Top 4 GASB 75 OPEB Reporting Pitfalls

Now that the first round of GASB 75 OPEB valuations are complete (and some are already onto their 2nd or 3rd rounds), it’s time to take a quick look at some common actuarial pitfalls. These are gotchas that employers and auditors may not be expecting, or notice, when reviewing a GASB 75 report.

Pitfall

  1. Unsupported actuarial assumptions. ASOPs 27 and 35 require actuaries to disclose the rationale for selecting the assumptions used in an actuarial valuation. Look for it in your GASB 75 or OPEB funding reports – it’s helpful for employers and auditors because it provides assurance that the actuary has carefully considered the underlying assumptions.
  2. Not estimating the “Cadillac Tax” effect on OPEB liabilities. Although this is usually a relatively small adjustment to liabilities, it’s very clear that GASB 75 expects it to be included in an actuarial valuation. Look for it in the actuarial report’s assumption summary section.
  3. Not updating GASB 75 results in the “off years” between valuations. Many GASB 45 reports used to provide 2 or 3 years of accounting results in a single document. However, the new GASB 75 rules require updated liabilities in the “off years” between biennial valuations.

This means that employers should receive some type of GASB 75 report every year – either a full actuarial valuation or a roll-forward report where the liabilities have been updated for new discount rates and actual prior year payments. For unfunded and partially-funded OPEB plans, the discount rate is based on a municipal bond index rate that will change every year and liabilities must be updated for this change.

  1. Not calculating an implicit subsidy liability. The implicit subsidy is the additional employer cost incurred when retirees participate in a group health plan but are only required to pay the same blended premium rate as active employees. It may seem like a nebulous cost, but it’s real. For almost all employers, the true cost of health care for non-Medicare retirees is higher than for (younger) active employees. If retirees are paying only the blended rate, then you’ve got an implicit subsidy liability.

GASB 75 (and even GASB 45) defers to actuarial standards of practice (ASOPs) when deciding whether to value an implicit subsidy liability. ASOP 6 was revised to measure an implicit subsidy for community rated plans, effective in 2015. Under the revised ASOP 6, an implicit subsidy exists whenever retirees pay the same non-age-based premiums as active employees.

Bonus: Using the GASB 75 OPEB accounting expense as a funding policy target. The GASB 45 ARC (Annual Required Contribution) was a convenient funding policy target … even if the methods used to determine the ARC weren’t based on sustainable funding practices. Well, surprise, GASB 75 eliminated the ARC so employers that want to prefund their OPEB need to develop their own Actuarially Determined Contribution (ADC).

Although the GASB 75 accounting expense may seem like a convenient successor to the ARC, it’s really not intended for that purpose. If the ARC is extinct and the GASB 75 OPEB expense isn’t appropriate, then what’s a good measure for OPEB funding policy decisions? Stay tuned – we’ll devote a series of future blog posts to this topic. In particular, we’ll discuss several important ways that OPEB funding policies should be approached much differently than pension funding policies.

Pension Lump Sums Less Expensive in 2019

Lump sum windows and other pension risk transfer strategies continue to be popular among many defined benefit (DB) pension plan sponsors. Paying lump sums to terminated vested participants can reduce long-term plan costs and risks by permanently eliminating these liabilities. However, the cost of the lump sum payments is heavily influenced by the underlying interest rate and mortality assumptions.

Although there is some flexibility when selecting the interest rate basis for a lump sum window, this post estimates the potential 2019 lump sum effect using the November 2018 interest rates as a proxy.

Higher Interest Rates Will Decrease the Cost of Lump Sums

So, what’s the story for 2019? The table and chart below show the potential difference in lump sum values at sample ages assuming payment of a $1,000 per month deferred-to-65 benefit. The calculations compare the November 2017 rate basis (i.e., 2018 lump sums) to the November 2018 basis (i.e., 2019 lump sums).

2018-19 lump sum comparison

2018-19 lump sum numerical table

The dollar decrease in lump sum value is relatively consistent around $11K to $15K. This translates to an 8% cost decrease at later ages, versus a 20% cost decrease at younger ages.

Interest rates increased steadily throughout 2018, except for a slight falter at year-end. Below is a comparison of the November 2017 and November 2018 417(e) lump sum interest rates. All the segment rates increased, with a notable jump in the first segment rate.

417(e) rate comparison 2018-19

What else should plan sponsors consider?

  1. The lump sum mortality basis changed substantially in 2018, but there’s only a minor update in 2019. This shouldn’t be a major factor in 2019 lump sum cost comparisons.
  2. It’s unclear which direction interest rates will move during 2019. Likewise, investment returns have been volatile over the past few months. These unknown factors illustrate the appeal of lump sum payouts and other risk transfer activities: they eliminate significant pension risks in exchange for an upfront cost.
  3. In addition to lump sum payout programs, plan sponsors should consider annuity purchases and additional plan funding as ways to reduce long-term plan costs/risks. Some sponsors of frozen plans are also pursuing a “borrow to fund and terminate” strategy.

2019 PEPRA compensation limits

The 2019 PEPRA compensation limits are $124,180 for Social Security members and $149,016 for non-Social Security members.

These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later.  “Classic” members hired from 1996 through 2012 are subject to the higher §401(a)(17) pay limit that applies to private sector employees.

Each year, the California Actuarial Advisory Panel (CAAP) publishes an “unofficial” calculation of the PEPRA compensation limit.  The 2019 limits are published on the State Controller’s Office website at Agenda Item #2 –PEPRA Pension Compensation Limit Letter for 2019.

CalPERS usually publishes the limits early in the calendar year.  The 2018 PERS notice is at https://www.calpers.ca.gov/page/employers/policies-and-procedures/circular-letters.  Search for letter #200-001-18.

