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  #851  
Old 05-12-2019, 09:15 AM
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https://www.ai-cio.com/news/court-re...-pension-suit/

Quote:
Court Reinstates Two Claims Against UPenn in Pension Suit
Penn is accused of breaching its fiduciary duty by accepting high fees, poor investments.
Spoiler:
A US federal appeals court reinstated two out of seven claims in a lawsuit alleging that the University of Pennsylvania breached its fiduciary duties when managing its 403(b) pension funds for its employees.
In September 2017, a district court dismissed the lawsuit against the University of Pennsylvania, Sweda v. Univ. of Penn., which accused the Ivy League school of breach of fiduciary duty, prohibited transactions, and failure to monitor fiduciaries under the Employee Retirement Income Security Act (ERISA). The suit alleged Penn “failed to use prudent and loyal decision-making processes regarding investments and administration, overpaid certain fees by up to 600%, and failed to remove underperforming options from the retirement plan’s offerings.”
But last week, the appellate court reversed the district court’s dismissal of the breach of fiduciary duty claims for counts 3 and 5, and remanded for further proceedings. Count 3 accuses Penn of breaching its fiduciary duties with unreasonable administrative fees and count 5 is in regard to unreasonable investment management fees, unnecessary marketing and distribution (12b-1) fees, and mortality and expense risk fees, as well as performance losses.
The appellate court said that the district court erred in dismissing the two counts by “ignoring reasonable inferences” that were supported by the alleged facts.
“While Sweda may not have directly alleged how Penn mismanaged the plan,” said the court in its ruling, “she provided substantial circumstantial evidence from which the district court could ‘reasonably infer’ that a breach had occurred.”
The plaintiffs are seeking to represent a proposed class of 20,000 current and former Penn employees who participated in Penn’s Retirement Plan since August 2010. The Plan is a defined contribution plan offering mutual funds and annuities, and the University matches employees’ contributions up to 5% of compensation.
Penn’s 403(b) plan offers mutual funds through TIAA-CREF and Vanguard Group, and annuities through TIAA-CREF. Since 2010, the plan has offered as many as 118 investment options, and as of December 2014, the plan offered 78 options: 48 Vanguard mutual funds and 30 TIAA-CREF options, including mutual funds, fixed and variable annuities, and an insurance company separate account.
The plaintiffs argue that Penn is obligated to limit the plan’s expenses to a “reasonable amount” to ensure that each fund is a prudent option for participants, and that it must make those decisions for the exclusive benefit of participants, and not for conflicted third parties.
Penn “squandered that leverage by allowing the plan’s conflicted third party service providers—TIAA-CREF and Vanguard—to dictate the plan’s investment lineup,” alleges the lawsuit, “to link their recordkeeping services to the placement of investment products in the plan, and to collect unlimited asset-based compensation from their own proprietary products.”
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  #852  
Old 05-14-2019, 09:44 AM
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ST. JOSEPH'S HEALTH SERVICES
RHODE ISLAND

https://www.golocalprov.com/news/st....ontroversial-m
Quote:
St. Joseph’s Failed Pension Fund Pushed Into Federal Control, Controversial Move Is Unprecedented

Spoiler:
GoLocalProv.com has learned that Rhode Island's largest failed pension fund has been pushed into federal oversight by receiver Stephen Del Sesto.
The unprecedented action by Del Sesto will move the St. Joseph Health Services pension fund to the control of the federal Pension Benefit Guaranty Corporation. This action will force the fund to be treated under the Employee Retirement Income Security Act of 1974 (ERISA) — the federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

The problem? St. Joseph's failed plan does not comply with the ERISA standards.

Previously, the St. Joseph pension plan was treated as a “Church Plan” — the name for retirement plans controlled by religious organizations which are exempt by federal law from state or federal regulatory review and compliance.

Unprecedented Move

The decision by Del Sesto is a complex and admittedly an extraordinary move. Traditionally, pension funds that are already being regulated under ERISA, but are financially failing are placed under the federal control of the PBGC.

VIEW LARGER +
Receiver for the fund, Stephen Del Sesto

In February, 2019, the Pension Benefit Guaranty Corporation took responsibility as trustee for Sears Holdings Corporation’s two defined benefit pension plans. Together the two plans cover about 90,000 workers and retirees of Sears, Roebuck and Co. and Kmart Corporation. The Sears pension plans are underfunded by more than $1.5 billion.
“This should have been done 10 to 20 years ago. [St. Joseph’s] was not a church plan despite the Diocese [of Providence] claims," said Del Sesto in an interview with GoLocal.

