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  #761  
Old 11-07-2018, 03:54 PM
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UNITED KINGDOM

https://www.ai-cio.com/news/tpr-bans...c-investments/

Quote:
TPR Bans ‘Reckless’ Pension Trustees over Risky, Exotic Investments
Trustees invested in eucalyptus farms, parking lots, and suspected scams.


Spoiler:
The Pensions Regulator in Britain has banned two pension fund trustees for investing in “exotic, high risk and suspected scam investments,” such as eucalyptus farms, Cape Verde hotel rooms, and parking spaces in Dubai and Glasgow.

TPR banned Stephen Alexander Ward and Anthony Salih, who were directors of Dorrixo Alliance (UK) Limited, which acted as trustee for the London Quantum pension scheme. The regulator’s Determinations Panel said both men lacked the competence and capability to be trustees, and in particular described Ward as reckless and lacking in integrity.

“Ward’s conduct was reckless in all the circumstances, and amounted to turning a blind eye to a significant issue and failing to ask obvious questions,” said the independent Determinations Panel in its ruling. “Given his 40 years of experience in the pensions industry… it is difficult to believe that Mr. Ward was unaware of the risks that his actions and failings posed to members, and the likelihood that they breached the requirements of pensions legislation.”

Both men were warned that they could be jailed if they ever act as pension trustees again.

According to TPR, hundreds of people were approached by introducers being paid a commission to persuade pension holders to transfer their funds to the London Quantum pension for investment in “exotic sounding” propositions. More than 90 people took the bait and transferred over 6 million worth of savings to the pension.

It also said hundreds of thousands of pounds were then paid out to Dorrixo, to introducers, and to a business providing administration and marketing services, all the while the members believed their funds were being put into low- or medium-risk investments.

“Stephen Ward and Anthony Salih put millions of pounds of other people’s money at risk and have neither the knowledge nor the skills needed to run a pension scheme,” Nicola Parish, TPR’s executive director of frontline regulation, said in a release. “Trustees play a vital role as the first line of defense for pension schemes, but these two men allowed huge sums to be invested into high risk, exotic investments that bear all the hallmarks of being scams.”

TPR appointed Dalriada Trustees Limited as an independent trustee to the pension with exclusive powers.

“As this case shows, we will take action to replace trustees if we believe they are putting scheme funds at risk,” said Parish, “and will ban those who are not fit to perform such an important task—pursuing cases [all] the way through the courts if that is what it takes to get the right result.”
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  #762  
Old 11-07-2018, 04:17 PM
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Quote:
Originally Posted by Bel Biv View Post
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.
Thanks for responding!
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Old 11-12-2018, 06:54 PM
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ST. CLARE'S HOSPITAL

https://dailygazette.com/article/201...hat-went-wrong

Quote:
The St. Clare's pension plan: What went wrong?
How a struggling community hospital shorted its employees on tens of millions of dollars in retirement income

Spoiler:
SCHENECTADY — The St. Clare's pension plan collapse has its roots not just in the state-ordered shutdown of the hospital 10 years ago, but in more than a decade's worth of financial struggles that led up to the closure and a chain of events that followed.

In retrospect, it seems almost inevitable that the fund would run out of money too soon:

The hospital made only part of the recommended deposit to its pension fund in three years and no deposit at all in the other seven years in the decade leading to its closure in 2008.

It used a $28.5 million state bailout to satisfy the existing guaranty.

Then the fund's investments sank during the Great Recession. Finally, the payout projections were revised upward -- the already inadequate fund would need much more money than previously believed.

Read more
St. Clare's retirees share anger, anxiety at pension crisis
Whither the American pension?
So, 10 years after the hospital surrendered its license to operate, the trustees of its pension plan have decided to cut or eliminate payouts to make the fund last longer. This has left retirees angry and confused, searching for answers about what went wrong even as they try to figure out how to live on significantly reduced incomes.


St. Clare's Hospital in Schenectady as it looked during the early 1950s. Photo courtesy Efner History Center, City Hall

Here are some factors behind the current troubles, as detailed in earlier news accounts and Daily Gazette interviews from late October and early November:

