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  #531  
Old 06-18-2017, 04:22 PM
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GENERAL ELECTRIC

http://www.pionline.com/article/2017...ed-pension-tab

Quote:
GE’s $31 billion hangover: Immelt leaves behind big unfunded pension tab

It’s a problem that Jeffrey Immelt largely ignored as he tried to appease General Electric Co.’s most vocal shareholders.

But it might end up being one of the costliest for John Flannery, GE’s newly anointed CEO, to fix.

At $31 billion, GE’s pension shortfall is the biggest among S&P 500 companies and 50% greater than any other corporation in the U.S. It’s a deficit that has swelled in recent years as Mr. Immelt spent more than $45 billion on share buybacks to win over Wall Street and pacify activists like Nelson Peltz.


Part of it has to do with the paltry returns that have plagued pensions across corporate America as ultra-low interest rates prevailed in the aftermath of the financial crisis. But perhaps more importantly, GE’s dilemma underscores deeper concerns about modern capitalism’s all-consuming focus on immediate results, which some suggest is short-sighted and could ultimately leave everyone -- including shareholders themselves -- worse off.

“It’s a clear tension,” said Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School and executive director of the Pension Research Council. “Buybacks clearly use assets available not to fund the pension promise but to make shareholders happy.”

In GE’s case, lavish shareholder rewards failed to deliver outsize returns and leave Mr. Flannery with less room to maneuver. Not only must he boost profits, shore up its cash flow and contend with its flagging oil services and transportation businesses, but the 30-year GE veteran also needs to pay close to $50 billion in pension obligations that come due in the next decade.
.....
But if nothing else, balancing the competing interests of its shareholders and employees has proven to be especially hard for GE. Mr. Immelt began ramping up GE’s buybacks in 2015, shortly after Peltz’s Trian Fund Management took a stake in the industrial giant and recommended the company step up the repurchases to boost its stock price. GE bought back about $23 billion that year and then $22 billion in 2016. Last year’s total was more than double the amount GE spent in 2013, data compiled by Bloomberg show.

‘Living in fear’

Yet in those same two years, GE spent little more than $2 billion on total pension contributions, which hasn’t been nearly enough to keep the overall shortfall from widening. (The company also curtailed capital investments.) At the end of 2016, its pension had $94 billion in obligations but only $63 billion in assets -- a funding ratio of 67%.


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  #532  
Old 06-29-2017, 09:32 PM
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UPS

https://www.wsj.com/articles/ups-to-...ers-1498563670

Quote:
UPS to Freeze Pension Plans for Nonunion Staffers
Carrier has a U.S. pension deficit that reached $9.85 billion at the end of 2016


United Parcel Service Inc. UPS -0.27% will freeze pension plans for about 70,000 nonunion employees, seeking to contain the burden of a retirement fund with a nearly $10 billion deficit.

The package carrier is the latest major U.S. corporation seeking to corral rising pension obligations, which have swollen after years of low interest rates. The collective deficit in pension plans of S&P 1500 companies totaled $408 billion at the end of last year, according to consulting firm Mercer.

The Atlanta-based company, which is spending billions to expand its network to handle the surge in e-commerce shipments, said Tuesday it will freeze pension benefits in five years for nonunion workers. It will move those individuals to 401(k) accounts and contribute funds to those retirement plans.

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UPS has more than 434,000 workers worldwide, with more than 80% in the U.S. Most of them are unionized and won’t be affected by the changes. But the move could set up a showdown with the International Brotherhood of Teamsters, which represents 268,000 UPS workers and is preparing to negotiate a new contract.

A pension freeze puts UPS in line with a wide swath of American corporations. In 2014, 37% of Fortune 500 companies with defined benefit plans had frozen them in some way, compared with 35% with open plans, according to the consultancy Willis Towers Watson. That was the first year that frozen plans outpaced all other types, including closed or terminated. As recently as 2010, half of large companies with defined benefit plans were open.

UPS is trying to make a dent in a U.S. pension deficit that reached $9.85 billion at the end of 2016, according to its annual report. The plans, with $41.07 billion in obligations, were 76% funded at that point, down from nearly 90% at the end of 2013.