The St. Joseph pension funds approximately 2,700 participants and the fund is underfunded by an estimated $118 million. For years the Diocese of Providence failed to make proper contributions to the fund. Then, in 2014 St. Joseph was orphaned — no longer receiving any contributions — as a part of the deal that sold the CharterCare hospitals (St. Joseph, Roger Williams, and Fatima) to Prospect of California.

In a submission to Superior Court Judge Brian Stern, Del Sesto wrote, “In the federal lawsuit brought by the receiver, the receiver contends that these prior sponsors (Dioceses and Prospect) intentionally misclassified the Plan as a Church Plan in an effort to avoid their obligations and responsibilities as fiduciaries of an ERISA-covered defined benefit pension plan.”

The St. Joseph pension fund was put into receivership in August 2017. This move does not directly impact the ongoing federal and state fraud suits brought by Del Sesto and special investigator Max Wistow against more than ten entities including the Diocese of Providence and Prospect of California.

LEARN MORE ABOUT THE FRAUD LAWSUITS BELOW


VIEW LARGER + Bound to Collapse
The PBGC has acknowledged that they have received Del Sesto’s submission and payment of more than $1 million to place the plan under its control, but Del Sesto says due to the inability of the fund to make annual contributions as required by federal law -- the fund is likely to be out of compliance almost immediately. "I am required to make about a $10 million contribution annually and the pension plan has no income coming in. The fund will nearly immediately be in failure," said Del Sesto.

Further Del Sesto writes to the court, "Pending those determinations and based upon advice from his retained experts, the receiver has taken steps to revise the Plan's terms and to administer benefits in a manner that complies with the requirements of ERISA and the tax-qualification rules of the Internal Revenue Code on a going forward basis. As part of that effort, the Receiver adopted a revised Plan document on April 15, 2019, subject to a retroactive effective date of July 1, 2017 (the "Effective Date"). The Receiver also retained and directed certified public accountants and an actuary to prepare and file an annual financial report on behalf of the Plan with the United States Department of Labor and Internal Revenue Service, as is normally required of ERISA-covered pension plans. Lastly, the Receiver also has filed an election (as part of that annual report) to have the Plan covered by ERISA for all Plan Years beginning on or after the Effective Date."

Del Sesto warns that this is unprecedented -- a failed plan that has never been compliant with ERISA now being thrust under federal control and which will almost immediately be out of compliance. "I am unaware of any situation like this and we have looked," said Del Sesto.


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  #853  
Old 05-19-2019, 08:44 PM
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NRA

https://www.npr.org/2019/05/15/72296...ons-at-nonprof
Quote:
As Leaks Show Lavish NRA Spending, Former Staff Detail Poor Conditions At Nonprofit

.....

Spoiler:
A series of internal National Rifle Association documents leaked online over the weekend, detailing lavish six-figure spending on clothing and travel expenses for CEO Wayne LaPierre.

The disclosures prompted board member Allen West to speak out. On Tuesday he announced that he had previously called for LaPierre's resignation and argued that "it is imperative that the NRA cleans its own house." A second NRA board member followed suit on his Facebook page by writing, "it is time for new management."

These developments, combined with a cascade of stories about other incidents of runaway spending at the gun rights organization, especially rankled former rank-and-file NRA employees.

They told NPR about low wages, pension problems and a culture of fear within the organization that treated ordinary staff very differently than its leadership.

Especially upsetting was the disclosure of these enormous costs despite one fact acknowledged in documents obtained by NPR: The company has underfunded pensions affecting hundreds of former and current employees — even as LaPierre made $1.4 million in 2017, according to the group's most recent financial disclosures.

Article continues after sponsor message

"In relation to other nonprofit organizations, he is paid more than just about anybody else in the field," said Daniel Borochoff, president of Charity Watch, a nonprofit watchdog. "Do they need to pay him this in order to operate well? Or are there other executives that they would be able to hire that would be able to do the job as well at a lower cost? That's what nonprofits need to defend."