What became St. Clare’s Hospital was conceived a century ago to meet the needs of a growing county served by just one general medical facility — Ellis Hospital. The Roman Catholic Diocese of Albany purchased a plot of land for the project in 1917, but the idea went nowhere for years.
"From the collection of the Schenectady County Historical Society"
Undated images show the early stages of construction of St. Clare's Hospital in Schenectady in the late 1940s.
By the 1940s, a petition drive and a fundraising campaign were underway to buld the hospital. More land was purchased for the McClellan Street campus. The cornerstone was dedicated in 1948, and construction was completed in 1949.
However, St. Clare’s was always the smaller of the two city hospitals and was always a safety net for the city’s less-fortunate residents. Many of its patients were uninsured or underinsured, and many bills went unpaid over the decades.
The hospital struggled for years with its expenses, recalled John Owens, its chief financial officer from 1986 to 2004, and it sometimes shorted its pension fund deposits as a result.
Critically, St. Clare’s in the 1990s took advantage of a religious exemption in federal law that allowed it to not pay insurance on its pension fund — saving the hospital money but leaving its future retirees with no prospect of a bailout from the federal Pension Benefit Guaranty Corp., in the case of insolvency.
"From the collection of the Schenectady County Historical Society"
Undated images show the early stages of construction of St. Clare's Hospital in Schenectady in the late 1940s.
St. Clare’s made only partial contributions to its pension fund in three of the last 10 years it was in operation and no contribution at all in the other seven years, according to Joseph Pofit, president of the board of St. Clare’s Corp., the successor entity that became responsible for the hospital’s legacy assets and liabilities in 2010. Moreover, one of the three partial payments, he added, was only a nominal amount.
Enter the New York State Commission on Health Care Facilities — commonly called the Berger Commission, after its chairman, Stephen Berger. Formed under then-Gov. George Pataki in 2005 to improve efficiency and reduce costs in the healthcare industry, it mandated closures and mergers of dozens of hospitals statewide.
The continuing financial problems of St. Clare’s made it a ripe target, Owens said.
People gather in front of then-new St. Clare's Hospital for a cornerstone ceremony on Sunday, June 13, 1948. Photo courtesy Efner History Center.On order of the commission, St. Clare’s surrendered its operating license in 2008.
Ellis Hospital absorbed St. Clare’s, as well as Bellevue Woman’s Hospital in Niskayuna, another facility targeted by the Berger Commission.
The consolidations cost state taxpayers more than $80 million: a total of $58.7 million paid to Ellis by two state agencies to cover transition costs with St. Clare’s (including $28.5 million for the anticipated needs of the St. Clare's pension fund) and $22 million to Bellevue to cover its mortgage and other outstanding costs (which included a $1.8 million pension shortfall).
The three facilities became Ellis Medicine. They operate today as Ellis Hospital, Bellevue Woman’s Center and The McClellan Street Health Center, site of primary care, outpatient procedures, short-term rehab and long-term nursing care.
PENSION CRISIS
The St. Clare’s pension fund deficit was well-known in 2008. Ellis Hospital, in fact, refused to absorb St. Clare’s unless it was absolved of all St. Clare’s pension liabilities.

As matters developed, the state's $28.5 million was not enough to prevent exactly the problem coming to a head a decade later.

Read more
St. Clare's retirees share anger, anxiety at pension crisis
Whither the American pension?
There are three main reasons for this, Pofit said: The United States entered the Great Recession right after the deal was completed, so the value of investments made at that time quickly fell. Then, after the economy recovered, interest rates paid on investments were very low for a very long time. And third, payments to retirees were more expensive than anticipated.

In other words, the fund's assets appreciated less than expected and was depleted faster than expected.


Pofit laid out the situation then and now in detail for The Daily Gazette:

As it shut down in 2008, St. Clare’s paid $28.4 million of the $28.5 million in state pension bailout money to Prudential to fund guaranteed annuities. Prudential had long guaranteed the hospital's retirement payments, but St. Clare’s, for many years, had been unable to pay Prudential for that guaranty. As part of the settlement, Prudential terminated the guaranty for anyone who retired from St. Clare's after Nov. 1, 2005.
During the Great Recession, the pension plan saw an 18 percent drop in asset value, from $34.2 million to $27.3 million. Also, the plan has paid $22.6 million in benefits since 2009. Despite these factors, the fund rebounded and gained 3 percent in value since the recession through the actions of professional fund managers at Prudential.
The plan currently holds assets of $29 million. Its current liabilities — money it must pay to retirees under the soon-to-be slashed pension schedule — are estimated at $68.7 million.
Because the hospital hasn’t existed for a decade; because no other entity is paying money into the pension fund, or is likely to; and because the fund is now conservatively invested in safer, lower-yielding bonds, the fund is on track to run out of money in six to 10 years, when many retirees will still be alive. Payouts to retirees began to outstrip returns on investment in 2017. So, to preserve payments to the older retirees, younger former employees were cut from the plan.
Retirees were notified in 2017 that their benefits would be reduced in six to 10 years’ time. But last month, retirees were notified the cuts would come much sooner: In January, approximately 443 current beneficiaries will see their pension payments reduced. Approximately 661 current and future beneficiaries, mostly still employed or recently retired, will see their pensions eliminated outright.
The moves have caused an uproar among the still close-knit former St. Clare's workforce. Pofit provided a statement from the corporation in response:

“Please know that the St. Clare’s Corporation board of directors is very sympathetic to the difficulties this situation has created for the participants in the St. Clare’s plan. We have great respect and admiration for the outstanding service of employees of St. Clare’s Hospital who with skill and compassion delivered health care services to many of the most vulnerable people in the Schenectady community over many years.”

LIMITED OPTIONS
PHOTO COURTESY ALBANY LAW SCHOOL
Albany Law School Professor David Pratt is shown in an undated image provided by the school.Amid all this, the retirees have found little recourse. They’ve held meetings, maintain an active Facebook group and have been getting advice from Albany Law School professor David Pratt.

