With the filing of a new class action, companies will be closely scrutinizing who should be managing their retirement plans. March 08, 2013
expected the new Department of Labor (DOL) rules on fee disclosures for
retirement plans went into effect in 2012 and plan statements included
fees for the first time starting with third-quarter reports. Despite
the move toward transparency driven by new legislation for employer
retirement funds and some hard lessons learned from recent verdicts,
past actions still haunt the industry as new legal claims are filed.
By most lights, corporate pensions are in trouble, particularly as there is no end in sight for the Fed's ZIRP. Low rates continue to push pensions deeper into underfunded territory. Here's a snapshot from Deutsche Bank. July 16, 2012
ABB and Fidelity lose in court after mismanaging the company's 401(k).
The long awaited decision in the Tussey v. ABB case was released on March 31st, with both defendants (ABB and Fidelity) ordered to compensate the plaintiffs.
April 05, 2012
Keeping retirement plans funded could be a bigger problem than companies anticipate.
Low returns on defined-benefit pension plan assets represents a significant economic challenge to companies, one that could siphon cash and, potentially, affect ratings, according to a new report by Fitch Ratings.
February 23, 2012
New rules on disclosure and recent lawsuits have retirement plan providers looking to build trust, add transparency.
Now is the time to take a good look at your pension management plans and to make sure your company and its plan administrators are positioned to meet the new Department of Labor (DOL) rules on fee disclosures.
February 13, 2012
A brief look at what’s on International Treasurer’s radar screen this week.
A preliminary look at what’s coming up on some of the NeuGroup Peer Group meeting agendas and also the changing regulatory environment for pension plans were two content items that came up during International Treasurer’s the editorial call this week.
February 01, 2012
Companies should be wary of investing their DB plans with buyout firms.
A new study by academics at Yale and Maastricht University shows that over the past 10 years, private equity returns after fees have lagged substantially those of the market at large. The study, prepared for the Financial Times, showed that the average private equity fund returned 4.5 percent, as opposed to 6.7 percent for the S&P 400 index of medium-sized firms.
January 26, 2012
By Matt Clay
Pension managers burned in the crisis are among those reshaping securities lending to avoid a repeat.
While the issues with money market funds grabbed the lion’s share of the headlines during the financial crisis, their troubles paled in comparison with the securities lending market, which suffered losses in the billions of dollars. Last month, a representative group of securities lending participants met in San Diego for the International Beneficial Owners’ Securities Lending and Repo Summit. The consensus thinking was that, although securities lending has been dealt a blow by the crisis, it can, when managed appropriately, be a valuable contributor to investor portfolios. Several trends that came out of the summit suggest a marketplace of more informed participants with a greater attention to risk management. March 04, 2010
Corporate DB plans, unlike the corporate investors, capital markets and FX risk managers have not been as concerned about the credit market’s turmoil and liquidity squeeze. That’s because pension funds don’t look at the market daily, weekly or even quarterly. “We’re not managing performance for the month,” one manager said: “We measure increments of 1 and 2 years,” said the investment officer of one large DB plan.
Indeed, some DB plans, which have been moving toward a closer match-up of their asset and liabilities profile, have discovered their shift has become a sort of natural hedge. “Most of the ‘blow ups’ have been in the quant/equity world and not in regular fixed income markets,” noted an investment manager for a corporate fund. Over the month of July, “we were actually positive,” he said. August won’t look as good but in the aggregate, the volatility is unlikely to affect his company’s asset performance significantly. “Our large funds were only down 1 percent, and most of it was due to the one fund that has remained primarily equity based.”
What was interesting to this investment chief and others is that niche players in the pension investment market (offering unique strategies) either did very well or totally flunked. “One of our managers ended up 1500 bps below their benchmark,” one reported, “and gained 400 bps the next week.” September 24, 2007
The Pension Protection Act (PPA) was supposed to herald a substantial shift from equities into fixed-income instruments by pension fund managers. The reason: The PPA imposed progressively higher funding targets and then stiffer penalties on those that came up short.
By rebalancing their portfolios and reducing equity allocation in favor of longer-term debt, pensions could minimize or even eliminate their funding-variance risk, i.e., the chance that a move in interest rates or market decline would decrease the value of their assets vs. their liabilities, thus pushing them below the 100 percent funding target. June 11, 2007
This year is a pivotal one for managers of corporate pensions: A new federal law (the Pension Protection Act, or PPA) is now in effect changing some of the critical “rules of the game” for sponsors, e.g., lifting the target funding level to 100 percent. A flat yield curve is making it hard to enhance total returns, and there’s talk that slower growth in the US will pull rates even lower. Finally, Phase One of a FASB pension accounting rule is coming into effect.
Any one of these would be a challenge. Ditto for this confluence of trends, which is hitting companies with defined benefit plans (DBs) the hardest. Some have had to freeze their plans, or worse, go bankrupt in order to restructure their obligations.
And while everyone got a bit of a break in 2006, as rising equity prices helped lift many corporate plans to fully funded status, these levels may not be sustainable. Most plan sponsors foresee having to fund further, and the majority of DBs are still taking on new participants. May 02, 2007