It’s January 2, 2014 – How Good Is It?

2014-01-02 It's January 2, 2014 - How Good is it

What a difference a year makes!  Last year I updated readers on the mediocre year we had in 2012 for gaining ground in funding defined benefit pension plans.

The good news (or great news depending on your perspective) is that for our clients that didn’t immunize their plans, 2013 was the best year they have seen in a while.  Interest rates are up somewhere between ½% and 1% and asset returns are positive and for many plans they are double digit returns.  When you add in the special payments that most plan sponsors are making, we expect many of our clients to see a 15% to 20% increase in their transfer/solvency ratio.

As mentioned in last year’s post, it will take some time to collect all of the membership data and work out the numbers for each plan.  In addition, virtually all of our clients are scheduled to have a valuation in 2014 and we won’t be surprised if some clients that are not scheduled for valuations will voluntarily request one to recalibrate their transfer ratio and special payment requirements.  As a result, we wish to thank all of our clients in advance both for their timely response to our requests for data as well as their patience as we assemble their valuation.  As always, we are completely organized for the year and clients should already have in their hands their customized schedule of activities for the year.

Also mentioned last year, although we don’t give investment advice, we want clients to regularly review their investment policy.  One of our clients subscribes to our quarterly ‘solvency tracking’ reporting for their plan and meets semi-annually to review investment policy.  Seeing the September results, the client made a significant shift on the ‘de-risking’ spectrum during October.  While we cannot advise clients on when, if ever, it is the right time to de-risk, we can advise clients on the soundness of a process that properly reviews the ‘de-risking’ question at regular intervals.  Please let us know if you need help in this regard.

We wish everyone a prosperous 2014 both personally and for their businesses.





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