Their options are few and unattractive, Pratt said. They can:

“Grin and bear it, fundamentally unfair”
Negotiate a settlement with the diocese to provide funding, which the diocese refuses to do
Or bring a lawsuit to force such a settlement, which no law firm has been willing to take on without being paid a large sum of money up front.
“I cannot tell you how bothered I am by this,” Pratt said. “It keeps me up at night.”


So, who really is to blame for the mess -- or responsible for cleaning it up? Beyond the long-gone administrators of a hospital that no longer exists, there are three obvious candidates, each of which has emphatically rejected responsibility: Ellis Medicine, New York state and the diocese.

Almost uniformly, the dozen-plus St. Clare’s retirees who spoke to The Daily Gazette seemed not to blame Ellis. They are thankful, in fact, that Ellis offered them jobs at the start of the Great Recession. And of course, Ellis took steps before the merger to avoid liability for the pension plan.
The state has said its involvement ended when it paid tens of millions of dollars to reorganize the three Schenectady County hospitals.
The diocese maintains it never operated the hospital, saying it was affiliated with St. Clare’s, sponsored it, but never owned or operated it and does not now bear responsibility for its legacy costs.
Most of the retirees object to this last contention: It was a Catholic hospital under the wing of the local diocese.

Bishop Cusack bought the land a century ago. Bishop Gibbons laid the cornerstone. Bishop Hubbard was chairman of the board in the hospital’s final days and negotiated its closure. Bishop Scharfenberger, until recently, sat on the board of directors of the St. Clare’s Corp., as did two Schenectady parish priests. The corporation itself operated until recently out of rented space in the diocese’s Pastoral Center in Albany.

Read more
St. Clare's retirees share anger, anxiety at pension crisis
Whither the American pension?
Pofit explained that there obviously was a decades-long relationship between the diocese and the hospital, which was opened by an order of nuns that was not part of the diocese. But there was never an official linkage -- St. Clare’s was a Catholic institution that followed the teachings and practices of the Catholic Church, and the Albany diocese helped it do this, he said.

“I do not accept that explanation,” Pratt said, in more succinct words than many of the retirees he’s been working with. “My basic take is: Promises were made, and promises should be kept.”

MARC SCHULTZ/GAZETTE PHOTOGRAPHER
Entrance to Ellis Medicine McClellan Street Health Center which was St. Clare's Hospital.

HEAL THE HEALERS
Ceil Mack, a longtime St. Clare’s employee (and now pension recipient) who helped created a website repository for the hospital’s history in its final weeks in 2008, has now helped create an online petition drive to try to create some momentum for a pension bailout.

The group's tagline, “Help Heal the Healers,” harkens back to the original 1940s petition to build St. Clare’s.

“We are again tapping into that spirit,” Mack said. “Our call to action is going to be to all the people that have been raising their voices in the past weeks and months.”

Mack is not identifying a single culprit or savior; local, state and federal officials, the diocese and the Catholic church, and the business community will all be asked to help find ways to help.

“We want to urge them to come up with solutions to fund that pension,” Mack said. “All of these people and organizations represent a great collective network of problem-solvers.

“We’re looking for people with great ideas. That’s what our call to action will be.”

Read more

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  #764  
Old 11-14-2018, 07:01 AM
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https://dailygazette.com/article/201...erican-pension

Quote:
Whither the American pension?
Fewer and fewer workers covered by pension benefits as 401(k) and similar plans proliferate

Spoiler:
The sudden erosion of pension benefits for 1,100 former employees of the old St. Clare’s Hospital in Schenectady is a scenario that isn’t supposed to happen.

In 1974, Congress enacted the Employee Retirement Income Security Act, which regulated workplace pensions and created the Pension Benefit Guaranty Corp. Since then, employers with pension plans are required to follow PBGC regulations and pay premiums to the PBGC. In return, the PBGC takes over pension payments to retirees if a guaranteed pension fund fails.

However, the Employee Retirement Income Security Act contained a religious exemption that was later expanded to hospitals operated by religious groups, and St. Clare’s took advantage of that. Now, many of its former employees are on their own.

Read more
St. Clare's retirees share anger, anxiety at pension crisis
The St. Clare's pension plan: What went wrong?
Karen Ferguson, director of the nonprofit consumer organization Pension Rights Center, in Washington, D.C., has been in contact with some of the St. Clare’s retirees. She said a recent Supreme Court ruling that unanimously upheld the religious exemption to ERISA was not as absolute as it seemed. But what can be done to help the St. Clare’s retirees get more money remains to be seen.

“This is a broken promise to these folks who were promised these benefits, earned these benefits,” Ferguson said.

She noted two recent cases in nearby states that are similar to the St. Clare’s pension case:

The St. Joseph Health Service pension fund was reportedly the largest to fail in Rhode Island history, affecting more than 2,700 people to the tune of at least $125 million. It prompted a lawsuit against a dozen entities, including the Diocese of Rhode Island. Media outlets there reported a tentative settlement in late October.