Like most corporate pension sponsors, UPS fell victim to historically low interest rates. Companies calculate the value of future benefits based on interest rates. Obligations rise when rates fall. A precipitous drop in interest rates—which have stayed lower for longer than many pension managers expected after the financial crisis—helped drive up the shipper’s deficit.

While interest rates have pushed up the obligations, UPS helped compound the problem, by neglecting to add enough to the plan to make the up the difference. Although the company contributed almost $5 billion into its fund between 2012 and 2016, it only made minimum contributions required by law in 2012. In 2013 it put no money into the plan.

http://www.foxbusiness.com/features/...th-update.html

Quote:
Correction to UPS Pensions Article (on Tuesday)
By Paul Ziobro and Vipal Monga Published June 28, 2017 Features Dow Jones Newswires

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United Parcel Service Inc. will freeze pension plans for about 70,000 nonunion employees, seeking to contain the burden of a retirement fund with a nearly $10 billion deficit.

....
UPS's pension struggles mirror broader funding problems among companies that offer retirement benefits. The median S&P 1500 pension plan's funded status was 76% at the end of 2016, according to a report by the financial strategies group at Citigroup Inc.

Companies are required by law to close those gaps over time, but the deficits have persisted, even though S&P 1500 firms collectively have contributed more than $550 billion into the plans from 2008 to 2016.

The ongoing cash drain is encouraging more executives to look for ways to stem the bleeding. "This costs a lot of cash, and the cash hasn't resulted in a better funded status," said Jason Richards, pension risk consultant at Willis Towers Watson.

Companies that freeze their pensions can later offer lump-sum payouts to active employees and potentially spin them off entirely to third parties, he explained. Those options aren't available to plans that continue to accrue obligations to workers.

General Motors Co., Verizon Communications Inc. and others have sold large pension obligations to insurers in recent years, as part of a multistep process that included freezing pension plans. Earlier this week, financial-services firm The Hartford offloaded $1.6 billion of its pension to Prudential Financial Inc.

UPS said its pension freeze will go into effect on Jan. 1, 2023 for affected employees, meaning they no longer accrue additional benefit for future service. The company had closed the pension plan to new hires in July 2016.

Under the new program, UPS will contribute 5% to 8% of employees' annual compensation to their 401(k) accounts and match up to 3% of employee contributions. "It's a fairly generous program we're moving to despite freezing the defined benefit plan," Mr. Gaut said.

UPS declined to say whether it would seek a similar concession from union members. "It's way too premature to talk about anything relating to our future collective bargaining discussions," Mr. Gaut said.

Teamsters spokesman Galen Munroe declined to comment.

Last year, UPS offered buyouts to all former UPS employees who were vested in the pension plan. Around 22,000 accepted the deal, accelerating $685 million in pension benefits that were due last year.

Write to Paul Ziobro at Paul.Ziobro@wsj.com and Vipal Monga at vipal.monga@wsj.com

Corrections & Amplifications

This item was corrected at 11:27 a.m. ET on Wed., June 28, 2017. The original misstated The International Brotherhood of Teamsters as The United Brotherhood of Teamsters.

The International Brotherhood of Teamsters union represents workers at United Parcel Service Inc. "UPS to Freeze Pension Plans for Nonunion Staffers -- 3rd Update," at 6:19 p.m. EDT Tuesday, as well as a fourth update at 6:48 p.m. EDT, incorrectly stated the union's name in the fourth paragraph. (June 28, 2017)

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  #533  
Old 07-17-2017, 06:15 PM
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https://www.nytimes.com/reuters/2017...itain-bmw.html

Quote:
UK's BMW Workers Accept New Pensions Deal, Ending Dispute

LONDON British workers at BMW's Mini and Rolls-Royce operations have overwhelmingly accepted a new offer from the German carmaker on Monday over the closure of its final salary pension scheme, ending a disagreement which had led to strikes.

Over 80 percent of members at four sites, including BMW's Mini plant and Rolls-Royce facility in southern England and engine production site, accepted the new deal which will close the final salary scheme, Britain's biggest union Unite said.

