warming.

“Governments cannot confront this unprecedented global challenge alone,” said Energy Minister Claire Perry. “We need businesses around the world to step up to the mark and today our largest companies are leading the way, making significant pledges worth millions to cut emissions while continuing to grow the green economy.”


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  #753  
Old 10-17-2018, 11:44 AM
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https://www.ai-cio.com/news/funded-r...paign=CIOAlert

Quote:
Funded Ratio for Corporate Pensions Hits 10-Year High
The 100 largest company pension plans gained $21 billion in September.

Spoiler:
The funded status of the 100 largest corporate defined benefit pension plans rose to 94.5% during September from 93.3% at the end of August, its highest level in a decade, according to consulting firm Milliman.
The latest data from the Milliman 100 Pension Funding Index (PFI) shows that the pension plans experienced a $21 billion increase in funding as a result of an increase in the benchmark corporate bond interest rates used to value pension liabilities.

The last time the Milliman 100 funding ratio was higher than it is now was just before the financial crisis when the funded ratio was 99.4%.

“September’s funded ratio marks a 10-year high and is the closest these plans have been to being fully funded since September 2008,” Zorast Wadia, co-author of the Milliman PFI, said in a release. “But the improvement is overshadowed by the market losses experienced over the past couple days, which could very well lead to a reversal of these funding gains.”

From the end of August to the end of September, the monthly discount rate rose 13 basis points to 4.18% from 4.05%, causing the projected benefit obligation (PBO) for the plans to fall by $27 billion. However, this was offset by a $6 billion decrease from investment losses.

The market value of assets declined by $6 billion as a result of September’s 0.14% investment loss to $1.540 trillion, from $1.546 trillion at the end of August. By comparison, the 2018 Milliman Pension Funding Study reported that the monthly median expected investment return during 2017 was 0.55%, which is 6.8% on an annualized basis.

Meanwhile, the funded status deficit improved by $31 billion, which was attributed to above-average investment returns and interest rate gains during the quarter. Asset gained 1.92% in the third quarter and discounts rates increased by six basis points. The funded ratio of the Milliman 100 companies was 92.7% at the end of the second quarter.

Milliman said that under an optimistic forecast, which would see interest rates rise to 4.33% by the end of 2018, and 4.93% by the end of 2019, with 10.8% annual returns on assets, the funded ratio would climb to 98% by the end of 2018 and 114% by the end of 2019. But under a pessimistic forecast, with a 4.03% discount rate at the end of 2018, and 3.43% by the end of 2019, with 2.8% annual returns, the funded ratio would decline to 93% by the end of 2018, and 85% by the end of 2019.

According to Milliman, corporate plan sponsors contributed $62 billion to their plans in fiscal year 2017, brining the year’s total assets to a record $1.55 trillion. That was 45% more than the $42.6 billion contributed in 2016, with 17 of the employers contributing at least $1 billion, and seven contributing more than $2 billion.


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  #754  
Old 10-18-2018, 06:20 AM
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SEARS

https://burypensions.wordpress.com/2...krupting-whom/

Quote:
Sears & PBGC: Who’s Bankrupting Whom
Spoiler:
How much will the Sears bankruptcy cost taxpayers? Let’s look at at some public information.


In a March 9, 2017 press release:

The Pension Benefit Guaranty Corporation and Sears Holdings Corporation have reached a new agreement that provides additional funding and security for the company’s two pension plans.

The additional funding and security for the company’s defined benefit pension plans is being provided in connection with the sale of Sears’ Craftsman brand to Stanley Black & Decker. Under the terms of the agreement with PBGC, the Sears pension plans will receive rights to a $250 million payment due to Sears in three years from Stanley Black & Decker and a 15-year income stream relating to future Stanley Black & Decker sales of Craftsman products. In addition, Sears will provide PBGC a lien on $100 million of real estate assets.

Who knows if that money is still coming and, if it is, who will be getting it.

But the real story here may be who bankrupted Sears and the answer might be the PBGC. And when PBGC goes bankrupt the answer then could will be Sears. Per their 5500 filings.

