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  #801  
Old 02-07-2019, 06:17 PM
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https://www.thinkadvisor.com/2019/02...&utm_term=tadv

Quote:
Insurers Are Competition for the PBGC: GAO Chief
Pension risk transfers are leaving the pension guarantor agency with fewer premium-paying customers.
Spoiler:
The private insurers in the group annuity market are taking paying pension guarantee customers away from the Pension Benefit Guaranty Corp. (PBGC)
Gene Dodaro, the comptroller general of the United States, talked, briefly, about the competition between the PBGC and the private “pension risk transfer” market Wednesday, at a hearing on financial security in retirement that was organized by the Senate Special Committee on Aging.

(Related: PBGC Multiemployer Pension Guarantees Are Lousy: Hearing Witness)
Dodaro was the only hearing witness who mentioned annuities in the written version of the testimonies posted on the committee website.

Dodaro — who serves as the head of the U.S. Government Accountability Office (GAO), an agency that helps Congress keep tabs on what’s happening at federal agencies and in federal programs — mentioned the private risk transfer market while discussing the challenges facing the PBGC.

The PBGC
The PBGC is an entity that’s supposed to use premiums from private employers with defined benefit pension plans, and the assets of failed plans, to back up pension plan benefits guarantees.

The PBGC has $110 billion in assets, but “its pension benefit guarantees are increasingly at risk due to its substantial liabilities,” Dodaro said, according to the written version of his remarks.

The PBGC reached Sept. 30, 2018 — the end of the federal government’s 2018 fiscal year — with a net accumulated financial deficit of about $51 billion, and about $185 billion in exposure to future losses on underfunded pension plans, Dodaro said.

Insurers and the PBGC’s Covered Lives
“The primary drivers of the government’s fiscal exposure related to PBGC’s deficit are the collective financial risk of the many underfunded pension plans insured by PBGC and the long-term decline in the number of participants covered by traditional [defined benefit] plans,” Dodaro said.

The number of plans insured has dropped by 78% since 1985, and the number of PBGC-insured pension plan participants who are still working has dropped by 13 million, Dodaro said.

“There has also been a recent trend of single-employer plan sponsors transferring the liability for some of their participants to insurance companies via group annuity ‘buy-outs,’” Dodaro said, referring to the arrangements also known as pension risk transfers.

Insurers may say that pension risk transfer deals reduce PBGC exposure to losses on underfunded pension plans as well as PBGC premium revenue.

But, from the perspective of the GAO, the arrangements do reduce the number of participants in PBGC-covered plans, Dodaro said.

“As a result of these trends, even though PBGC premium rates have increased significantly in recent years, PBGC’s premium base has been eroding over time as fewer sponsors are paying premiums for fewer participants,” Dodaro said.

Lump Sums
Dodaro also talked, briefly, about the fact that many participants in both defined benefit pension plans and defined contribution plans end up getting the accumulated value in the form of a lump sum, or big, one-time payment, rather than in the form of an annuity, or an arrangement to make a stream of income payments.

When pension plan participants get lump-sum payments, rather than lifetime income options or other methods for withdrawing funds in a systematic way, “the participant may face challenges similar to those with [defined contribution] accounts in terms of managing the spend down of their retirement savings,” Dodaro said.

Three Shaky Pillars
Dodaro described Social Security, employer-sponsored retirement plans and personal savings as the three pillars of the U.S. retirement system.

He said that, in addition to threats to their ability to draw on employer-sponsored retirement plans, American workers face many other threats to their post-retirement financial security, such as a low average savings rate, and the possibility that Social Security may end up paying only 77% of the scheduled benefits.

“Over the past 40 years, the nation has taken an incremental approach to addressing the U.S. retirement system; however, such an approach may not be able to effectively address the interrelated foundational nature of the challenges facing the system today,” Dodaro said. “Without a more comprehensive re-evaluation of the myriad challenges across all three pillars of the retirement system, identifying effective, enduring solutions may be difficult, and the consequences could be significant. Unless timely action is taken, many older Americans risk not having sufficient means for a secure and dignified retirement in the future.”

Resources
Links to hearing resources, including the written versions of the testimonies and a video recording, are available here.


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  #802  
Old 02-08-2019, 05:50 PM
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https://augustafreepress.com/senate-...ess-employees/

Quote:
Senate bill would facilitate retirement plans for small business employees
Spoiler:
U.S. Sens. Mark Warner (D-VA) and Susan Collins (R-ME) reintroduced legislation to reduce duplicative filing costs for small businesses seeking to make retirement plans available to their employees.