Members were offered greater flexibility regarding the timing of transitional payments worth 22,000 pounds over three years or 25,000 pounds paid into the new pension programme, the union said.

Last month, Unite threatened more strikes at the firm's British plants if BMW failed to agree a deal after a previous offer was rejected in a ballot by members.

Many British companies have closed their final salary schemes in recent years, arguing that they have become too expensive and unsustainable as people claim more from funds as life expectancy grows.
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  #534  
Old 07-17-2017, 06:17 PM
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GENERAL MILLS

http://plansponsor.com/General-Mills...Pension-Plans/

Quote:
General Mills to Freeze U.S. Pension Plans
The freeze begins January 2028.

General Mills is freezing its U.S. defined benefit (DB) pension plans, according to a recently filed 10-K with the Securities and Exchange Commission (SEC).

According to the filing, General Mills sponsors a number of DB plans for employees in the United States, as well as other countries. The firm says, “Changes in interest rates, mortality rates, health care costs, early retirement rates, investment returns, and the market value of plan assets can affect the funded status of our defined benefit plans and cause volatility in the net periodic benefit cost and future funding requirements of the plans. A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations.”

General Mills adds that its DB plans in the United States are subject to the requirements of the Pension Protection Act (PPA). “In the future, the PPA may require us to make additional contributions to our domestic plans,” the filing says, although the firm indicates it does not expect to be required to make any contributions in fiscal 2017.

The company will freeze the pay and service amounts used to calculate pension benefits for active employees who participate in the United States DB plans as of December 31, 2027. Beginning January 1, 2028, active employees in the United States will not accrue additional benefits for future service and eligible compensation received under these plans.

https://www.ai-cio.com/news/general-...lans-end-2027/
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  #535  
Old 07-23-2017, 03:33 PM
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FEDEX
KROGER

https://www.ai-cio.com/news/fedex-kr...lion-db-plans/

Quote:
FedEx, Kroger to Contribute $1 Billion Each to DB Plans
FedEx’s 2017 pension contribution is more than triple that of 2015 and 2016 combined.

Federal Express and supermarket chain The Kroger Co. each plan to contribute $1 billion to their respective defined benefit pension plans, according to SEC filings.

FedEx said in its annual report filed with the SEC that “we anticipate making contributions totaling $1 billion” to its US pension plans. It said that approximately $700 million of that is expected to be required.

The company also said it has a credit balance from its cumulative excess voluntary pension contributions over what it is required to pay that exceeds $3 billion.

“The credit balance is subtracted from plan assets to determine the minimum funding requirements,” said the company. “Therefore, we could eliminate all required pension contributions to our principal US pension plans for several years if we were to choose to waive part of that credit balance in any given year. Our US pension plans have ample funds to meet expected benefit payments.”

FedEx’s filing also revealed that, so far in 2017, its contributions to its US pension plans are more than triple the payments the company made in 2015 and 2016 combined. It said it contributed $660 million in 2015 and 2016, and has contributed $2 billon in 2017. It said $1.3 billion of this was made in May to approximately 18,300 former employees who elected to receive their benefit payments early in a lump sum under a voluntary program offered to qualifying participants.

Meanwhile, Kroger said in an SEC filing that it had conducted a review of the structure and benefits of its sponsored defined benefit plans, and that as a result, the company will make several changes.

“We will make a contribution to the plan this year of up to $1 billion that we believe will significantly address the underfunded position of the plan,” said the company. Kroger will issue debt to pay for the funding of the pension liability, and in a separate SEC filing said it is offering three series of notes due in 2022, 2027, and 2048, to raise a total of $1.5 billion. It also said that the company’s overall balance sheet obligations will not change as a result of the pension contribution. “We are committed to maintaining our current investment-grade rating,” said the company.

Additionally, certain participants’ benefit balances will be distributed out of the plan via a transfer to other qualified retirement plan options, or a lump sum payout, based on each participant’s choice.

Kroger said there will be a one-time expense in 2017 associated with the settlement of its obligations for the eligible participants’ pension balances, and that the one-time cost has not been factored into its guidance for the year.

