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P-Solve Monthly Retirement Update

January 2018

Key Takeaways:

✔ Discount rates took a quick dip at the end of the month bringing rates down 0.50% from the beginning of the year.

✔ While rates dipped at the end of December, they made a small rebound of almost 0.10% on January 2nd.

✔ Equities generally continued a winning streak during the month, ending the year with an impressive rally.

December 2017 Summary

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%. Most plans should have experienced at least a modest improvement in funded status compared to the beginning of the calendar year; how much will depend on asset allocation.

Discount Rates & Asset Returns

Discount rates took a sharp decline during the last 10 days of 2017 bringing the Citi Pension Discount Index to 3.60%. With that decline companies can expect a 0.50% decrease in year-end discount rates from the beginning of the year.

The continuation of synchronized global growth & the passing of tax legislation in the U.S. further propelled risk assets in December. Foreign equities were the best performers, with emerging markets increasing almost 4%. Long dated credit led the way in fixed income, increasing by 2%.

What’s New at P-Solve?

2017 Fiscal Year End Considerations

We have been discussing the various changes coming to fiscal year-end reporting with plan sponsors. For a summary of these changes including how net periodic pension cost will be changing in 2018 read the article from our chief actuary, Dan Atkinson, and one of our consulting actuaries, Michael Clark.  Read more here.

Defined Contribution Revenue Sharing

The head of our defined contribution consulting practice, Marc Fandetti, recently published a piece on revenue sharing in defined contribution plans. For plan fiduciaries, understanding how these arrangements work and assessing whether or not there are better options for paying plan expenses is critical. To learn more about how revenue sharing is setup in your plan, please contact Marc.

Ask P-Solve!


What do new mortality tables mean for lump sum distributions in 2018?


The IRS recently incorporated new mortality tables into the calculation of lump sums beginning with 2018 plan years. This will increase the cost of lump sums by 4% – 6% in addition to the increase due to lower interest rates at the end of 2017. The IRS also released the 2019 table reflecting recent mortality improvement projection scales released by the Society of Actuaries that will slightly decrease lump sums in 2019.

SECURITY INDICES: This presentation includes data related to the performance of various securities indices.  The performance of securities indices is not subject to fees and expenses associated.  Investments cannot be made directly in the indices.   The information provided herein has been obtained from sources which P-Solve LLC believes to be reasonably reliable but cannot guarantee its accuracy or completeness.

CONFIDENTIAL:  For addressee use only, not to be disclosed to any other person without express consent from P-Solve LLC.  Past performance cannot be relied upon to predict future results.  P-Solve LLC is an investment advisor registered with the US Securities and Exchange Commission.