Sears Holding Pension Plan (20-1920798/001) 1/1/6 – 11/30/16:

Plan effective date: 1/1/1944

As of 1/1/16 there were 191,507 participants with total liabilities (HATFA) of $4.46 billion and assets of $3.35 billion. Payouts were 408 million to 115 thousand retirees. Deposits were $329 million and benefit accruals were frozen (code 1A in 8a) so there was a chance that, if Sears could come up with those contributions without providing any additional benefits, this plan might have been paid for in 7 years. But then we get to the PBGC. A plan with this level of underfunding using HATFA rates would be paying the maximum premium – $564 per participant in 2016, or $108 million.

Sears is now off the hook for that half billion dollars annually (payable to their plan participants and increasingly to the PBGC), an amount that would have escalated over the years (both to plan participants as more retire and to PBGC as they keep raising premium rates), while the PBGC will get a one-time infusion of maybe $2.5 billion and be losing $100 million+ in premiums while having to pay hundreds of millions of dollars to Sears retirees as long as they are around (the PBGC, that is).

.

.

.

PS: Sears may have tried a gambit to reduce those PBGC premiums by splitting into two plans – 1 & 2:

Sears Holding Pension Plan 1 (20-1920798/001) 12/1/6 – 11/30/17: with 37,150 participants at the beginning of the year

Sears Holding Pension Plan 2 (20-1920798/101) 12/1/6 – 11/30/17 effective 12/1/2016 with 147,300 participants at the beginning of the year and 62,178 at the end of the year.


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  #755  
Old 10-19-2018, 09:22 AM
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SEARS

https://burypensions.wordpress.com/2...pbgc-on-sears/

Quote:
PBGC on Sears
Spoiler:
Don’t be fooled by the logo. Anyone dealing with a typical government agency would be stunned at the freakish efficiency of the PBGC. I have gotten issues with premium payments and coverage determinations that might take other agencies 45 days to address settled in 45 minutes. They send letters reminding you to pay your premium months before it’s due and emails moments after your premium filing contained what their system sees as an error. They audit practically every plan that terminates and it feels like a human being reviews every piece of paper or electronic transmission they get.* Yet they still have the capacity to stun.


Sears declared bankruptcy on October 15. That same day, even though a distress termination has not yet been submitted, the PBGC website put up a Q&A for participants.

More on the Sears bankruptcy and pensions from ontheworkbench.com:
.


.
.
.
* Unfortunately the job all this efficiency is brought to is that of collecting extortionate premiums and overseeing pension defaults. Had the PBGC been put on a border wall the sale of 30-foot ladders would be spiking by now. There is also the issue of having only about 25,000 Defined Benefit plans to oversee these days instead of the quarter of a million a couple of decades ago with what seems like the same amount of staff.


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  #756  
Old 10-19-2018, 04:43 PM
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If public pension plans had any integrity about actuarial assumptions, maybe they could offer to take over the Sears plans and invest at 7+ % interest to cover the liabilities.
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  #757  
Old 10-19-2018, 05:38 PM
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SEARS

https://www.ai-cio.com/news/pbgc-cov...sion-benefits/

Quote:
PBGC to Cover ‘Vast Majority’ of Sears Pension Benefits
Pensions lifeboat says it’s prepared to provide for 90,000 retirees and workers.


Spoiler:
The Pension Benefit Guaranty Corp. (PBGC), the government-sponsored lifeboat for struggling pensions, said it expects that its guarantees will cover the “vast majority” of benefits for members of Sears’ pensions plans.

Last week, Sears filed for Chapter 11 bankruptcy, and its pension plans, which cover about 90,000 workers and retirees, are underfunded by about $1.5 billion.

The PBGC said it has been working with Sears for several years to improve the funding of the company’s two defined benefit pension plans. It also said that a preliminary analysis shows that the monthly plan benefit is fully guaranteed for the “vast majority” of participants covered under the Sears Holdings Corp. pension plans.

“If circumstances require,” said the PBGC in a release, “we are prepared to step in and provide PBGC-guaranteed benefits.”

The company’s defined benefit plans, known as Sears Holdings Pension Plan 1 and Sears Holdings Pension Plan 2, remain ongoing and under the responsibility of Sears. Although underfunded pension plans often terminate during bankruptcy proceedings, a company’s bankruptcy filing alone does not terminate a pension plan.

Sears said it expects to move through the restructuring process as “expeditiously as possible,” and is pursuing a reorganization plan that it hopes to initiate “in the very near term.”