“We believe a contribution to the plan and payout to participants at this time are strategic opportunities,” said Kroger, “based on the current interest rate environment, the potential future changes to the US tax code, and scheduled Pension Benefit Guaranty Corporation fee increases.


http://www.barrons.com/articles/tack...ebt-1500695915

Quote:
Tackling a Pension Shortfall by Taking on Debt
Far from a cause for worry, issuing debt to fund pensions is actually a smart move for public companies like Kroger.

It must have raised some eyebrows on Monday when supermarket chain Kroger launched a big $1.5 billion bond sale—with a primary goal of funding its pension plans. Contributing to retirement plans may seem to be a surprising priority for a leader in an industry that is now squarely in Amazon.com’s sights.

In fact, issuing debt to fund corporate pensions is a growing trend. A bunch of large companies have done the same thing as Kroger (ticker: KR) this year, including FedEx (FDX), Delta Air Lines (DAL), and DuPont (DD).

To investors more accustomed to companies issuing debt to fund acquisitions and stock buybacks or issue dividends, this may sound like a troubling trend. But it is actually a very good idea. More companies with underfunded pension plans should do the same thing.

At midyear, the average corporate defined-benefit pension plan was only 83% funded, according to Goldman Sachs Asset Management. That’s up from 81% at the start of the year, but it’s still a big shortfall. General Electric (GE), Lockheed Martin (LMT), and Exxon Mobil (XOM) all had plans funded at just around 70% of assets at the end of last year. The shortfalls are “despite very benign equity markets,” notes Kevin McLaughlin, who heads liability risk management in North America at Insight Investment. “The need to make contributions to close these deficits is real.”

There are several reasons borrowing to fund pension plans makes particular sense right now. First, current interest rates are very low, making issuing debt cheap, especially for investment-grade companies. What’s more, corporate contributions to pension plans are tax-deductible. If corporate tax reform is passed later this year or next—a major goal of Republicans—the tax benefit of making those contributions would shrink.

Most pressingly, the cost of having an underfunded pension is growing, as annual fees on shortfalls charged by the Pension Benefit Guaranty Corp., which guarantees benefits to retirees, rise. Those fees have grown from less than 1% in 2013 to 3.4% today and are scheduled to rise above 4% by the end of the decade. That increase has been a key catalyst for the new spate of bond deals, says Mike Moran, chief pension strategist at Goldman Sachs Asset Management.

There aren’t a lot of downsides to issuing debt for this purpose. Far from frowning on the activity, credit-rating agencies see it as neutral to positive. An underfunded pension already counts as a form of debt, so it doesn’t add to total liabilities. Moody’s, for example, said Delta’s contributions to its pensions are improving its credit profile in an April note.

From a bond investor’s perspective, it’s a lot better for companies to use debt to fund pensions than using it for dividends or stock buybacks, which only benefit equity holders, says Matt Brill, a bond fund manager at Invesco. “We don’t feel negative toward it at all,” he says. “At the end of the day, they owe the money anyway.”

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  #536  
Old 07-23-2017, 07:11 PM
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NFL

OJ SIMPSON

http://www.cnbc.com/2017/07/22/heres...in-prison.html

Quote:
Here’s how OJ Simpson made $600,000 when he was in prison

It's possible that O.J. Simpson, who is to be released on parole as early as October, has been making $10,565 a month since he turned 65, ESPN reported this week.

That's because the now 70-year old is drawing an NFL pension that, under a complicated formula, has granted him more than $600,000 over his past 57 months in prison. This week, USA Today reported that Simpson's lawyer said the former Gridiron and movie star has money from a pension plan in which he invested $5 million years ago.

The NFL calculates pensions based on the number of seasons played and at what age a player decides to start collecting. Simpson played for 11 seasons from 1969 to 1979, and likely waited until he was 65, not 55, to start accruing that income.

O.J.'s monthly allocation is, by any measure, a great retirement package. But for most NFL players, the number won't be so high. The average player only last 3.5 seasons in the league, and many probably need their pension as soon as they can access it. One out of six NFL retirees declare bankruptcy.


http://cdn.espn.go.com/nfl/story/_/i...-prison-nevada

Quote:
O.J. Simpson might have made more than $600,000 during his eight-plus years in prison.