Wayne LaPierre Re-Elected As NRA Leader Amid Internal Turmoil And Outside Probe
POLITICS
Wayne LaPierre Re-Elected As NRA Leader Amid Internal Turmoil And Outside Probe
Of the more than 600 organizations that Charity Watch tracks, LaPierre is the eighth-highest compensated nonprofit leader in the country. If you exclude hospitals or medical professionals, he is the second-highest compensated, Borochoff said.

It's a level of compensation that has been noticed by former NRA staff, who are now speaking out publicly.

"I can think of no other non-profit organization that compensates their Executive Vice President the kind of salary and benefits that Mr. LaPierre gets relative to how much employees receive," wrote former 13-year NRA employee Andy Lander in an open letter that has circulated widely throughout the gun-rights community.

Lander added, "I also cannot understand how a person like Mr. LaPierre treats the people that work for him like his own personal indentured servants, unless you know the secret handshake, then you're compensated very handsomely as long as you follow along blindly providing no resistance to the people running the organization."

The NRA did not respond to multiple requests for comment on this story. But LaPierre retains a substantial amount of support from his board of directors.

"Wayne has dedicated his entire life to defending our freedom. And as the leader of the association Wayne has led the NRA through the most incredible, hard-fought victories," board member Carolyn Meadows said during the NRA's annual meeting last month. "Wayne will be the first to say that it's not him, that it's about the members."

Meadows was subsequently selected to be the president of the organization.

Documents raise questions about NRA pension plan

Even as the organization pays its top executives high wages, the future prospects for those NRA employees who qualify for a pension are worsening.

NPR obtained a copy of 2019 National Rifle Association pension documents from a source with direct access to them. Brian Mittendorf, who chairs the Department of Accounting at Ohio State University, helped NPR review these documents.

They show that the NRA's pension obligations were approximately $134 million at the beginning of this year, but they had only set aside $93 million to meet those obligations.

They also show that the NRA's pension situation has become more troubling in the past few years. There are 786 people in the NRA's pension plan, of which 223 are currently employed by the organization.

Buried at the bottom of one page of the pension report, in a bullet point, the NRA said it had implemented a freeze to their pension plan in 2018. This means that even current employees who are in the plan can no longer accrue new benefits despite continuing to work for the organization.

"In effect, it is the most an organization can do to cut pension benefits without completely terminating its plan," Mittendorf said.

The freeze in benefits for employees who participate in the pension plan is in contrast to a one-time $3,767,345 supplemental retirement payment LaPierre received in 2015, according to the NRA's public disclosures.

"It's indicative that the organization has not set aside sufficient funds to cover its rank-and-file employees' retirements," Mittendorf said. "That means that the organization's financial trouble puts these rank-and-file employees' future at risk. Something would need to change at the organization to cover them. ... The people at the top are going to be financially secure. It's the rank-and-file employees that are at risk."

.....
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  #854  
Old 05-20-2019, 05:32 PM
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SAINT JAMES HOSPITAL
NEWARK, NEW JERSEY

https://www.ai-cio.com/news/hospital...lost-benefits/

Quote:
Hospital Retirees Sue Newark Archdiocese for $2.7 Million in Lost Benefits
Suit claims Archdiocese hid IRS ruling that revoked ERISA protection.
Spoiler:
Retirees of Saint James Hospital of Newark, New Jersey, are suing the Archdiocese of Newark, claiming it wrongly denied them at least $2.7 million in lifetime pension benefits.
According to the complaint, which was filed in the Superior Court of Essex County, the Archdiocese did not inform the retirees about an IRS ruling that led to the loss of federal protections for its pension, yet it continued to assure the retirees that they were entitled to lifetime benefits.
In October 1988, the Archdiocese sent a letter to past and present employees informing them that it wanted to terminate the hospital’s pension plan. In the letter, the Archdiocese said the termination would not reduce or adversely affect vested benefits, and that “there appear to be sufficient assets to pay all benefit commitments under the plan.”
The retirees say the last statement was false.
“There was not in fact enough money in the SJH Plan to cover the full cost of the pensions promised to its participants and beneficiaries,” said the plaintiffs in the complaint. “Instead of putting more money into the plan, the Archdiocese developed a strategy to escape PBGC scrutiny and the protections of ERISA [The Employee Retirement Income Security Act of 1974].”
The complaint said that without informing the plan’s participants and beneficiaries, the Archdiocese sent a request to the IRS to change its status to that of a church plan, and in 1990, the request was granted. The change meant that the plan was no longer subject to the rules of ERISA.
The plaintiffs say that the Archdiocese concealed the IRS ruling from the plan participants, and did not provide documents describing the new rules that governed the plan after it was no longer under ERISA jurisdiction.
Beginning in 1996, the Archdiocese began to transfer trust assets dedicated to funding the retirees’ pension benefits to another account that plaintiffs say was insufficient to pay the promised lifetime benefits. The complaint alleges the Archdiocese transferred $2.7 million less than was necessary to pay the promised full lifetime pensions, despite having a $20 million surplus in its overall pension accounts.
The plaintiffs consist of a group of 135 retirees who worked primarily for Saint James Hospital, earned pensions, and left the hospital before becoming eligible to collect their pensions.
“The Archdioceses knew that it was not providing enough money to pay lifetime pensions,” said the complaint. “But it also knew that, because none of the individual named plaintiffs or class participants had even started receiving their pension payments at the time of the 1996-1997 transactions, it would be decades before the money ran out.”
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  #855  
Old 05-23-2019, 09:50 AM
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MORTALITY