The company has received commitments for $300 million in senior priming debtor-in-possession financing from its senior secured asset-based revolving lenders, and is negotiating a $300 million subordinated debtor-in-possession financing with ESL Investments, Inc., which is Sears’ largest shareholder and creditor.

Last year, Sears annuitized $515 million of its pension liabilities with MetLife, transferring responsibility for paying future pension benefits for 51,000 Sears retirees to the insurance firm. The company said the potential termination of the pension plans would not affect those purchased annuities.

“Over the last several years, we have worked hard to transform our business and unlock the value of our assets,” Edward Lampert, chairman of Sears Holdings, said in a release. “While we have made progress, the plan has yet to deliver the results we have desired, and addressing the company’s immediate liquidity needs has impacted our efforts to become a profitable and more competitive retailer.”


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  #758  
Old 10-25-2018, 04:10 PM
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NEW YORK
ST. CLARE'S HOSPITAL
CHURCH PLAN

https://www.timesunion.com/business/...o-13329915.php

Quote:
St. Clare's pension failure underscores risk to religious plans

Spoiler:
With the pension plan for workers at the former Catholic-run St. Clare's Hospital bleeding red ink, it is not the responsibility of the Albany Roman Catholic Diocese, according to officials of both the diocese and the hospital.

But because St. Clare's officials two decades ago got the federal government to classify the hospital pension as a so-called "church plan" due to its ties to the diocese, the ailing fund is now not backstopped by federal pension insurance meant to protect workers from such fiscal calamities.

This month, more than 1,100 people who once worked at the hospital that closed in 2008 got the bad news: They either will not receive their expected pension or get a smaller check than was promised, starting Nov. 1.

"This is an absolute bombshell for these workers, who are not rich people," said David Pratt, a labor lawyer at Albany Law School who is working with the former hospital workers. "They have no backup."


Pratt said St. Clare's highlights a pitfall with pension funds run by religious groups, which are exempted from the 1974 Employee Retirement Income Security Act that requires private pension plans to pay insurance premiums into the federal Pension Benefit Guaranty Corp. These premiums are used to bail out pension plans that get in trouble, something that is not now available for the St. Clare's plan.

During the 1990s, officials at St. Clare's sought and received federal approval for the religious exemption for its pension, which up to that point was federally insured as a private plan. The hospital then got a $90,000 refund for its previous premiums.

Founded in 1949 by Catholic priests and Franciscans, St. Clare's from its beginnings has been linked to the Albany Roman Catholic Diocese for many years, with bishops at the time also serving on the hospital board of directors.

The current St. Clare's Corp. board, which was set up to oversee the pension after the hospital closed under a 2008 state reorganization plan, includes Bishop Edward Scharfenberger. Federal tax forms filed by St. Clare's Hospital Corp. as recently as 2017 also identify it as "an auxiliary of the Albany Diocese of the Roman Catholic Church."

But both corporation Chairman Joe Pofit, a former diocesan official who ran its senior housing program, and the Diocese itself agreed that the hospital was never an official part of the church, even though the affiliation was strong enough to make the the pension plan eligible for the church exemption.

"The Roman Catholic Diocese of Albany was not involved in the governance and operation of St. Clare's Hospital or St. Clare's Corporation," according to a statement from Mary DeTurris Poust, communications director for the diocese.

Pofit, who once was the diocesan director of senior housing programs, said that bishops had only one vote on the St. Clare's board and had no further control beyond that.

Around the country, the legality of church plans that leave participants without pension guarantees was upheld in 2017 by the the U.S. Supreme Court in response to lawsuits that claimed religious groups were inappropriately sidestepping federal rules on minimum funding requirements and insurance.

The Supreme Court ruled that the exemption applied to pensions of "church affiliated" institutions, a decision that opponents said saved hospitals billions of dollars. Pratt said what happened at St. Clare's likely will happening for years to come at other religious institution pension plans.

That ruling rejected lower court decisions that religious hospitals, schools and other agencies could not circumvent federal pension guarantee rules unless their plans were established by a church itself.

Currently, the St. Clare's pension fund is about $35 million in the red, Pofit said, and would have been completely out of cash by 2024 if it kept paying benefits unchanged.

Pofit said the pension fund would have been in trouble long ago, if it had not been for a $28.5 million infusion from the state in 2008 as part of the agreement to close St. Clare's. He said the fund was immediately hit by declining investments due to the onset of the Great Recession and was never able to recover its fiscal footing.