The former St. James Hospital in Newark, New Jersey, seems more similar to the St. Clare’s situation, Ferguson said. After mergers and acquisitions, the Archdiocese of Newark and all other entities disavowed responsibility for the deflated St. James pension plan — successfully, thus far.

FEWER PENSION PLANS
But what about the rest of America?

Two generations of American workers increasingly don't have to worry about pension plan failures because fewer and fewer workplaces offer pensions.

In the 40 years since ERISA was enacted, a sea change has moved Americans from defined benefit pension plans to defined contribution investment plans, such as 401(k)s.

The number of defined contribution plans more than tripled, and the number of defined benefit plans fell by more than half, from 1975 to 2015. In 1975, about three times as many workers were covered by pensions as had investment accounts. In 2015, nearly three times as many had investment accounts as had active pensions.

Read more
St. Clare's retirees share anger, anxiety at pension crisis
The St. Clare's pension plan: What went wrong?
Defined benefit pensions guarantee a specific payment to retirees. If the pension fund doesn't contain enough to pay retirees, the employer must come up with the money to make up the difference. Ideally, the retired employee never notices this.

Defined contribution plans are funded by specific contributions by employees and/or employers that the employees, in many cases, decide how to invest. If the employee invests wisely and the economy is strong, the plan can appreciate sharply, building a big nest egg to spend in retirement. The opposite is also true: If the investment or the economy sours, the employee retires with less money or must delay retirement.

The PBGC doesn’t cover defined-contribution plans.

Ferguson said the shift in the American workplace from pensions to 401(k)-type plans is not a fair trade, exposing workers to risk and uncertainty.

“This really was a way of saving money at the expense of employees and retirees,” she said. “Financial institutions bear great wealth and wield great influence now.”

WIDESPREAD ISSUE
Not all pension funds are equal.

Public employee pensions in New York state, for example, are about as certain as anything can be in this world -- guaranteed by policy, politics and the state constitution. And the money is there for them: For the fiscal year that ended March 31, police and firefighter pensions were 96.9 percent funded, and other state employees’ pensions were 98.2 percent funded -- one of the best funding ratios in the nation.

The pension fund of neighboring New Jersey, by contrast, was only 36 percent funded at the end of the 2017 fiscal year -- one of the most severe examples in a nationwide patchwork of underfunded municipal pension plans. The Pew Charitable Trust estimated the collective shortfall among the 50 states' plans was $1.4 trillion in 2016.

Meanwhile, many of the largest American firms have also shorted their pension funds to free up money for other purposes. By far the biggest of these (by dollar amount though not by percentage) is none other than General Electric, which went from a $14.6 billion pension fund surplus in 2001 to a $31 billion deficit at the start of 2018.

The financially struggling company has announced plans to borrow $6 billion to shore up the pension fund this year.


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  #765  
Old 11-20-2018, 07:00 AM
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PBGC
SINGLE EMPLOYER PLANS

https://burypensions.wordpress.com/2...s-1-the-plans/
Quote:
PBGC & Single Employer Plans (1): The Plans

Spoiler:
This week the Pension Benefit Guaranty Corporation (PBGC) released their 2018 annual report, the Office of Inspector General released their audit report of PBGC’s financial statements and Forbes had an article on how the bankruptcy of a sponsor of a large Single Employer Defined Benefit Plan would impact participants and the PBGC.

With so much to digest a series is warranted so here it is, starting with data taken from the latest 5500 filings of 28 Single Employer Plans with over 100,000 participants sorted by funded status.



https://burypensions.wordpress.com/2...-in-the-black/
Quote:
PBGC & SEPs (2): In the Black

Spoiler:
Last week the Pension Benefit Guaranty Corporation (PBGC) released their 2018 annual report and it turns out that their Single Employer Program has wiped out their deficit and is showing profits. Here is how the PBGC explains it:


The Single-Employer Program’s FY 2018 net position improved by $13,353 million, eliminating the program’s FY 2017 deficit resulting in a positive net position of $2,439 million as of September 30, 2018. The primary factors in the Single-Employer Program’s FY 2018 net gain of $13,353 million included $7,608 million in favorable credits due to change in interest factors (which was a result of increases in market interest rates), $5,556 million in net premium and other income, a gain of $1,502 million in investment income, $528 million in credits from actuarial adjustments, and $322 million in credits from completed and probable terminations. These positive factors for the Single-Employer Program were offset by $1,668 million in charges due to expected interest related to PBGC’s liabilities as of September 30, 2017 and $495 million in administrative, investment, and other expenses. (page 28)

At fiscal year-end, PBGC’s estimate of its single-employer reasonably possible exposure decreased to $175,439 million in FY2018, a $62,749 million decrease compared to $238,188 million in FY 2017. This decrease is primarily due to the decline in the number of companies with lower than investment grade bond ratings and/or credit scores. (page 29)



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Old 11-20-2018, 07:57 AM
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https://www.barrons.com/articles/the...ies-1542403959

Quote:
The Pension Myth and the Financial Realities

Spoiler:
Everyone knows about the good old days, when hardworking Americans were able to enjoy a comfortable, worry-free retirement thanks to their healthy pension. But like many tales from decades ago, the reality wasn’t as sweet as recalled, and the situation facing many of today’s retirees isn’t necessarily much worse—though it may feel like it.