https://www.ai-cio.com/news/life-exp...pension-plans/
Quote:
Life Expectancies Are Declining Slightly in Private Pension Plans
Society of Actuaries director hints at opioid crisis, societal issues as cause.
Spoiler:
Private pension funds are seeing a small decline in how long their beneficiaries live, according to new data from the Society of Actuaries.
Although the percentage change in plan member life expectancy was not significantly smaller, the numbers have gone down for both white- and blue-collar workers between 2006 and 2012, regardless of gender. The 2012 end point of the study reflects the data collection available to date.
From the total data aggregate, men live to be about age 84.7 years, compared to 85.0 in 2006, but women’s average lifespan was unchanged at 87.4. But for women, perhaps due to a statistical anomaly, there’s a fall-off when they are divided into blue- and white-collar workers. Life expectancies dipped a tiny bit for blue-collar women (86.9 versus 86.7) and more so for white-collar women (88.5 down to 87.9).
The slide among men showed much the same pattern, with less of a drop for blue-collar males (84.3 to 84.1) than for white-collar ones (86.7 to 85.9).
Dale Hall, managing director of research at the Society of Actuaries, told CIO reasons for the mortality decline could be the type of businesses the pension plans cover, as well as issues affecting the total US population over the past decade.
“There’s a lot of new diseases, Alzheimer’s, the opioid epidemic effect, other things that are impacting the way mortality improvement has happened over time,” said Hall.
For CIOs and plan sponsors, their liabilities will also decrease slightly. Liabilities in blue-collar women and older men will shrink up to 1.5%, while liabilities for younger blue-collar men could see up to a 1.7% reduction.
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  #856  
Old 05-29-2019, 12:00 PM
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MORTALITY

https://www.plansponsor.com/soa-prop...paign=Newsdash

Quote:
SOA Proposes New Mortality Tables
The Society of Actuaries (SOA) proposed mortality tables include mortality data from both single-employer and multiemployer defined benefit (DB) plans.
Spoiler:
The Society of Actuaries (SOA) released an exposure draft of new private-sector retirement plan mortality tables.
The new tables, Pri-2012, honor the SOA’s commitment to updating its mortality tables every five years, as new data is available. The SOA will accept comments to the exposure draft through July 31, and plans to finalize the tables later this year.
The Pri-2012 mortality tables provide pension actuaries and plan sponsors with the most current information to measure retirement plan obligations and make forward-looking mortality improvement assumptions. The Pri-2012 tables were developed from data collected for 2010-2014, and named for the central year of 2012. It includes 16.1 million life-years of exposure and 343,000 deaths from 402 pension plans. Pri-2012 includes mortality data from both multiemployer and single-employer defined benefit (DB) plans.
The SOA says most plan sponsors that update their mortality assumption from the RP-2006 tables to the Pri-2012 tables will experience only a small change in their pension liabilities, usually within plus or minus 1%. The amount will vary depending on the plan’s mix of occupations, ages and gender, as well as the discount rate and other assumptions used to compute liabilities.
When moving from the RP-2006 tables to the Pri-2012 tables, the life expectancy of a 65-year-old female pension plan participant remains roughly unchanged at 87.4 years, while the life expectancy of a 65-year-old male pension plan participant decreases 1.3%, from 85 years to 84.7 years.
Participants in multiemployer plans did not exhibit significantly different mortality than participants in single-employer plans. Additionally, the SOA found that type of occupation (blue-collar vs. white-collar) is emerging as a stronger predictor of mortality than plan benefit amount.
https://www.pionline.com/article/201...ut-for-comment

Quote:
Revamped Society of Actuaries mortality tables out for comment

Spoiler:
Revised mortality tables for private-sector retirement plans were made available for comment Wednesday by the Society of Actuaries.

