Retirement Plan Sponsors

As a trusted advisor, we stand ready to guide Plan Sponsors through the complexities and everchanging landscape of pension plans. Below find valuable updates from our dedicated Defined Benefit Business Council.

Insights From Your Trusted Team

Cash Balance Plans

In November, IBM made huge news in the retirement community by ending their 401(k) company match and instead reopening their pension plan. For years, IBM has made matching contributions into its employees’ 401(k) accounts. Starting in 2024, however, it will instead fund a “Retirement Benefits Account” for each employee by reopening their pension as a cash balance plan.1

Cash balance plans are gaining steam across the industry as a powerful, qualified savings vehicles that blends the best qualities of traditional pensions and 401(k) plans for both plan participants and Plan Sponsors.2

Find out why. Reach out to Fiducient Advisors to discuss the benefits of cash balance plans and how to utilize these unique plans within your organization.

Watch Our 4 Minute Video on Cash Balance Plans

Traditional Pension Plans3

Pension discount rates began the quarter on an upward trend, with the FTSE Pension Discount Curve reaching its high for the year of 6.01% at the end of October.

  • Rates subsequently plummeted in November and December, with the FTSE Curve ending the year at 4.83%.
  • The net result was that rates ended the quarter a whopping 82 basis points lower than where they began the quarter and 18 basis points lower than they began 2023.
  • This decrease in discount rates increases pension liabilities; however, the strong asset performance seen in the fourth quarter likely offset some of the negative impact on liabilities.

Discover More Trends in Corporate Retirement Plans

Pension Risk Transfer and Plan Termination

The 2023 Pension Risk Transfer (PRT) market proved to be very strong as many Plan Sponsors capitalized on improvements in their plan’s funded status.

  • While fourth quarter data is not yet available, PRT activity in the U.S. through the third quarter of 2023 came in at $28.9 billion, second only to the record-setting year of 2022.4 
  • Although the overall market size may be down slightly in 2023 from 2022, the number of transactions has increased by over 100% as 2022 was dominated by a few “mega” transactions.5
  • During the fourth quarter many insurance carriers hit capacity constraints and pulled out of the market. This is another example of the importance of planning ahead and working with your consulting team on a well thought out timeline during the de-risking process.5
  • Annuity purchase premiums increased slightly coming into the end of the calendar year but are still lower than they were looking back to calendar year 2021.2 

Listen How Liability-Driven investing (LDI) Strategies Can Help Control Overall Funded Status Volatility

Municipal Plans6

For public plans with a calendar fiscal year, the rally in fixed income and global equities in November and December helped to drive absolute portfolio returns meaningfully higher for the year and well above the 6.46% average long term return assumption used to discount liabilities for Connecticut public plans.

Read How Public Plans Rallied in Fiscal Year 2023

The PBGC is Running a Surplus for Single Employer and Taft Hartley Pension Plans7

The PBGC (Pension Benefit Guaranty Corporation), a government agency which ensures pension benefits for ERISA defined benefit plans, released their annual report in November.

The report shows that the PBGC now carries surplus of over $44.6 billion for single-employer plans and a surplus of $1.5 billion for multiemployer plans (Taft-Hartley). Both types of plans posted significant increases in surpluses compared to the previous fiscal year end.

While this is not yet translating to smaller premiums paid by Plan Sponsors, it may result in increasing industry pressure on the PBGC to revisit premium rates after their dramatic increase in recent years.

 1https://www.pionline.com/pension-funds/ibm-shows-how-companies-can-use-surplus-reopen-pension-plans. 
2“Is renewed interest in DB plans real, or just a pipe dream?”, Pensions & Investments (pionline.com); November 20,2023.

3https://www.yieldbook.com/m/indices/FTSE-pe

4LIMRA: Record High Number of Pension Risk Transfer Contracts Sold in Third Quarter 2023, December 19, 2023. 
5Benefit and Retirement Plan Consultants – October Three, December 18, 2023.

6Hooker & Holcombe (USI) 2023 Municipal Pension & OPEB Report: 200 Municipal CT Plans. Data extracted from the CAFRs submitted by local municipalities in CT for fiscal year ending June 30, 2022.

7PBGC Annual Performance & Financial Report 2023 | Pension Benefit Guaranty Corporation; November 15, 2023.