The numbers, on the surface, are stark: Just 13% of people working for Corporate America have a defined-benefit pension plan these days, down from 76% in the mid-1980s, according to data from the Bureau of Labor Statistics.


MORE ON THE 401(K)
The Pension Myth and the Financial Realities
40 Years of the 401(k)—the Good, the Bad, and the Future
How to Fix the 401(k)
The Inventor of the 401(k) Thinks It Has Gone Awry
But the reality is that very few people worked at one company long enough to get a pension that could support them in retirement. That’s true even at blue-chip companies like AT&T and IBM, which offered the kind of pensions on which legends are built. In fact, policy expert Dallas Salisbury, former head of retirement think tank Employee Benefits Research Institute, said he invited a pension actuary who had worked at AT&T to talk to EBRI about how exactly AT&T could afford such rich benefits. His answer: Only about 10% of employees worked there long enough to get a pension, and just a fraction of them got the full benefits. Based on BLS data from the 1970s and 1980s, professionals needed a 30-year tenure before they were eligible for a pension that amounted to 30% of their last year’s income. Despite the lore of the “company man,” the median tenure for all wage and salaried jobs in 1983 was five years, about where it was in 2016, based on the latest EBRI data.

“This myth that since ‘I worked for a company with a pension, I’d get a good pension’ was the common belief, so people didn’t worry when they should have, and didn’t save,” says Salisbury. “There isn’t a more acute crisis now. Far more Americans are saving for, and thinking about, retirement—and actually have real benefits.”

Granted, many companies switched from pension plans to 401(k) plans in an attempt to save money. That shifted the burden to employees, and left behind lower-income workers and contract employees unable to scrape up savings on their own. On the plus side, however, the number of people covered by some sort of plan today is triple the number in 1975.


Share of Workforce With Pensions

Private sector

Public sector

100%

100%

50

50

0

0

2008

‘97

1988

1987

‘98

2008

‘18

‘18

Source: Bureau of Labor Statistics
Yet it’s hard to shake the notion that retirement used to be easier. Part of the reason is longevity: People are living longer—five years longer for men today than in the 1980s, and three years for women—but the average retirement age for college-educated men has inched up just a year from the mid-1970s, to nearly 66.

The bigger reason may lie in the mechanics of saving for retirement and then turning that into income—a constellation of investing decisions that had previously been handled by a pension but now falls to employees. That means people are more focused on retirement, and often more anxious. To get the most out of a 401(k), investors need to start early to benefit from compounding, a big ask for millennials struggling with student-loan debt. With a pension, retirees were guaranteed a percentage of their income, and didn’t have to worry about actively contributing or figuring out the right allocations.

The other challenge is turning savings into income to last for retirement. “What the 401(k) did was pin a hundred $1,000 bills on the jacket of an old person, and tell them to go on the bus and be careful—with a pamphlet of financial literacy with tips of do’s and don’ts in their pocket,” says Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School, in New York. “It’s just insane that it’s never even imagined how the de-accumulation process would happen. The traditional plan took care of that.”

Not So Sweet
The pensions of the past were certainly generous—in theory. In reality, few Americansworked long enough to get their full pensions. A 10-year tenure earned you less than12% of your pay, and the median tenure for workers in the 1980s was just five years.
Sources: Bureau of Labor Statistics; EBRI
%
10 years
20
30
40
0
10
20
30
40
The financial-services industry is trying to come up with ways to create guaranteed income to ease this step. Many policy experts recommend a low-cost lifetime income annuity within a retirement plan. “Annuities are the new defined-benefit plans,” says Patrick Rowan, senior managing director of income products at TIAA. The company, which oversees $1 trillion in assets and manages pensions for educators, introduced a “test drive” feature that lets participants in its variable annuity opt for a two-year trial before deciding if they want to lock in lifetime income.

About 80% of participants in defined-contribution plans expressed interest in guaranteed lifetime-income products, according to a recent EBRI survey. But actual take-up is slow. “It’s something lots of people are talking about but nobody is doing,” says Brooks Herman, head of data and research at 401(k) plan tracker BrightScope. The other hurdle is that the advice to use simple income annuities typically comes with the caveat that retirees should work with a financial advisor to navigate the complexities of annuities and determine if it’s a good fit, given health conditions and other sources of income. Yet surveys show that only a third of Americans use a financial planner; Salisbury says he puts that number closer to single digits.



Of course, one key source of guaranteed income is Social Security. Salisbury, who retired from EBRI in 2015, has gone against the usual advice to delay taking Social Security until 70, which means a bigger benefit. For most people, Salisbury says, that advice is still sound. But as a veteran policy wonk and Washington fixture, Salisbury is all too familiar with the needed fixes to the Social Security. “I didn’t wait until 70, since I am in the highest taxable wage group—and if anyone is going to see their benefits cut [in coming decades], I am.”

