August 2020

31Aug

US. The Contribution Conundrum For Underfunded Plans

Reduced PBGC variable rate premiums may make now an optimum time to contribute. Plan sponsors undertaking risk-transfer activities in underfunded plans should consider contributing additional assets to maintain funded status equivalence. For some plans, low borrowing rates may present an opportunity. At the end of March 2020, the CARES Act was signed into law. One impact of this legislation for defined benefit plan sponsors is that any contributions that were required during 2020, either quarterly contributions or those...

August 31, 2020
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28Aug

US. The Future for ESG Investing in Retirement Plans

The department of labor (DOL)’S proposed rule on environmental, social and governance (ESG) investment practices, published in June, intended to add clarity to years of obscure regulatory guidance. Instead, it’s created a layer of complexity among fiduciaries and has fueled more than 1,000 critical comments. The proposed regulation restates that plan sponsors in defined contribution (DC) plans cannot disregard financial approaches in an effort to pursue ESG-related considerations without violating their fiduciary duties under the Employee Retirement Income Security...

August 28, 2020
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26Aug

US. A$1.6 Trillion Pension Fund Gap – Is Infrastructure Investment The Answer?

The U.S. is a superpower in the pension fund world, controlling more than 50% of global assets, and yet a recent Financial Times article identified a $1.6 trillion dollar funding gap as a grave threat to the U.S. economy. Read also US. The Future for ESG Investing in Retirement Plans For the last 15 years, as Canadian and Australian pension funds have returned on average nearly 5% per year, and often much more, their U.S. counterparts have averaged returns of...

August 26, 2020
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21Aug

Financial Knowledge Overconfidence and Early Withdrawals from Retirement Accounts

By Sunwoo T. Lee, Sherman D. Hanna Early distributions from retirement accounts could endanger future retirement income security, and the U.S. has restrictions to discourage them, including possible tax penalties. On the other hand, tapping one’s retirement assets may be rational when an individual encounters financial hardship. With the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), early distribution from retirement accounts became an even more attractive option to individuals. In this study, we examined factors related...

August 21, 2020
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21Aug

US. Sustainability Matters: Overwhelming Opposition to Proposed Regulation Limiting the Use of ESG in Retirement Plans

The U.S. Department of Labor has proposed a rule that would limit the use of investments that consider environmental, social, and corporate governance factors in worker retirement plans subject to ERISA, including 401(k) plans. Read also US. DOL Issues New Rules On Retirement Plan Income Disclosures The proposed rule questions the financial materiality of ESG issues and assumes that ESG-focused investment strategies and funds are primarily focused on providing “nonpecuniary” benefits, often at the expense of “pecuniary” benefits, otherwise known...

August 21, 2020
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20Aug

US. 27% of Savers Have Decreased or Stopped Retirement Plan Contributions Due to the Coronavirus

The coronavirus crisis has had a profound economic impact, and while some people have managed to coast through the past five months financially unscathed, others are truly struggling to make ends meet. It's not surprising, then, to learn that 27% of Americans have either stopped funding their retirement savings or have decreased their IRA or 401(k) contributions due to the pandemic, according to a new FinanceBuzz survey. If you've lost your job or taken a hit to your income in...

August 20, 2020
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19Aug

US. DOL Issues New Rules On Retirement Plan Income Disclosures

Industry trade associations applauded a new rule today from the Trump administration requiring retirement plans to provide an illustration of the amount of monthly income that might be generated by an individual’s retirement savings. The rule was mandated in the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The SECURE Act required a participant’s accrued benefits to be included on his or her pension benefit statement as a current account balance, and as an estimated lifetime...

August 19, 2020
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18Aug

US. Pension Debt Expected to Surge Due to COVID-19 Volatility

Underfunded defined benefit (DB) pension plans can expect to see their liabilities surge over the next several months due to volatility from the COVID-19 pandemic. According to research from Moody’s Investors Service, companies are on pace to see a 6% increase in total adjusted debt in 2020 as modest asset returns fail to offset tumbling discount rates. Moody’s said in a recent report that 2020 has so far “proved to be a roller coaster ride” for the two drivers...

August 18, 2020
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14Aug

US. Massive 401(k) Suit Settlement Struck

In a remarkably short period, an excessive fee suit involving proprietary funds has settled for what may be the largest monetary settlement among those cases to date. The suit—filed on Feb. 15, 2019 by plaintiff (and former McKinsey plan participant) Tushar Bhatia against McKinsey and MIO (MIO Partners, Inc., a subsidiary of McKinsey)—asserted claims for breach of fiduciary duty, prohibited transactions, and equitable restitution under ERISA. More specifically, he alleged that McKinsey adopted certain in-house funds for the...

August 14, 2020
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12Aug

Despite Robust Returns, US Corporate Pension Funding Falls in July

A 39-basis-point drop in the monthly discount rate to a record-low 2.26% canceled out strong asset gains and lowered the funded ratio for the US’s 100 largest corporate pension plans to 81.1% at the end of July from 83.5% a month earlier. Read also US. Public Funds Lead Institutional Investment Rebound According to consulting firm Milliman’s Pension Funding Index (PFI), the funded status of the plans worsened by $68 billion during July, while the deficit jumped to $388 billion as...

August 12, 2020
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