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.

Cash Balance Plans

With the Bloomberg Aggregate Bond Index declining 0.78% for the quarter¹, returns for cash balance plans with high fixed income allocations were subdued during Q1, however, modest exposure to equities landed many plans in positive territory for the quarter.

Cash balance updates included in Secure Act 2.0 may make it easier for plans to convert the Interest Crediting Rate from a fixed rate to a market rate, which can be more attractive to both Plan Sponsors and participants. 

Given persistent market volatility, Plan Sponsors should pay attention to timing of new plan entrants by reviewing participant balances that may be below the capital preservation floor or those that may be nearing the 415 max.

Reach out to a Fiducient Advisors' team member to discuss the benefits of cash balance plans and how to leverage these unique plans within your organization. 

Source: ¹Bloomberg Aggregate Bond Index; as of March 31, 2024.

Traditional Pension Plans

Funded statuses generally improved in Q1 as higher discount rates lowered liabilities and return-seeking allocations increased asset values.

The FTSE Pension Discount Rate increased by 28 basis points (+0.28%) during the first quarter of 2024 to end the quarter at 5.12%.²

With continued improvements in funded statuses broadly, strong equity market returns, meaningfully higher interest rates and expectations for continued market volatility, it may be an opportune time for Plan Sponsors to “lock-in” recent funded status gains via de-risking assets, liabilities or both. 

Source: ²https://www.yieldbook.com/m/indices/FTSE-pension-liability.shtml

Pension Risk Transfer and Plan Termination 

Recent large pension risk transfer (PRT) transactions by AT&T and Lockheed Martin have been challenged in court. 

At issue is the requirement to select the “safest available annuity provider” under the Department of Labor’s Interpretive Bulletin 95-1, and whether the Plan Sponsors’ selection of Athene (PRT provider in both transactions) violated this statute.

These lawsuits face numerous challenges and are unlikely to slow the volume of PRT transactions. With many plans approaching fully funded status, we expect to continue to see robust de-risking activity.

Did you know? We partner with Plan Sponsors to strategically advise on pension risk-transfers. Learn more about our defined benefit de-risking consulting services.

Source: Retiree lawsuits against AT&T and Lockheed Martin unlikely to get past dismissal, legal experts say | Pensions & Investments (pionline.com)

Municipal Plans

Public plans continued to benefit from the strong performance of equities while higher yields have increased the appeal of fixed income. With attractive yields and the possibility of central bank rate cuts on the horizon, Plan Sponsors should assess the sizing and overall credit quality of their fixed income allocations given the protective power and yield benefits fixed income can deliver to help achieve the actuarial expected returns.

This report is intended for the exclusive use of clients or prospective clients (the “recipient”) of Fiducient Advisors and the information contained herein is confidential and the dissemination or distribution to any other person without the prior approval of Fiducient Advisors is strictly prohibited. Information has been obtained from sources believed to be reliable, though not independently verified. Any forecasts are hypothetical and represent future expectations and not actual return volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. The opinions and analysis expressed herein are based on Fiducient Advisor research and professional experience and are expressed as of the date of this report. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is risk of loss.

800.392.9998

www.fiducientadvisors.com

Manage your preferences | Opt Out using TrueRemove™
Got this as a forward? Sign up to receive our future emails.
View this email online.

500 W. Madison Street Suite 1700 | Chicago, IL 60661 US

This email was sent to .
To continue receiving our emails, add us to your address book.