The bill was sponsored in the House by Reps. Linda Sánchez (D-CA), member of the House Committee on Ways and Means, and Phil Roe (R-TN), member of the House Committee on Education and Labor.

“Employer-provided retirement plans give workers stability and strengthen our economy in the long run, but the process of offering these plans can be expensive and complex for smaller employers,” said Sen. Warner. “This bill would remove an unnecessary impediment and reduce filing costs, thereby making it easier for employers to promote the retirement security that workers deserve.”

“Faced with an alarming $7.8 trillion shortfall in personal retirement savings, Americans simply aren’t saving enough to be able to afford a comfortable retirement,” said Sen. Collins. “When employers provide their employees with access to retirement plans, approximately 80 percent of them contribute. This bipartisan bill will help promote retirement security by making it easier and less expensive for small businesses to establish retirement plans, increasing their accessibility to employees and helping to ensure that those who worked hard for decades do not spend their retirement in poverty.”

“Too many Americans simply aren’t putting enough money away to be able to afford a secure retirement. It is no secret that women, especially women of color, are even farther behind in building adequate retirement savings due to continued pay inequality. By helping more small businesses provide workplace retirement plans we can give millions of hardworking families more financial peace of mind,” said Rep. Sánchez. “I’m proud to introduce this bipartisan, bicameral legislation to make it easier and less expensive for small businesses to establish retirement plans for their workers. This common sense legislation will help provide greater retirement security to more Americans.”

“It is imperative we do everything we can to encourage affordable and accessible retirement savings for all Americans,” said Rep. Roe. “This commonsense legislation will make it easier and less costly for small businesses to provide retirement plans for their workers by alleviating duplicative reporting requirements for plan administrators. I am proud to support this bill, which will promote a secure retirement for hardworking Americans.”

A 2016 report by the Pew Charitable Trusts showed that only 22 percent of workers at small companies have access to a workplace savings plan or pension, compared to 74 of workers at firms with 500 or more employees.

This legislation would allow employers and sole proprietors who participate in retirement plans to file a single aggregated Form 5500 – a required annual return that that provides compliance information to the Department of Labor (DOL) and the Treasury Department. Currently, employers are required to file separate forms to satisfy reporting requirements under the Employee Retirement Income Security Act and the Internal Revenue Code. By eliminating the need to report these two forms separately, this bill will remove unnecessary red tape and reduce costs for small businesses who wish to provide workers with retirement security. Under this bill, retirement plans would need to have the same trustee, fiduciary, plan administrator, plan year and investment menu in order to be eligible to file an aggregated Form 5500.

According to a 2016 survey conducted by the Transamerica Center for Retirement Studies, in collaboration with Aegon Center for Longevity and Retirement, only one-third of self-employed respondents indicated that they make sure they are saving for retirement. These self-employed workers, along with sole proprietors and small business owners, are the most likely to benefit from this legislation, as they are the most likely to establish retirement plans that meet the requirements necessary to file an aggregated Form 5500.

To provide DOL and Treasury time to implement this change, this bill has an effective date of no later than January 1, 2023. A copy of the legislative text is available here.


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  #803  
Old 02-11-2019, 02:05 PM
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SEARS

https://www.ai-cio.com/news/pbgc-sea...cy-settlement/

Quote:
PBGC, Sears Reach Chapter 11 Bankruptcy Settlement
Deal cleared way for court to OK ESL Investment’s $5.2 billion takeover of the retailer.


Spoiler:
The Pension Benefit Guaranty Corp. (PBGC) has agreed to withdraw its objection to the proposed sale of Sears’ assets to hedge fund ESL Investments, which cleared the way for a US bankruptcy court judge to approve ESL founder and Sears Holdings Corp. Chairman Edward Lampert’s $5.2 billion takeover of the 126-year-old retailer.

The agreement allows the government-sponsored lifeboat for struggling pensions to assume responsibility for Sears’ two pension plans, which are covered under PBGC’s Single-Employer Insurance Program.

Last month, the PBGC said it would assume responsibility for Sears’ two defined benefit pension plans, which cover approximately 90,000 workers and retirees at Sears, Roebuck and Co. and Kmart Corp. Sears filed for Chapter 11 protection in October, and the PBGC stepped in to become responsible for the plans because it said that Sears’ continuation of the plans is no longer viable.