On Oct. 11, the corporation told its 1,129 current or future retirees that anyone who had been receiving benefits on Nov. 1, 2015, or was at least 62 years old on that date, will get their pensions although at "reduced amount."

Anyone who does not meet either of those conditions will get nothing. Previous estimates from Pofit were that the average pension is $540 a month.

"We are sympathetic to the hardships, but we had to own up to the problems," said Pofit. "We made this change to guarantee payments to the most vulnerable members of the pension, the people who were older and have been collecting."

Pratt said the potential reduction in the monthly payments could be as much as 50 percent. Pofit disputed that, but could not provide an estimate, saying it would depend on how many people take a lump-sum payment, versus monthly checks. "We ought to know that in a month," he said.

"None of us know which end is up now," said Lori Daviero, a retired radiology technician who worked at the hospital for 23 years before leaving in 2000. She just turned 62 in September and got her first retirement check this month; under the new rules, she will get nothing next month.

"This is such an abrupt thing in your life," she said. "Getting just two weeks notice is crazy."


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Old 10-31-2018, 06:23 PM
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Quote:
Originally Posted by twig93 View Post
Interesting. Would love to hear a pension actuary's take on the new requirements.
I know this is 4 weeks after the request, so apologies....

All good stuff here. The new items being disclosed (significant sources of gains/losses) are already requested by most large companies for their own understanding. Many auditors also ask for similar information. So only new item here is actually writing this up in the financial statement footnote itself for the investor and analysts - which is a good thing as it leads to a better understanding of what the real risks are and what are not the real risks.

The removal of the disclosure of health care trend sensitivity is an interesting one, which certainly makes an actuary's life easier. I suspect, but don't know for sure, that the reasons behind this are that the plans that still remain either have caps, are DB-based in design (flat dollar times service) or DC based in design (HSA based), such that few plans actually have trend exposure anymore. Meaning health care inflation risk is burdened by the participants themselves rather than the company.
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Old 11-07-2018, 03:54 PM
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https://www.ai-cio.com/news/high-cou...gender-biased/
Quote:
High Court Rules Guaranteed Minimum Pensions Gender Biased
‘Landmark’ decision could cost UK pension industry up to 20 billion in payouts.


Spoiler:
The UK’s High Court has ruled that Lloyds Banking Group’s pension plans must equalize guaranteed minimum pensions for men and women in a closely watched case that the Pensions Management Institute estimates could cost providers 10 billion to 20 billion in payouts.

“This landmark judgment resolves this pension discrimination issue for good and will bring equality to millions of women across the country,” said Mark Brown, general secretary of BTU, the trade union representing Lloyds Banking Group staff. “It’s simply unacceptable that 48 years since the passing of the Equal Pay Act in 1970 we are still fighting for equal treatment in the workplace.

BTU estimates that up to 5 million participants, the vast majority of whom are women, in 6,000 private sector pension plans, will benefit from the High Court’s ruling.

The case involved three women—Angela Sharp, Judith Cain, and Susan Dixon–who were members of Lloyds Banking Group’s final salary pension plan, and who claimed they were discriminated against based on their gender because their pensions increased at a lower rate than male members of the pension.

At the crux of the case is how guaranteed minimum pensions are increased. Guaranteed minimum pensions were introduced in 1978 and allow employers that offered defined benefit plans to contract out their staff, and pay a reduced rate of National Insurance Contributions. In exchange for the lower rates, the companies promised that their pension would meet a minimum standard of benefits.

However, there have been complaints that guaranteed minimum pensions are inherently discriminatory because men and women accrue these at different rates, and they are entitled to them at different ages—60 for women and 65 for men.

“The trustee is under a duty to amend the schemes in order to equalize benefits for men and women so as to alter the result, which is at present produced in relation to GMPs,” said Justice Paul Morgan in his ruling, adding that “beneficiaries are entitled to receive arrears of payments due to them.”

The ruling directly affects the 230,000 members of Lloyds Banking Group’s pension plans, and could cost the company well over 100 million, according to BTU, with other estimates ranging as high as 150 million.

BTU said that the ruling has “major financial implications” for pensions, adding that “most of the FTSE 100 giants will have massive GMP liabilities, which could add millions to their burgeoning pension deficits.”
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