养老基金目标和战略英文.pptx

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,*,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,*,*,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,*,*,Pension Funding Targets and Strategies,Brian Donohue,Chicago Consulting Actuaries,Jerry Mingione,Towers Perrin,May 12,养老基金目标和战略英文,第1页,History of Funding Rules,In the beginning of time(post-ERISA).,actuaries had considerable control over the assumptions,and methods used for determining funding requirements.,Financial assumptions were set to be reasonable on a long-term basis.,Actuarial methods were selected,essentially right from the text book,with considerable freedom.,Unfunded liabilities were funded over 10-30 year periods,based on level payments.,养老基金目标和战略英文,第2页,History of Funding Rules,Then things changed legislatively.,In 1987,OBRA instituted the concept of current liability,in order to bring a solvency/termination basis perspective to funding requirements(and tax deduction allowances).,Basically,plans were required to maintain a funding level of 90%of current liability.,If they fell below this level,they would be required to contribute additional amounts to recover their funded position over(essentially)3-5 years.,Current liability-based funding requirements were made more stringent in 1994:,maximum CL interest rate reduced from 110%to 105%,updated mortality table,increased required funding%s for deficit reduction contributions.,养老基金目标和战略英文,第3页,History of Funding Rules,And capital market changes upset the dynamics.,Initially interest rates were high enough that the termination basis calculations did not override the long-term funding basis that plans had traditionally used for funding.,Then interest rates declined in the 90s,as did equity markets in the early years of this decade creating the doomsday scenario for pension plans.,Actuary-set long term-based financial assumptions did not react much.,Thus,the dynamics of pension funding requirements changed dramatically.,Treasury cut back the issuance of 30-year bonds in 1998,and then eliminated them entirely in.,Yields on 30-year T-bonds declined and the credit spread widened.,It became apparent that a legislative remedy was required.,Temporary relief was granted for-by raising the interest rate cap to 120%.,养老基金目标和战略英文,第4页,Current Situation,Lets compare assumptions in the late 1980s vs.today:,*,Potentially increases to about 6.4%with interest rate relief.,1988,average contribution,interest rate,8.4%,8.3%,30-year Treasury yield,9.0%,5.1%,maximum current,liability rate,10.1%,5.5%*,养老基金目标和战略英文,第5页,Current Situation,Heres what those changes imply in terms of valuation results and,contribution requirements:,1988,without relief,with relief,valuation interest rate,8.4%,8.3%,8.3%,current liability rate,10.1%,5.5%,6.4%,AAL funded ratio,84%,83%,83%,CL funded ratio,115%,73%,81%,regular minimum,$47.3,$49.2,$49.2,addtl.funding charge,0.0,75.6,34.7,minimum with DRC,124.9,83.9,养老基金目标和战略英文,第6页,Current Situation,The typical pension plan today has a current liability funded,status in the range of 80-90%.Many,of course,are well,below this level.,Contribution requirements tend to spike dramatically as funded levels fall below 90%.,However,contribution requirements in most cases lag emerging financial experience by roughly 2-3 years,due to the effects of:,volatility relief,four-year averaging of interest rates,asset smoothing,allowable contribution timing delays.,养老基金目标和战略英文,第7页,Current Situation,Plan sponsors have typically not been proactive in addressing their,declining funded positions with a few notable exceptions.,Why?,They counted on smoothing to avoid the worst effects of the capital market situation,and that the capital market situation would improve over time.,They counted on legislated solutions to mitigate contribution requirements.,The implications in terms of future contribution requirements were not always made clear.,The number of alternative funding measures made it hard to monitor results and determine/prioritize funding targets.,养老基金目标和战略英文,第8页,Lessons Learned,Poorly funded plans entail a number of adverse,consequences,in