According to court documents, the PBGC estimates that the Sears pension plans are collectively underfunded by approximately $1.4 billion, and have a funded level of just 64%. In its complaint, it had argued that as a result of the sale or liquidation of the company, the plans would not have assets available to pay benefits when due.

Sears lawyer Ray Schrock reportedly told bankruptcy judge Robert Drain that the PBGC will receive an unsecured $800 million from the Sears bankruptcy estate. He also said the agency would get up to $80 million in proceeds from potential claims against ESL Investments Inc. surrounding its dealings with Sears.

The Wall Street Journal reported that as part of its settlement with Sears, the PBGC agreed not to challenge Lampert’s right to bid using $1.3 billion in debt instead of cash. It also said that a group of unsecured creditors argued that Lampert shouldn’t be able to rely on loans he previously extended to Sears when he used stock buybacks, spinoffs, and dividends to make money while stripping Sears of its assets.

The PBGC said that it expects its guarantees will cover the vast majority of pension benefits earned under the plans, and added that it will not have a significant effect on its financial statements because the claim has already been included in the agency’s fiscal year 2017 and 2018 financial statements.


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  #804  
Old 02-11-2019, 09:08 PM
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3M

https://www.pionline.com/article/201...j0cHxEZdpvU4tE

Quote:
3M to stick up to $200 million into pension plans in 2019
Spoiler:


BLOOMBERG
3M Co., St. Paul, Minn., expects to contribute between $100 million and $200 million to its global defined benefit plans in 2019, the company disclosed in a 10-K filing with the SEC on Friday.

In 2018, 3M contributed $254 million to its U.S. pension plans and $112 million to its non-U.S. pension plans.

3M did not break the expected 2019 contributions down by region. It said in the filing that it "does not have a required minimum cash pension contribution obligation for its U.S. plans in 2019" and that "future contributions will depend on market conditions, interest rates and other factors."

RELATED COVERAGE
CMS Energy reports $240 million pension plan contribution General Motors to steer $670 million in contributions to pension plans in 2019Intel computes $480 million pension plan contribution in 2018
3M has more than 70 defined benefit plans in 26 countries, the company noted in the filing.

COMPARE EXPECTED U.S. COMPANY PENSION CONTRIBUTIONS WITH P&I'S CORPORATE PENSION CONTRIBUTION TRACKER
As of Dec. 31, U.S. pension plan assets totaled $14.8 billion, while projected benefit obligations totaled $15.95 billion, for a funding ratio of 92.8%, up from 90.4% the year before. As of that same date, non-U.S. pension plan assets totaled $6.17 billion, while projected benefit obligations totaled $6.965 billion, for a funding ratio of 88.6%, down from 89.8% the year before.

The discount rate for the U.S. pension plans as of Dec. 31 was 4.36%, up from 3.68% the prior year, and the non-U.S. plans' discount rate was 2.5%, up from 2.41%.

As of Dec. 31, the actual allocation of the U.S. pension plans was 41.5% fixed income, 19.8% equities, 16.2% absolute return, 14% private equity, and 8.5% cash and cash equivalents. As of that same date, the actual allocation for the non-U.S. pension plans was 51.1% fixed income, 32.4% equities, 11.6% absolute return, 3.4% private equity, and 1.5% cash and cash equivalents.



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  #805  
Old 02-14-2019, 05:39 AM
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ST. CLARE'S HOSPITAL

https://www.wamc.org/post/state-lawm...pension-crisis
Quote:
State Lawmakers Meet With Bishop To Address Schenectady Hospital Pension Crisis

Spoiler:
Lawmakers met with Bishop Ed Scharfenberger of the Roman Catholic Diocese of Albany at the capitol Friday in an effort to address the pension collapse involving the former St. Clare's Hospital.

St. Clare's, in Schenectady, was shuttered in 2008 as part of a state-ordered consolidation. Retirees recently saw their monthly pension payments cut or eliminated after the hospital board said the pension fund was nearly bankrupt. State Assemblyman Angelo Santabarbara says a budget request has been made for $42 million and hopes additional funding could come from the Mother Cabrini Health Foundation.

"Leaving this meeting the Bishop had agreed that he would go forward, contact Prudential, contact the attorney, the board at the Cabrini Foundation to arrange a similar meeting where we could have a continued discussion on this on what our plan is and what we would need from all parties to make this a viable plan. So everybody has some homework I guess," said Santabarbara.

