Society Of Actuaries Analyzes The Extension Of Pension Funding Stabilization
<p> Schaumburg, Illinois (September 15, 2014) &ndash; The <a href="http://www.soa.org/">Society of Actuaries </a>(SOA) today released an analysis of the effects of pension stabilization provisions on funding of the U.S. single-employer defined benefit system. The SOA report <a href="https://www.soa.org/research/research-projects/pension/default.aspx">&ldquo;Stretching the Corridor: The Effects of Extended Rate Stabilization on Defined Benefit Plan Funding Requirements&rdquo;</a> examines the degree of increased flexibility in plan sponsors&rsquo; minimum funding requirements.</p> <p> Using the SOA&rsquo;s in-house research capabilities, the report examines the effects of the Highway and Transportation Funding Act of 2014 (&ldquo;HATFA-14&rdquo;) amendment to the provisions, which extended the 10 percent corridor for five years. The analysis also provides insights on the effects of further extensions, as these extensions could result in a fundamental shift in how plan funding is targeted.</p> <p> &ldquo;The SOA report identified that the longer the effects of the corridor last for funding standards, the greater the deferral of funding requirements,&rdquo; said Joseph Silvestri, FSA, EA, FCA, MAAA, Retirement Research Actuary for the SOA. &ldquo;Keep in mind, we don&rsquo;t know if the effects of the corridor will last for two years, seven years or 15 years, because it depends on interest rates,&rdquo; added Silvestri.</p> <p> Further extensions would result in funding requirements that target a stable, predictable level of funding that may or may not be consistent with the market measures of plan liabilities. &ldquo;Corridor adjustments alter the balance between targeting a stable funding level or a market-consistent funding level,&rdquo; said Silvestri.&nbsp;&nbsp;</p> <p> The SOA analysis found that:</p> <ul> <li> The five-year extension of the 10 percent corridor will provide plan sponsors with additional flexibility in how they fund their plans.</li> <li> The five-year extension of the 10 percent corridor will defer funding of the system by an expected two to three years. Individual plans sponsors would ultimately determine the lag in plan funding as they assess the costs, benefits and risks associated with deferring their plan contributions.</li> </ul> <p> The report also identifies how the HATFA-14 change affects statutory funding minimums, Pension Benefit Guaranty Corporation (PBGC) variable premiums, and plan sponsors&rsquo; ability to transfer obligations through lump sum payment and annuity placement options.</p> <p> For the &ldquo;Stretching the Corridor: The Effects of Extended Rate Stabilization on Defined Benefit Plan Funding Requirements&rdquo; report visit <a href="http://www.SOA.org/files/research/projects/pension-stabilization-report.pdf"&gt;www.SOA.org/files/research/projects/pension-stabilization-report.pdf</a>.</p> <p> &nbsp;</p> <p> <strong>About the Society of Actuaries</strong></p> <p> The Society of Actuaries (SOA) is an educational, research and professional organization dedicated to serving the public, its members and its candidates. The SOA&#39;s mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems. The SOA&#39;s vision is for actuaries to be the leading professionals in the measurement and management of risk. Visit <a href="http://www.soa.org">http://www.soa.org</a>.</p> <p align="center"> &nbsp;</p>
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