The exposure draft of the new private-sector retirement plan tables, Pri-2012, will be available for comment through July 31 and then finalized later this year.

Mortality tables are used by pension actuaries and plan sponsors to calculate retirement plan obligations and for future projections based on mortality improvement assumptions. The Society of Actuaries has committed to updating its mortality tables every five years, as new data becomes available.

RELATED COVERAGE
SOA finds slight dip in mortality rates overall Largest public sector pension obligations likely for teachers, SOA mortality study findsIRS shift on lump-sum payments unlikely to spur big DB plan rush
The latest tables are based on data collected for 2010-2014 and are named after the central year, 2012. They include 16.1 million life-years of exposure and 343,000 deaths from 402 plans, and include both single and multiemployer pension plans.

While the current table had minimal multiemployer data, the new one includes a substantial amount of data from multiemployer plans; with roughly 41% of the total dataset and about 70% of the multiemployer data coming from those plans.

Plan sponsors updating mortality assumption from the previous tables, RP-2006, will most likely experience less than a 1% change in pension liabilities, the SOA said in a release. The amount of change will depend on occupations, ages, gender, discount rates and other assumptions used to compute liabilities.

Life expectancies between the current and new tables are roughly unchanged for a 65-year-old female pension plan participant, at 87.4 years, while the life expectancy of a 65-year-old male participant decreased 1.3%, to 84.7 years from 85 years.

Mortality for multiemployer plan participants was not significantly different, and the SOA found that blue-collar vs. white-collar occupations were a stronger predictor of mortality.


https://www.ai-cio.com/news/life-exp...pension-plans/
Quote:
Life Expectancies Are Declining Slightly in Private Pension Plans
Society of Actuaries director hints at opioid crisis, societal issues as cause.


Spoiler:
Private pension funds are seeing a small decline in how long their beneficiaries live, according to new data from the Society of Actuaries.

Although the percentage change in plan member life expectancy was not significantly smaller, the numbers have gone down for both white- and blue-collar workers between 2006 and 2012, regardless of gender. The 2012 end point of the study reflects the data collection available to date.

From the total data aggregate, men live to be about age 84.7 years, compared to 85.0 in 2006, but women’s average lifespan was unchanged at 87.4. But for women, perhaps due to a statistical anomaly, there’s a fall-off when they are divided into blue- and white-collar workers. Life expectancies dipped a tiny bit for blue-collar women (86.9 versus 86.7) and more so for white-collar women (88.5 down to 87.9).

The slide among men showed much the same pattern, with less of a drop for blue-collar males (84.3 to 84.1) than for white-collar ones (86.7 to 85.9).

Dale Hall, managing director of research at the Society of Actuaries, told CIO reasons for the mortality decline could be the type of businesses the pension plans cover, as well as issues affecting the total US population over the past decade.

“There’s a lot of new diseases, Alzheimer’s, the opioid epidemic effect, other things that are impacting the way mortality improvement has happened over time,” said Hall.

For CIOs and plan sponsors, their liabilities will also decrease slightly. Liabilities in blue-collar women and older men will shrink up to 1.5%, while liabilities for younger blue-collar men could see up to a 1.7% reduction.


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  #857  
Old 05-29-2019, 01:46 PM
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RHODE ISLAND