addition to spikes in future,contribution requirements:,quarterly contribution requirements,PBGC variable premiums,participant notices re underfunding,PBGC underfunding notice,additional minimum liability/charges to shareholder equity.,养老基金目标和战略英文,第9页,Lessons Learned,Recent experience has exposed a need to better monitor,CL funding,and potentially adjust funding over time so as,to maintain a target funding level:,60%to avoid restrictions on benefit improvements,80%/90%to avoid additional funding charge+participant notice,100%to avoid quarterly contributions.,110%to avoid lump sum restrictions to top 25.,125%to allow section 420 transfers to fund retiree medical benefits(based on OBRA CL).,养老基金目标和战略英文,第10页,Lessons Learned,Other possible funding targets:,FFL to avoid variable premium,ABO to avoid additional balance sheet liability.,养老基金目标和战略英文,第11页,Lessons Learned,While results were strong,they werent a panacea.,Plan sponsors still have the after-effects of smoothing methodologies to deal with.,Most plans now realize that a minimum funding strategy is not optimal.,There is also considerable legislative uncertainty remaining:,short-term interest rate and DRC-related relief,long-term funding reform.,养老基金目标和战略英文,第12页,Proactive Strategies,Push back quarterly contributions,requires,minor,acceleration of contribution timing,improves CL funded%,reduces PBGC premiums.,Avoid DRC,90%/90%/80%/80%pattern,avoids large increase in funding requirements.,Avoid PBGC variable premium,funding target based on FFL,variable premiums,unlike contributions,are a dead-weight loss to employers.,养老基金目标和战略英文,第13页,Proactive Strategies,Current liability,$828,$975,$1,106,$1,220,$1,314,$1,398,Market value of assets,849,886,902,979,1,026,1,075,Funded%(w/accrued contributions),104%,91%,85%,82%,80%,85%,PBGC premiums,1.1,0.3,2.2,2.4,2.7,2.2,Contributions,January 15,0.0,0.0,0.0,8.6,9.9,11.9,April 15,0.0,0.0,8.6,9.9,11.9,28.9,July 15,0.0,0.0,8.6,9.9,11.9,28.9,September 15,22.3,6.5,37.3,6.1,7.0,103.1,October 15,0.0,0.0,8.6,9.9,11.9,28.9,Total contribution,22.3,6.5,63.2,44.3,52.5,201.6,Example 1:Minimum Funding,Aggregate contributions:$390.4,Aggregate PBGC premiums:$10.9,养老基金目标和战略英文,第14页,Proactive Strategies,Current liability,$828,$975,$1,106,$1,220,$1,314,$1,398,Market value of assets,849,886,902,973,1,014,1,056,Funded%(w/accrued contributions),104%,91%,88%,84%,82%,91%,PBGC premiums,1.1,0.3,0.3,2.2,2.4,0.3,Contributions,January 15,0.0,0.0,0.0,7.7,8.6,10.4,April 15,0.0,0.0,46.0,15.9,18.7,129.2,July 15,0.0,0.0,8.4,9.5,11.5,28.3,September 15,22.3,6.5,8.6,9.8,11.8,29.0,October 15,0.0,0.0,0.0,0.0,0.0,0.0,Total contribution,22.3,6.5,63.0,42.8,50.5,196.8,Example 2:Push back quarterly contributions,Aggregate contributions:$381.9,Aggregate PBGC premiums:$6.5,养老基金目标和战略英文,第15页,Proactive Strategies,Current liability,$828,$975,$1,106,$1,220,$1,314,$1,398,Market value of assets,849,886,902,973,1,014,1,159,Funded%(w/accrued contributions),104%,91%,88%,84%,90%,90%,PBGC Premiums,1.1,0.3,0.3,2.2,2.4,0.3,Contributions,January 15,0.0,0.0,0.0,7.7,8.6,0.0,April 15,0.0,0.0,46.0,15.9,18.7,0.0,July 15,0.0,0.0,8.4,9.5,11.5,0.0,September 15,22.3,6.5,8.6,9.8,110.6,71.6,October 15,0.0,0.0,0.0,0.0,0.0,0.0,Total Contribution,22.3,6.5,63.0,42.8,149.4,71.6,Example 3:Avoid DRC,Aggregate contributions:$355.6,Aggregate PBGC premiums:$4.5,养老基金目标和战略英文,第16页,Proactive Strategies,Current liability,$828,$975,$1,106,$1,220,$1,314,$1,398,Market value of assets,849,935,948,971,1,029,1,158,Funded%(w/accrued contributions),109%,96%,88%,85%,90%,90%,PBGC Premiums,0.3,0.3,0.3,0.3,0.3,0.3,Contributions,January 15,0.0,0.0,0.0,7.8,0.0,0.0,April 15,0.0,0.0,0.0,15.9,11.4,0.0,July 15,0.0,0.0,6.1,9.6,11.5,0.0,September 15,69.2,0.0,8.7,24.5,109.7,72.0,October 15,0.0,0.0,0.0,0.0,0.0,0.0,Total Contribution,69.2,0.0,14.7,57.8,132.7,72.0,Example 4:Avoid PBGC variable premium,Aggregate contributions:$346.4,Aggregate PBGC premiums:$1.8,养老基金目标和战略英文,第17页,Proactive Strategies,Consultants need to clarify pension funding decisions for clients.,The actuarial report has become a compliance document,not a consulting document.,The old model(minimum and