Santabarbara, state Senator Jim Tedisco and Bishop Scharfenberger met with a committee of St. Clare’s pensioners behind closed doors. Mary Hartshorne is one of them. "It's important for people to know that we worked so hard for this for years and years and we deserve it. However, with the limitations with each area has limitations that we've decided that wee could agree on something and we're all gonna work together toward it. I can't tell you how much all of this means to us."

Tedisco says Scharfenberger, who did not speak at Friday’s press conference, expressed his concerns. But there's a roadblock: the pension company won't disclose how many people are affected by the pension collapse. "Now there's some discussion about the fact that we're gonna set precedent if we get state money. Well this is a little bit different case than bailing out pensioners from a pension system. The state of New York was involved. They were right-sizing their health-care system. They had a Berger Commission. They said St. Clare's hospital, who provided for the sickest and the lowest income individuals time and time again, who did not receive payments in many instances but kept caring for those people, they were the one hospital, maybe in this entire Capital District area, certainly in Schenectady County in that region, who were taking care of patients who probably couldn't afford to pay or could afford to pay a limited amount. And now you've got 1,100 or more citizens who are either being reduced drastically with their pension that they were promised, or a good portion of them not receiving any of their pension. That's totally unacceptable."

Tedisco said given the state is offering $3 billion in tax breaks to Amazon, he'd rather give them 2-point-nine-nine-five and put the rest toward the pension.

Santabarbara says the $42 million number needs to be confirmed and expects additional meetings will be held between now and April 1st when the budget is due.
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  #806  
Old 02-19-2019, 07:15 AM
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https://www.latimes.com/local/lanow/...216-story.html

Quote:
Federal agency sues former Orange County Register owners over handling of pension program

Spoiler:
A federal agency is suing former Orange County Register owners Aaron Kushner and Eric Spitz over their handling of Freedom Communication’s pension program, alleging the executives made “ill-advised, speculative investments” that resulted in the loss of tens of millions of dollars.

Pension Benefit Guaranty Corporation, a U.S. government agency that insures pension plans, filed a lawsuit Feb. 14 in U.S. District Court’s California Central District, Southern Division, alleging breach of fiduciary duties, engaging in prohibited transactions, and knowing participation in breach of fiduciary duties in violation of the Employee Retirement Income Security Act.

The lawsuit alleges Kushner and Spitz “failed to act prudently” in four investments, including one in which the pair “lost millions of dollars of pension plan assets by causing the pension plan to buy stock in Freedom when they knew that the company was in financial distress.”

Kushner and Spitz both declined to comment on the lawsuit.

Kushner and Spitz formerly co-owned Freedom Communications and its collection of newspapers, which included the Register. Freedom filed for bankruptcy protection in 2015.


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Old 02-20-2019, 10:52 AM
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ORANGE COUNTY REGISTER

https://www.latimes.com/business/hil...219-story.html

Quote:
Feds say the O.C. Register’s ghoulish purchase of life insurance on its employees cost it millions

Spoiler:
Facing a severe financial crunch back in 2013 and 2014, the then-owners of the Orange County Register cooked up a creepy plan to dig out of their hole: They bought life insurance policies on their own employees.

The idea was to record the putative value of those policies upon the workers’ deaths as a contribution to the newspaper’s pension fund, which was in the red by hundreds of millions of dollars.


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We called this plan “ghoulish” when word leaked out in 2014. But the Pension Benefit Guaranty Corp., a federal agency that now operates the pension fund as its trustee, says it was worse than that. In a lawsuit filed on Valentine’s Day, the PBGC says the stunt was incompetently arranged, and a violation of the company’s fiduciary duties to its own workers.

Life insurance, by its very nature, was created to benefit the people we love and care about most.

AARON KUSHNER, 2014
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Counting the money invested and the inflated fees the company paid to the pension “expert” who pitched the arrangement, the government says, the company lost $9.4 million on the scheme. The PBGC wants the money back from the Register’s owners at the time, Aaron Kushner and Eric Spitz, as well as Richard Covelli, the pension expert, and Covelli’s actuary.

That’s just part of the improper actions Kushner and Spitz took with the pension fund, the PBGC asserts. They also invested pension money in the Register’s parent, Freedom Communications, when they knew the company was failing; in an international hedge fund that has since failed; and in a portfolio of loans to finance life insurance policies for strangers, the agency says.

The Freedom and hedge fund investments are now worthless and the pension fund incurred losses on the others. The PBGC wants Kushner, Spitz and the other defendants to make good on all the damage, which it calculates at $54.65 million.