Salisbury says he has always been a “strong believer” in annuitizing income. One option is longevity insurance, which requires a smaller lump sum and doesn’t usually kick in with payments until someone turns 85; that’s why Salisbury says 70 is the “most efficient” time to buy such a policy. For those trying to come up with the right formula to tap their nest egg, Salisbury says the Internal Revenue Service’s required minimum distribution formula for when people turn 70 is a good rule of thumb. “That’s about as fast as you should take it out,” he says, adding that it encourages people to live within their means, even if that means downsizing.

In other words, some things about retirement haven’t changed: People still need to save more and spend less. “Is it new and unusual for people to hit retirement with limited savings and having spent their money on their kids’ education? It has happened for decades,” Salisbury says. “The only difference now is that there is data on it.”


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Old 11-20-2018, 07:58 AM
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INVESTMENTS

https://www.institutionalinvestor.co...ion-Portfolios

Quote:
The Case Against Boring Pension Portfolios
Researchers contradict the idea that liability-driven investing is best for corporate plans.


Spoiler:
There is such a thing as too much fixed income for corporate pension fund portfolios, new research shows.

As companies have closed and frozen their defined benefit plans en masse, the vast majority have implemented a bond-heavy strategy for liability-drive investing. But shunning riskier asset classes comes at a cost for beneficiaries, according to the recent paper “Should Corporate Pensions Invest in Risky Assets?” by University of Iowa professors Wei Li and Tong Yao, and Southern Illinois University at Edwardsville’s Jie Ying. If plan sponsors can’t handle the volatility of stocks, hedge funds, private equity, and real estate, they should move to a defined contribution plan structure.

The research contradicts the view held by some defined benefit plan sponsors that given their fixed-income-like payouts, they should engage in liability-driven investment strategies, which rely on fixed-income assets to secure returns.

According to the research, this isn’t exactly beneficial for employees. Here’s why: many employees rely on their pension funds completely for retirement savings, according to the research. Regardless of how their plan sponsors invest, these employees are taking on some risk because their pensions could be wiped out if their employers file for bankruptcy. And while the Pension Benefit Guaranty Corp. (PBGC) provides insurance for pension funds, retirees are only insured up to a ceiling, the paper noted. For higher-paid employees expecting to retire with large pensions, a bankruptcy could spell trouble.

“Employees have some desire to have a fair risk-return tradeoff,” Li said by phone Thursday. “They would prefer to have some risk exposure.”

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Because they already must take on some risk, it makes more sense for employees to seek out higher yields on investments, the research argued. Indeed, plan sponsors are incentivized to share their pension surpluses with employees via tax benefits, according to the paper.

So why are some defined benefit plans still investing using liability-driven investment strategies? They have strong incentives, like corporate tax advantages, to invest in less risky assets, the research shows.

What’s more is that these plan sponsors don’t gain anything from taking on riskier investments beyond full funding: the value added to their portfolios from these risky investments is passed onto employees, the research shows. When those more volatile investments fall, they can reduce the plan sponsor’s value as a company, according to the paper.

[II Deep Dive: Plan Sponsors Shore Up Their Portfolios Amid Trade Tensions]

There is, perhaps, a better way to distribute the risk fairly according to the paper: defined contribution plans. These plans make up 48.6 percent of pension assets in the seven major pension fund markets, according to Willis Towers Watson, and are steadily increasing their market share. Assets under management at these defined contribution plans increased by 5.6 percent over the past 10 years, while they grew by 3.1 percent at defined benefit plans during the same time frame, the report shows.

“A more efficient contract would let employees to shoulder all the pension investment risk while keeping them insulated from firm-specific risks,” according to the paper. “Interestingly, this arrangement resembles what a defined contribution plan offers. Our analysis shows that such an arrangement may substantially reduce firms’ pension funding costs.”


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Old 11-20-2018, 07:59 AM
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ST. CLARE'S HOSPITAL

https://www.timesunion.com/7dayarchi...n-13399556.php

Quote:
$29M fix needed to restore partial pension to former St. Clare's Hospital workers

Spoiler:
About $29 million, from a source as yet unknown, is needed to restore reduced pensions to hundreds of former St. Clare's Hospital workers who recently learned they will be getting nothing.

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That estimate was provided Friday in a letter from St. Clare's Corp. President Joe Pofit to Gov. Andrew Cuomo, Albany Roman Catholic Bishop Edward Scharfenberger, and five state lawmakers.

"Please help find the money. We would love to help people," Pofit said.

Pofit's letter said the necessary cash infusion would start at about $193,000 this year and rise to a peak of about $1.8 million in 2032 and then gradually decline.

This would be enough to provide 661 workers with 70 percent of their projected pension benefit, which is the reduced level now being provided to 434 workers who had retired prior to November 2015.

Workers at St. Clare's, which closed in 2008 as part of a state-ordered consolidation with Ellis Hospital, learned last month that their pensions would be pared back or eliminated Nov. 11 because the plan was running out of cash.

That collapse has prompted an outcry for the Albany Roman Catholic Diocese, which long had close ties to St. Clare's, to find a way to help the workers, who also have contacted a professor at Albany Law School for assistance.