maximum)has been replaced by a new model(targets and consequences)for pension funding.,Forecasts are essential to client understanding and decision-making.,Ultimately,pension funding decisions should be less complicated than they currently seem to employers.,养老基金目标和战略英文,第18页,Proactive Strategies,Long-term strategic approaches-determine the long-term,cost of the plan(e.g.,level%of pay)and fund this amount,subject to min/max constraints,potentially reduces the volatility of annual contribution requirements dramatically,does this by avoiding the“feast or famine”scenarios that most plan sponsors have been seeing.,Area of concern,:how do variations in contribution requirements,correlate to the ups and downs of the business cycle?,In economic terms it is not just the amount of required contributions that should be of concern,but the potential,disutility,of having to make those contributions at the wrong time.,养老基金目标和战略英文,第19页,Proactive Strategies,Minimum,Funding Target,Contributions,Analysis shows that target contributions in advance of,requirements should reduce the level and variability of,future contributions.,养老基金目标和战略英文,第20页,Proactive Strategies,What do companies actual funding policies look like,to the extent they have developed one?,90%of surveyed companies reported having some type of funding policy,although typically these are unwritten/informal.,Contribution targets within these policies were as follows,34%expected to pay the minimum required contribution,16%targeted to maintain a 90%funded level for current liability,8%targeted to avoid PBGC variable premiums,6%set funded level targets based on PBO/ABO measures,5%targeted to avoid participant underfunding notices,5%expected to pay the maximum deductible amount.,Source:Towers Perrin survey;115 responses,养老基金目标和战略英文,第21页,Funding Reform,In terms of near-term funding relief,Congress seems,prepared to grant the following:,Replacement of 30-year Treasury bond yield with a composite rate consisting of high quality long corporate bond indices,adds as much as 1.0%to the 4-year weighted average for (note:there is some uncertainty as to how Treasury will implement the new rate).,Other limited relief provided for airlines,steel,and multiemployer plan sponsors.,These provisions will only be effective for two years-through YE,.Thus continuing efforts to craft more permanent funding,reform will be necessary-starting immediately.,养老基金目标和战略英文,第22页,Funding Reform,What might permanent reform look like?The Treasury department,has made proposals along the following lines:,Solvency measures would reflect,snapshot values,of assets and liabilities,including interest rates based on a,yield curve,.,The changes would make pension funding more responsive to capital market conditions and the varying effects of plan demographics.,There would be increased disclosure requirements with respect to plan funded status(based on the same snapshot/solvency measure),and restrictions on benefits provided under poorly funded plans.,There have also been proposals to modify the PBGC premium structure to be more reflective of the plan termination-related risks entailed by different plans and investment strategies.,There is no escaping that the PBGC needs additional revenue in order to make up its current shortfall;how to get it is the question.,养老基金目标和战略英文,第23页,Funding Reform,If current liability measures are revised to reflect a snapshot of,current capital market conditions,there will be considerable new,volatility in CL basis funding measures,and thus in contribution,requirements.,All parties seem to agree that it is appropriate to make other changes in order to address that expected volatility.,Some preliminary proposals have been floated,including:,limiting the year-to-year increase in contribution requirements(e.g.,2%of covered payroll),averaging the CL funding ratios over a period of years,reducing the%of unfunded amounts(lengthening the amortization period)required to be contributed each year.,None seems the perfect solution-each has practical problems,attached.,养老基金目标和战略英文,第24页,Q&A,Questions?,Cheap Shots?,Comments?,养老基金目标和战略英文,第25页,