https://www.ai-cio.com/news/rhode-is...paign=CIOAlert
Quote:
Rhode Island Secures Church Pension Transparency
Bill’s passage will solve reporting loophole in religious institutions.
Spoiler:
Rhode Island is poised to require religious organization-run pension programs to disclose their finances to plan participants, in the wake of a scandal surrounding a broke church-related plan where the beneficiaries didn’t know how bad things were.
The plan, for employees of St. Joseph’s and Our Lady of Fatima hospitals, was exempt from standard disclosure rules for pension recipients.
The state’s House of Representatives this week passed the disclosure measure, previously approved by the state Senate and awaiting the governor’s expected signature. It calls for regular updates on the financial health of church and other clerically managed funds.
“Any member of a pension plan, no matter who administers the plan, should have access to information about their pension,” said Rhode Island Treasurer Seth Magaziner. “This must never happen again in Rhode Island.”
The fund was acquired in 2014 when the California-based Prospect CharterCare bought St. Joseph and the hospitals it owned.
Diocese Lay Employees Retirement Plan members discovered it was insolvent in 2017.
Evan England, Magaziner’s director of communications, told CIO some involved in the sale tried to help the ailing plan, but that their efforts went “into a black box.”
“It ought to have been sustained,” he said.
The transparency bill was passed swiftly in both chambers.
The Rhode Island faith-based fund, which has been in the Pension Guaranty Benefit Corporation’s oversight since last year, will now be subject tothe same guidelines as the Employee Retirement Income Security Act (ERISA), which requires broad transparency to plan participants.
“Essentially this legislation requires that they annually mail their members just basic information about the health status of their plan,” said England.
Religious plans currently claim exception from ERISA and other reporting standards, such as those mandated by the Governmental Accounting Standards Board.
All that’s left is for Governor Gina Raimondo to sign, which is believed to be inevitable by all parties.
Neither Magaziner, the churches, nor the governor could be reached for comment.
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Old 05-29-2019, 01:49 PM
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https://www.ai-cio.com/news/new-bill...ions-40-years/

Quote:
New Bill Would Conduct the Largest Investigation of Private Pensions in 40 Years
Bipartisan senators look for new ways to ensure retirement security.
Spoiler:
Bipartisan US senators are proposing legislation in an effort to secure workers’ retirement benefits in the long run, through the formation of a new retirement commission that would guide private retirement plans to a more sustainable future.
Coined the Federal Retirement Commission Act, Sens. Todd Young, an Indiana Republican, and Cory Booker, a New Jersey Democrat, would create a group responsible for reviewing private benefit programs and submitting to Congress recommendations on how to improve or replace the programs. Their judgements would be mandated to consider societal trends such as wage growth, health care costs, life expectancy, serial employment, and shrinking household size, with a focus on moving from defined benefit to defined contribution models.
“With many individuals reaching retirement with little to no savings of their own, we must take a serious look at our current retirement programs and make the changes necessary to help secure the futures of so many hardworking Americans,” Young said in a statement.
The bill would essentially restructure these private pension plans to run more efficiently and effectively. The Senate Finance Committee held a hearing on the issue after its introduction, where it was widely regarded as a top priority for Congress given the troublesome financial situations many retirees face.
The bill comes on the heels of the 2017 Government Accountability Office Report, which concluded an independent panel of experts would be valuable to address the needs of the current environment and improve the nation’s collective retirement security.
It’s been over 40 years since a federal commission completed an investigation of the retirement system at the magnitude the two senators are proposing. The last time was Jimmy Carter’s 1979 executive order to complete a two-year study of the pension system and the future of the nation’s retirement income policies.
“Private retirement systems have undergone significant changes over the past 40 years as traditional pensions have become less common,” Young said in a prepared statement. “Individuals must now prudently plan for their own retirement security through retirement savings accounts like 401(k) plans.”
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Old 05-29-2019, 01:50 PM
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UNITED KINGDOM
MORTALITY