It is not immediately clear where this extra money laid out by Pofit might come from.

This week, Scharfenberger wrote that the diocese "does not have the resources to rescue the corporation," although he offered his offices to meet with workers to talk over the problem.

As part of the state-ordered consolidation, the state gave St. Clare's $28.5 million in 2008 to sustain the pension fund, a figure that at the time was deemed adequate to protect the workers' pensions.

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 now-ailing fund was not backstopped by federal pension insurance meant to protect workers from fiscal calamities.

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

During the 1990s, officials at St. Clare's sought and received federal approval for a 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, but the plan was then left uninsured from fiscal calamity.

Founded in 1949 by Catholic priests and Franciscans, St. Clare's from its beginnings has been linked to the Albany Roman Catholic Diocese. Bishops also served on the hospital board of directors.

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."


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Old 11-20-2018, 05:05 PM
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GE
PBGC

https://burypensions.wordpress.com/2...-3-ge-bailout/

Quote:
0
NOV
PBGC & SEPs (3): GE Bailout
Spoiler:
Forbes had an article on how the bankruptcy of a sponsor of a large Single Employer Defined Benefit Plan would impact participants and the PBGC.

In its 2018 Annual Report, the PBGC reports that the Single-Employer Plan had assets of $109.9 billion and liabilities of $107.5 billion for a net of 2.4 billion, a big improvement from last year’s -10.9 billion.

At the end of 2017, the portion of GE’s pension plan that is insured by PBGC had assets of $50.4 billion and liabilities of $68.3 billion for a net underfunding of $17.9 billion.

If the PBGC were to take over GE’s pension plan, the financial stability of Single-Employer plan would suffer greatly. The Plan would have assets of about $163 billion and liabilities of about $176 billion for a net underfunding of about $13 billion. That does not mean payments would stop, or even be reduced. But it means that eventually, the plan would run out of money before it could meet its obligations. To make the program financially sound, something has to change.

If the PBGC were to take over the GE Pension Plan it would be the loss of $270 million in premiums that would hurt the most. Let’s look at data from the latest 5500 filing.






Single-Employer plans report their liabilities on the 5500 using interest rates defined in the MAP-21 and HATFA ‘relief’ whereas the rates that the PBGC wants you to use for calculating variable rate premiums approximate those in PPA which generate bigger liabilities (and premiums) and are also closer to the 417(e) rates that have to be used when you pay out lump sums.

Whereas multiemployer plans report liabilities on the 5500 using RPA ’94 rates approximating the lower PPA rates, Single-Employer Plans do not show this higher liability amount anywhere except on their PBGC filings (which are not public information). This means that the funded ratios that you see on 5500 filings are closer to reality for multiemployer plans and the GE plan may indeed be underfunded by $12 billion (the Forbes article used an asset value of $50.4 billion which ignored the $6 billion in contributions receivable as of 12/31/17).

Were the PBGC to take over GE’s plan they would reduce benefits to their coverage limits which could wipe out the underfunding and put the plan in balance. However, what would be lost are those $270 million (and rising) of premiums annually that the PBGC is using for other purposes. It is those extortionate premiums that are driving Defined Benefit plans to terminate until one day in the not too distant future we may be left with only Single-Employer plans not covered by the PBGC plus one big plan consisting of all those plans that the PBGC once covered and now sponsors.


https://www.forbes.com/sites/kenkam/.../#18de35e468e3

Quote:
GE Pensioners And Stockholders Contemplate The Unthinkable

Spoiler:
After the cost of insuring General Electric's debt hit a six year high on Monday and the stock continued its precipitous decline, GE retirees began to ask about the unthinkable. I know this because I got more than a 100 responses to my last article on Forbes. What would happen to their pensions if GE went bankrupt? No one is saying that a bankruptcy filing is imminent, but with few signs of a turnaround at GE, it's time to consider the worst case scenario. General Electric's pension plan is insured by a government agency called the Pension Benefits Guaranty Corporation's (PBGC) Single-Employer Plan. Here's what the PBGC says you are guaranteed.

What Would The PBGC Pay?

Right off the bat, it should be noted that the PBGC does not guarantee health benefits. For 2018, the PBGC's guarantee limit for the single-employer plan is spelled out here.


PBGC's Guarantee LimitsPBGC


If your current pension benefit is less than the PBGC's guarantee limit in the table in all likelihood you will continue to receive the same amount that you get from GE's plan now.

The numbers in the table are determined by a formula established by law about 40 years ago. Each year the guarantee limits go up, never down and they are set without regard to the financial condition of the plan.

Who Makes Up The Shortfall?

You may wonder, as I do, how the PBGC can pay the same benefits when GE's 2017 annual report says their plan's assets are short by close to $29 billion. Who makes up for the shortfall?

First, let's break down the shortfall. The PBGC only insures the plan that covers U.S. employees and retirees. That plan accounts for about $18 billion of the shortfall. The rest of the shortfall, about $11 billion, is due to a Supplemental Pension Plan covering higher paid executives and other plans that cover international employees all of which are not insured by the PBGC.