After Simpson was granted parole on Thursday, that money is now his to spend and can't be touched by the families of Nicole Brown Simpson and Ronald L. Goldman, who won a civil judgment against Simpson in February 1997 that, including interest, is now worth more than $40 million.

The reason the income is O.J.'s, unlike other money he might earn in the future, is because his NFL pension is protected by state law.

There has been much confusion as to how much Simpson was pulling in for his pension, but it's fairly easy to calculate since the terms of NFL player pensions are public. One factor that adds to the confusion is the uncertainty of the age Simpson elected to begin collecting on his pension.

So let's show you the math.

O.J. played in the NFL from 1969 to 1979.

NFL players who played before 1982 get a pension credit of $250 per season per month. Multiplying that by his 11 seasons, that's $2,750 a month.

As part of a settlement in 2011, former players were given an extra payment of $124 per month per season in seasons played before 1975 and $108 per month per season in subsequent years. O.J. played six seasons before ($124 x 6 = $744) and five seasons after ($108 x 5 = $540) 1975. That's another $1,284.

Adding $1,284 plus $2,750, that's $4,034 a month.

That's what O.J. would have made if he elected to start taking out his NFL pension at the age of 55. Getting paid that for 105 months in jail would mean O.J. made $423,570.

But if he waited until 65 -- he just turned 70 -- he would collect 2.619 times that, according to the formula. That would make his pension $10,565 a month.

Based on 57 months in jail after his 65th birthday, that's $602,205.

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  #537  
Old 07-23-2017, 10:24 PM
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https://www.bloomberg.com/graphics/2...rate-pensions/

Quote:
S&P 500’s Biggest Pension Plans Face $382 Billion Funding Gap
By Brandon Kochkodin and Laurie Meisler
July 20, 2017
People who rely on their company pension plans to fund their retirement may be in for a shock: Of the 200 biggest defined-benefit plans in the S&P 500 based on assets, 186 aren’t fully funded. Simply put, they don’t have enough money to fund current and future retirees. The situation worsened for more than half of these funds from fiscal 2015 to 2016. A big part of the reason is the poor returns they got from their assets in the superlow interest-rate environment that followed the financial crisis. It’s left a hole of $382 billion for the top 200 plans.


.....
Companies With the Lowest Ratios of Pension Assets to Pension Obligations

1
Intel
Information technology
46.59%

2
Delta Air Lines
Industrials
49.38%

3
Delphi Automotive
Consumer discretionary
55.67%

4
American Airlines Group
Industrials
58.11%


5
Anadarko Petroleum
Energy
58.24%

6
Procter & Gamble
Consumer staples
59.41%

7
TE Connectivity
Information technology
60.77%

8
Parker-Hannifin
Industrials
62.21%

9
United Continental Holdings
Industrials
63.87%

10
Freeport-McMoRan
Materials
64.29%
there are more companies/numbers at the link
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  #538  
Old 07-25-2017, 06:59 PM
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UNITED KINGDOM
ROYAL MAIL

https://www.ai-cio.com/news/unite-vo...ion-proposals/

Quote:
Unite to Vote on Royal Mail Pension Proposals

UK-based union Unite said it will hold a consultative ballot of its 6,000 Royal Mail managers on the latest pension proposals offered by the company’s management.

The Royal Mail said in a statement that it is offering members the choice of joining either a defined benefit cash balance plan, or a defined contribution plan. Royal Mail said it is one of few companies offering to replace one defined benefit plan with another. The balloting of members started this week, and will close on Aug. 7.

“We have had many discussions with the company over the last few months and these have been difficult,” said Brian Scott, Unite officer for the Royal Mail. “However, the Unite negotiating team considers that what is on offer is the best achievable in the circumstances.”

Despite Scott calling the offer the “best achievable” one, the union said that it would not make a recommendation to its members on the package.

“We are committed to holding a membership consultative ballot on the Royal Mail’s latest proposals,” Scott said. “We are not making any recommendation. We think it is important that Unite members have an opportunity to express an opinion on what is being put forward by the company.”