The O.C. Register's supremely ghoulish financial strategy
JAN 28, 2014 | 1:43 PM
Kushner and Covelli couldn’t be reached for comment. Covelli's actuary, Traci M. Christian, did not respond to a call made to her Kansas office. Spitz didn’t reply to messages left at his home in Newport Beach or at C4 Distro & Trading, the cannabis firm he founded in 2016 with former California Treasurer and Atty. Gen. Bill Lockyer.

All these schemes took place when Freedom was between bankruptcies. Kushner, a former greeting card executive, and Spitz bought Freedom in 2012, two years after it emerged from Chapter 11. They launched an ambitious program to build up the print circulation of the Register and its sister publication in Southern California, the Riverside Press-Enterprise, hiring more than 100 reporters and editors. But by January 2014 they acknowledged that the strategy had failed, and laid off staff by the dozens.

They both resigned from Freedom in March 2015, and the company reentered bankruptcy later that year. The pension fund was turned over to the PBGC, which takes over deeply impaired corporate pension funds, after the bankruptcy filing.

Freedom subsequently sold the Register and Press-Enterprise to Digital First Media. That chain is owned by the hedge fund Alden Global Capital, which has pursued a policy of cutting staff to the bone and pocketing revenue from the spavined remainder.


O.C. Register boss resents being labeled a 'ghoul'
JAN 29, 2014 | 12:04 PM
A few days after the Kushner regime announced the 2014 layoffs, many of the remaining employees got emails informing them that the company wished to buy life insurance on them.

The direct beneficiaries of these million-dollar-plus policies wouldn't be the employees or their families, but the pension plan.

We called this a “ghoulish corporate strategy” in our first report on the scheme. Kushner hadn’t responded to our questions about it, but then told employees that our post was "a reminder of the kind of newspaper and journalism of which we want no part." He said, “Life insurance is not ghoulish, nor are the people who sell it, nor are those who buy it. Life insurance, by its very nature, was created to benefit the people we love and care about most."

Well, yes and no. As I reported at the time, the insurance Kushner was proposing is not illegal. It's known formally as COLI, for "company owned life insurance," and less politely as "dead peasant" insurance. That's a reference to Nikolai Gogol's classic comic novel "Dead Souls," which is about a con man who crisscrosses czarist Russia buying up dead serfs as collateral for a business deal.

Millions of employees of major firms may be covered today by dead peasant policies. The law requires companies proposing to take them out on rank-and-file employees to get the workers’ advance written consent, which the Register aimed to do via its email.

According to the PBGC, however, the Kushner, Spitz and Covelli scheme broke other rules. It’s unclear how many policies the pension fund bought, or the timing, but the PBGC says the pension fund spent $9.4 million to buy the life insurance, paying Covelli and his associates inflated fees and commissions.


A vulture firm's bid for Gannett shows there's still value in newspapers — for plundering
JAN 15, 2019 | 12:35 PM
The biggest problem was that they valued the policies at the net present value of the future death benefits. That’s improper, the PBGC says; accounting rules say the policies had to be valued at their cash surrender value, a much lower figure. Kushner and Spitz knew about this flaw, the PBGC alleges, because the pension fund’s fiduciary advisor, Aon Hewitt, and the fund’s accounting firm told them so.

Contrary to Kushner’s claim to the workers that the insurance scheme was designed to benefit them and their families by strengthening the pension fund, the federal agency says the deal was designed to benefit Kushner and Spitz, by reducing the amount they had to pay into the pension fund to cover its shortfall. But according to the lawsuit, the real valuation was so low in relation to the cost of the insurance that the deal would increase the amount they owed to the fund.

Once Kushner and Spitz realized that their valuation was faulty, the PBGC says, they abandoned the life insurance plan. In any case, the agency says, the insurance “was not a suitable asset for the pension plan to acquire.”

The PBGC isn’t happier with the other investments it attributes to Kushner and Spitz. These include $7.25 million they had the fund invest in shares of 2100 Freedom, the corporate entity they had created to hold Freedom Communications, when they knew Freedom was “in financial distress,” the PBGC says. Those shares are now worthless.

Then there’s a $6-million investment in a Luxembourg hedge fund known as Topaz, an investment the PBGC says was in the red from Day 1. Topaz eventually was subjected to liquidation proceedings in Italy. The investment is now worthless, the PBGC says.

Finally, there was a $32-million investment in a loan scheme to a welter of life insurance trusts. This also was a brainchild of Covelli, the PBGC says, adding that the investment cost more than the fair market value of the loans.


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