https://www.ai-cio.com/news/uk-loses...-expectancies/
Quote:
UK Loses Decade of Improving Life Expectancies
Mortality rate at the end of 2019 expected to fall back to 2009 level.
Spoiler:
The trend of falling life expectancies seen over the past few years in the UK has continued into this year, according to KPMG, which has declared a “lost decade” of life expectancy improvements as the mortality rate in 2019 is expected to fall back to levels not seen in 10 years.
According to KPMG’s 2019 Pensions Accounting Survey, the median life expectancies for retirees aged 65 declined by 0.2 years to 86.9, while life expectancies for 45-year-olds fell 0.1 years to 88.4. That means that a current retiree aged 65 is expected to survive another 21.9 years on average, while future retirees currently aged 45 are expected to live another 23.4 years from the age of 65. The median gap between current retiree and future retiree life expectancies has remained at 1.4 years for a 20-year projection, according to the report.
The research is based on trends in best-estimate assumptions from 212 clients with defined benefit pension plans reporting under IFRS, UK GAAP, or US GAAP at the end of last year.
“By the end of 2019, assumed life expectancies will be back to levels last seen in 2009,” Naz Peralta, KPMG’s pensions director, said in a release. “This ‘lost decade of life expectancy’ is largely due to the slowing rate of future mortality improvements as projected by the Continuous Mortality Investigation Bureau (CMIB) over the past four years.”
The CMIB, which is supported by the Institute and Faculty of Actuaries, continually updates its research and produces annual updates of the CMI projection model. During the past few years, these updates have projected a slowing rate of future mortality improvements.
KPMG attributed this trend to the fact that 76% of companies adopted the latest CMI projections, which reflected a decrease in the expected rates of future improvements in mortality. There was a new parameter added to the CMI 2018 model, called the initial addition parameter. The parameter is intended to allow users of the model to make adjustments to reflect differences in improvements in a particular sub-population relative to the general population data on which the model is calibrated.
“The initial addition parameter is the second new parameter added in recent years,” said Peralta. “Although these in theory allow companies to tailor their assumptions better, in practice it is likely to cause some confusion due to the complexity and subjectivity involved. We expect many companies will use the default assumptions for these new parameters until they are understood better.”
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Old 05-29-2019, 08:19 PM
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UNITED KINGDOM

https://www.ai-cio.com/news/uk-pensi...s-20-equities/

Quote:
UK Pension Funds Now Hold less than 20% in Equities
Report also says accounting rules change could cost FTSE 100 pensions $100 billion.

Spoiler:
The UK’s largest corporate pension funds continue to shed their equity investments, dumping approximately 30 billion ($38 billion) worth in 2018, and for the first time investing less than 20% of their total assets in the stock market, according to research from investment advisory firm Lane Clark & Peacock (LCP).

The equity holdings by the pension funds of the FTSE 100 companies have been on a steady decline for years, and are down from 60% in 2002.

“In conjunction with this, the move away from defined benefit provision continues,” said LCP. The firm said that only 41% of the FTSE 100 provides any form of defined benefit pension to existing UK employees, down from 44% in 2017. And only two FTSE 100 firms—chemicals companies Croda and Johnson Matthey—still offer defined benefit pensions to new UK employees.

The research came from LCP’s annual report looking at FTSE 100 companies’ pension disclosures, which also said that FTSE 100 pension plan funding could fall by 100 billion if the International Accounting Standards Board changes its accounting rules as it has been suggesting.

“For some years, the International Accounting Standards Board has been proposing to tighten the rules,” said the report. “While proposals put forward in 2015 were dropped, new proposals may be put out to consultation in the coming year.”

LCP estimates that the potential new IFRIC14 rules, combined with the possibility of more prudent contribution requirements, could lead to a one-time balance sheet hit of more than 100 billion, compared with the impact of IFRIC14 on FTSE 100 companies’ 2018 accounts, which was only 13 billion.

International accounting standards limit the amount of a surplus arising from a defined benefit plan that an entity can recognize as an asset, and IFRIC 14 clarifies how an entity applies those requirements. IFRIC 14 also addresses the interaction between such minimum funding requirements and the limits on the measurement of the defined benefit asset or liability.

The report also looked into how guaranteed minimum pension (GMP) equalization was affecting the pension plans of the FTSE 100 companies.

An October High Court ruling confirmed that pension plans need to remove the inequalities that arise in benefits between men and women because of unequal GMPs earned between 1990 and 1997. The judgment affects most companies with pension plans.

LCP said that the FTSE 100 disclosed an average estimated cost of correcting for gender inequality in GMP benefits of 0.4%. The firm said that while this is “considerably lower” than estimates had suggested, five FTSE 100 companies still took a hit to profits of 100 million or more due to GMP equalization.

The report also explored executive pensions, which have received criticism from national newspapers recently for being overly generous compared to the general workforce. LCP’s analysis of the 2018 disclosed accounts for the FTSE 100 shows average CEO pension contributions of around 25%, typically paid as a cash supplement.

Additionally, the report said approximately half of the FTSE 100 currently pay CEO pension contributions of 25% or above, and that only around 15% of the FTSE 100 companies pay CEO pension contributions or cash that are in line with their workforce.

“Relatively few companies have reduced contribution rates for their current CEOs,” said the report. “Standard Chartered and Lloyds did undertake changes but faced a significant amount of negative publicity and shareholder disquiet as the moves were seen as tokenistic.”


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