An expert on the PBGC, who I spoke to on background, explained that the shortfall is made up for by insurance premiums paid by pension funds that are still ongoing. PBGC receives no funds from general tax revenues. The PBGC is not backed by the full faith and credit of the U.S. government. It is more like Fannie Mae and Freddie Mac. No one knows who would pay if the PBGC couldn’t meet its obligations.

In its 2018 Annual Report, the PBGC reports that the Single-Employer Plan had assets of $109.9 billion and liabilities of $107.5 billion for a net of 2.4 billion, a big improvement from last year's -10.9 billion.

At the end of 2017, the portion of GE's pension plan that is insured by PBGC had assets of $50.4 billion and liabilities of $68.3 billion for a net underfunding of -17.9 billion.

If the PBGC were to take over GE's pension plan, the financial stability of Single-Employer plan would suffer greatly. The Plan would have assets of about $163 billion and liabilities of about $176 billion for a net underfunding of about $13 billion. That does not mean payments would stop, or even be reduced. But it means that eventually, the plan would run out of money before it could meet its obligations. To make the program financially sound, something has to change.

Would the government come to the rescue with a bailout of GE as it did for Fannie and Freddie? It has happened before but I would not count on it happening again.

The General Motors And Chrysler Bailout

The last time the PBGC faced a similar situation was in 2009 when President Obama bailed out General Motors and Chrysler thereby keeping up to $20 billion of unfunded pension liabilities off the PBGC's books. In 2009, the PBGC's Single-Employer plan was underfunded by about $21 billion.

When President Obama bailed out General Motors and Chrysler in 2009, the primary justification was to save an estimated 1 million jobs after the financial crisis had nearly frozen access to credit for vehicle loans and sales had plunged by 40%. The U.S. Treasury paid a total of $80.7 billion for stock in GM, GMAC, and Chrysler. By the end of 2014, the stock was sold for $70.5 billion for a loss of $10.2 billion. However, by preventing GM and Chrysler from dumping a combined $20 billion of unfunded pension liabilities onto the PBGC, the bailout indirectly saved the PBGC.

GE's UK Retirees Get Lucky

On Tuesday, GE announced that it was selling 166 million shares of Baker Hughes to raise about $4 billion and will transfer some UK pension liabilities to Baker Hughes on a fully funded basis. GE's UK pensioners are the lucky ones. This sale carries a whiff of desperation because the Baker-Hughes shares GE is selling for about $24 per share were acquired just in 2016 in a complex transaction which according to Jeff Immelt, who was CEO at the time, cost the company $76 per share (see page 17 of this November 7, 2016 presentation).

The Sum Of The Parts

I continue to hear from knowledgeable retirees that the Aviation, Healthcare, and Power businesses are worth more than the $8 per share that the market now values General Electric. However, small shareholders don't determine company strategy. Not even knowledgeable shareholders who used to run parts of the company.

In the last conference call, GE's management reported that the power business lost $631 million last quarter and GE took a $22 billion write-off because "expected future profits in the unit now appear unlikely". After that call, JP Morgan's Steven Tusa questioned GE's liquidity when he lowered his target price to $6 last week Friday.

The question of whether GE is undervalued is separate from how much of GE's stock you should own.

If you have enough to live on comfortably without your GE stock, and its greatly reduced dividend, then you can afford to maintain an oversized position in its shares-- though I don't recommend it.

However, if your retirement depends on GE turning around, it's time to invest your portfolio in other stocks.

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Old 11-23-2018, 04:22 PM
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THE NETHERLANDS

Quote:
Dutch pensions face possible benefit cuts

Spoiler:
The MSCI World index declined by 6.7% during October and the 30-year swap rate dropped almost three basis points, to 1.5%. Interest rates are crucial for discounting future pension liabilities.

Falling equity markets and lower interest rates hurt the funding levels of the four largest Dutch pension funds in October, prompting them to contemplate benefits cuts to participants, IPE.com reported.

Two metal industry pensions, PMT and PME, drew closer to imposing benefit cuts in 2020 after figures published last week showed that their funding ratios had declined three percentage points, to about 101%.

PME said it had already been communicating to members the risk of cuts through all its information channels during the past year. “We are trying to find a balance between warning and unnecessarily worrying our participants,” it said. Cuts can be spread out over a 10-year period, but they are unconditional and cannot be reversed.

The MSCI World index declined by 6.7% during October and the 30-year swap rate dropped almost three basis points, to 1.5%. Interest rates are crucial for discounting future pension liabilities.

Civil service pension ABP saw the value of its assets drop 2.8% to €407bn, while its liabilities rose 0.1% to €399bn. To avoid benefit cuts, its funding ratio must rebound to the required minimum of about 105% by year-end. Benefit cuts must be applied when a plan has been underfunded for five consecutive years.

To PMT and PME, their funding at the end of 2019 will be crucial to avoid cuts. At the end of October, their coverage ratios stood at 102.5% and 101.7%, respectively, compared to the required 104.3%.


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