Part of River and Mercantile Group PLC
- Loading stock data...
With the growing number of annuity purchases taking place in the market today, it is imperative that plan sponsors understand the fiduciary implications for implementing this de-risking strategy.
P-Solve’s, Michael Clark and Marc Fandetii, will be speaking at the 2018 Retirement Industry Conference as well as 3 upcoming P&I 401(k) and 403(b) Investment Conferences.
P-Solve Insights P-Solve managing director, Ryan McGlothlin, will be speaking at this year's Enrolled Actuaries Meeting in Washington, DC on April, 09, 2018, 2:45PM - 4:00PM EST Ryan will be speaking in the investment issues session, 301 - Investment...
The small drop in discount rates during the month will increase liabilities for most plans, while the generally negative equity returns will ensure that investments don’t make up for this liability increase. Neither the discount rate movement nor the asset performance was catastrophic, but the majority of plans will likely see a drop in their funded percentage.
Plan sponsors should see little change in funded status as of the end of February. Negative equity returns offset decreasing liabilities. Discount rates rose by over 0.2% in February to their highest level since April 2017. At the same time, the 3.7% decline in the Russell 1000 index of US stocks represented to worst monthly performance for equities since January 2016, when stocks fell by 5.4%.
This article addresses three major features common to most TDFs’ structure: asset allocation (specifically, equity exposure), management style (including active and passive management, use of proprietary funds, and tactical asset allocation), and fees – which, if not evaluated carefully and on a manager-by-manager basis, could result in a mismatch between an employer’s goals and participant investment results.
Strong markets coupled with favorable changes in corporate tax rates made 2017 a very good year for pension plan sponsors. The continuing run up in the equity markets meant that most plan sponsors saw funded status improvements in 2017 in spite of discount rate declines.
The equity markets have been extremely volatile over the past two weeks. Are these market movements perhaps the start of something big, or just the first step to volatility returning to a more typical level?
Between an uptick in discount rates and strong equity performance, plan sponsors should see a nice bump in funded status as of the end of January. Discount rates recovered from the dip they took at the end of December. Equities had a solid month with US and international equities up around 5% and emerging markets over 8%.
Pension plan funded status likely took a small hit in December. The Citi Pension discount rate dropped 18 basis points during December implying a 2-3% increase in liabilities. This was offset by favorable returns albeit generally below 2%. Plan funded status for calendar 2017 months should be at least modestly improved for most plans; how much will depend on asset allocation.