Scott said that the latest position is an improvement from the original proposal.
“One of the main developments is that we will keep the defined benefit pension scheme open, and the lump sum approach being put forward will become a separate section of that scheme,” said Scott. “This will reduce any adverse impact on members’ future retirement incomes.”
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Old 07-28-2017, 05:50 PM
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EUROPE

http://www.reuters.com/article/us-pe...-idUSKBN1AB19Q

Quote:
ECB asks pension funds for more data

FRANKFURT (Reuters) - The European Central Bank will require euro zone pension funds to disclose more detailed data on their operations, arguing that it lacks proper visibility in a huge sector that is vital for the transmission of monetary policy, it said on Wednesday.

With 50 million customers and 2.5 trillion euros ($2.9 trillion) in assets, pension funds are among the biggest and fastest-growing investors.

That makes them vital for the ECB in gauging the success of its policy, particularly in a period of ultra-low rates when some savers doubt their funds' ability to generate enough for their retirement.

"Current gaps in the data available and the lack of comparability across countries make it difficult to gain a comprehensive understanding of the role of the sector in the transmission mechanism of monetary policy, of the cash flows and of the risks associated with pension obligations," the ECB said.

The ECB will ask large, autonomous funds in the euro zone to start reporting according to harmonized rules with more data also released to the public, it said in new draft guidelines that are still subject to a consultation with the industry.

The funds, excluding for example those set up by corporations or credit institutions, will have to list transactions security by security, and provide data on both assets and liabilities, broken down by economic sector, maturity and geography.

"It will help us better understand their role in the transmission mechanism of monetary policy because we will... see not just how the stocks are changing but what are they buying or what are they selling, so how do they react to our monetary policy," said Aurel Schubert, head of the ECB's statistics unit.

Given the added cost of the new reporting rules, national central banks may exempt some funds from the new rules, particularly if they hold less than 10 million euros or have fewer than 100 members, but each country must report on at least 80 to 85 percent of the sector.

The full extent of the new reporting requirement should involve between 1,500 and 2,000 funds, the ECB said.

The new set of quarterly data will be first collected from the first quarter of 2019, while first full-year data will have to be provided on 2018 figures.



I really don't like the sound of that.
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Old 07-31-2017, 12:52 PM
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PBGC FEES

https://www.ai-cio.com/news/gsams-mo...on-de-risking/

Quote:
GSAM’s Moran: Surging PBGC Fees Incentivize Pension De-Risking
Companies are increasingly considering annuitization and lump sums due to sharply rising premiums.

Pension Benefit Guaranty Corp. (PBGC) fees have risen so sharply, and so quickly, that they have not only become a major factor in how companies fund their pensions, but have even incentivized de-risking strategies, says Mike Moran, managing director for Goldman Sachs Asset Management (GSAM).

The two main fees pension funds must pay to the PBGC are a variable-rate fee that is tied to its liabilities, and a flat-rate fee for each of a plan’s participants. The flat-rate fee has nearly doubled for single-employer plans to $69 from $35 in 2012, and has more than tripled for multiemployer plans to $28 from $9 in 2012. Meanwhile, the variable rate has also more than tripled from 0.9% in 2013 to 3.4% today, and will surpass 4% by the end of the decade, says Moran.

Prior to this recent surge in prices, the prevailing attitude among pension funds was to wait for interest rates to rise to help alleviate their funding deficit, says Moran. But because interest rates haven’t budged, and the PBGC fees continue to rise, it has become too expensive for many pension administrators to do nothing.

“The change that has really happened over the last year or two, in particular over the past six months, is plans are saying maybe rates will rise, maybe they’re not going to rise,” said Moran in an interview with CIO. “But while we’re waiting for that to happen, which we can’t control, what can we control?”

One of the things pensions can control, says Moran, is increasing their funding level to reduce their liabilities, and thus lowering their PBGC variable-rate premiums, which has become a growing trend for pension fund providers. According to GSAM’s Corporate Defined Benefit Mid-Year-Update, 2016 was the strongest year for contributions to US corporate defined benefit plans since 2013. The report also said it expects that trend to continue, with a 10% increase in total contributions in 2017.
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