August 2020

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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11Aug

The Millennial Retirement Puzzle

Millennials now comprise the largest living demographic group in the U.S. Thanks to innovation and advances in technology, this first generation of digital natives has enjoyed opportunities that were unimaginable a few decades ago. Their demand for transparency, relevance and authenticity in the way they interact with service providers has been the driver of unprecedented change across industries, including — and perhaps especially — financial services. Read also Nearly half of young people have lost income due to the...

August 11, 2020
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11Aug

US. Public Funds Lead Institutional Investment Rebound

Institutional plan sponsors posted a median plan return of 10.6% during the second quarter as markets rebounded from the COVID-19 pandemic-induced first quarter crash thanks to a strong performance by US equities, according to the Northern Trust Universe. The Northern Trust Universe tracks the performance of more than 320 large US institutional investment plans that have an aggregate asset value of more than $1 trillion. Public funds outperformed the other institutional segments tracked by Northern Trust, earning...

August 11, 2020
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10Aug

US. California’s immense pension dilemma

California’s public employee pension dilemma boils down to this: The California Public Employees Retirement System has scarcely two-thirds of the money it needs to pay benefits that state and local governments have promised their workers. Moreover, CalPERS’ official estimate that it is 70.8% funded is based on an assumption of future investment earnings averaging 7% a year, which probably is at least one or two percentage points too high. In the 2019-20 fiscal year that ended June 30, CalPERS...

August 10, 2020
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07Aug

How Much to Save? Decision Costs and Retirement Plan Participation

By Jacob Goldin, Tatiana Alexandra Homonoff, Richard Patterson, Bill Skimmyhorn Deciding how much to save for retirement can be complicated. Drawing on a field experiment conducted with the Department of Defense, we study whether such complexity depresses participation in an employer-sponsored retirement saving plan. We find that simplifying one dimension of the enrollment decision, by highlighting a potential rate at which non-participants might contribute, increases participation in the plan. Similar communications that did not include a highlighted rate yield...

August 7, 2020
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04Aug

US. Beleaguered Public Pension Funds Make Record Gains in Second Quarter

Public pension funds set a 22-year performance record in the second quarter, recovering some but not all of their losses from the first quarter. Double-digit stock gains pushed pension returns to a median 11.1% for the second quarter, according to Wilshire Trust Universe Comparison Service. Even with the rebound, median annual returns for the public pensions whose fiscal years ended June 30 were 3.2%, far short of the funds’ long-term investment-return target of around 7%. “That’s the funny thing...

August 4, 2020
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03Aug

Nearly 1 in 5 Americans Is Delaying Retirement Due to COVID-19.

The COVID-19 pandemic has had a huge financial impact since cases first started multiplying rapidly back in March. Now, almost five months later, unemployment is still rampant and the economy is stuck deep in recession territory. Read aslo US. Beleaguered Public Pension Funds Make Record Gains in Second Quarter All of this is causing Americans to rethink their near-term and long-term financial plans, so it's not surprising to learn that 19% of U.S. adults now intend to push back their...

August 3, 2020
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