We’ve confirmed all the PEPRA calculations in the CalPERS and CAAP letters.  The table below shows a complete set of the PEPRA compensation limits through 2019.

PEPRA Compensation Limit
Year Social Security Members Non Social Security Members
2013 $113,700 $136,440
2014 115,064 138,077
2015 117,020 140,424
2016 117,020 140,424
2017 118,775 142,530
2018 121,388 145,666
2019 124,180 149,016

For PEPRA members in the CalSTRS Defined Benefit (DB), Defined Benefit Supplement (DBS) and Cash Balance (CB) Benefit programs, the 2018-19 pay limit is $146,230.  Each year’s adjustments are based on February CPI figures and the limits apply to fiscal years.  Since CalSTRS members aren’t included in Social Security, only the non-Social Security figures are shown in the table below.  CalSTRS publishes a similar table at https://www.calstrs.com/post/final-compensation.

Fiscal Year PEPRA Compensation Limit  for CalSTRS Members
2013-14 $136,440
2014-15 137,941
2015-16 137,941
2016-17 139,320
2017-18 143,082
2018-19 146,230

 

What’s the Effect of 2019 IRS Retirement Plan Limits?

IRS Notice 2018-83 just announced the 2019 retirement plan benefit limits, and there are many changes since 2018. What does it all mean for employer-sponsored retirement plans? Here is a table of the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.

Qualified Plan Limit 2017 2018 2019
415 maximum DC plan annual addition $54,000 $55,000 $56,000
Maximum 401(k) annual deferral $18,000 $18,500 $19,000
Maximum 50+ catch-up contribution $6,000 $6,000 $6,000
415 maximum DB “dollar” limit $215,000 $220,000 $225,000
Highly compensated employee (HCE) threshold $120,000 $120,000 $125,000
401(a)(17) compensation limit $270,000 $275,000 $280,000
Social Security Taxable Wage Base $127,200 $128,400 $132,900

 

 Changes affecting both DB and DC plans

  • Qualified compensation limit increases to $280,000. This is a similar increase to recent years, so highly-paid participants will now have more of their compensation “counted” towards qualified plan benefits and less towards non-qualified plans. This could also help plans’ nondiscrimination testing if the ratio of benefits to compensation decreases.
  • HCE compensation threshold increases to $125,000. It’s nice to have an increase after several years of a stagnant $120,000 limit. Employers may find that slightly fewer participants meet the new HCE compensation criteria, which could have two direct outcomes:
    • Plans may see marginally better nondiscrimination testing results (including ADP results) if there are fewer HCEs. It could potentially make a big difference for smaller plans that were very close to failing the tests.
    • Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test.

Note that there is a “lookback” procedure when determining HCE status. This means that the 2020 HCEs are determined based on whether their 2019 compensation is above the $125,000 threshold.

 

DC-specific increases and their significance

  • The annual DC 415 limit increases from $55,000 to $56,000 and the 401(k) deferral increases to $19,000. Savers will be glad to have more 401(k) deferral opportunity, albeit a modest $500 increase. Even though these deferrals count towards the total DC limit, employers can also increase their maximum profit sharing allocations. Individuals could potentially get up to $37,000 from employer matching and profit sharing contributions ($56K – $19K) if they maximize their DC plan deductions.
  • 401(k) “catch-up” limit remains at $6,000. Participants age 50 or older still get a $6,000 catch-up opportunity in the 401(k) plan, which means they can effectively get a maximum DC deduction of $62,000 ($56K + $6K).

 

DB-specific increases and their significance

  • DB 415 maximum benefit limit (the “dollar” limit) increases to $225,000. This is the third straight year we’ve seen an increase in the DB 415 limit after three years of static amounts. The effect is that individuals who have very large DB benefits (say, shareholders in a professional firm cash balance plan) could see a deduction increase if their benefits were previously constrained by the 415 dollar limit.

 

Social Security wage base and integrated plans

  • Social Security Taxable Wage Base increases to $132,900. This is a substantive $4,500 increase from the prior limit. A higher wage base can reduce the rate of pension accruals and DC allocations for highly-paid participants in integrated pension and profit sharing plans that provide higher rates above the wage base.

Professional Firm Retirement Plans and the New QBI Tax Deduction

Qualified retirement plans were a good deal before the December 2017 Tax Cuts and Jobs Act.  For many professional firms, they’re now better than ever.

Here’s the new part:  many owners of pass-through businesses like S corporations, LLCs and sole proprietors are eligible for a 20% deduction on Qualified Business Income (QBI), essentially non-W2 business income (profits).

For “specified service businesses”, i.e. most professional firms, the 20% deduction is limited in 2018 for owners with income of more than $315,000 (married) or $157,500 (single) [1].  It’s completely eliminated for owners with income of more than $415,000 (married) or $207,500 (single).  If your income is below the threshold, you’re eligible for the entire 20% deduction.  If your income is too high, retirement plan contributions can bring it down below the threshold.  An excellent “Deduction-Reduction” article notes that retirement plan deductions aren’t a clear winner for every business owner, especially in light of the January 2019 QBI regulations.  But at the right income levels, the combined effect of the retirement plan and QBI deductions can be astonishing.

Let’s take the example of Rachel, a 50 year old married partner in a successful LLC.  Her share of the firm’s profits is $404,000.  If she maximizes her 401(k) deferral and the firm maximizes her profit sharing contribution (total of $61,000 with catchup), her income has dropped just below $315,000.  She’s entitled to the $61,000 deduction and, in addition, she can now deduct the entire 20% of QBI.  The table below shows how it works:

 With 401(k)/PS Contribution  Without 401(k)/PS Contribution
 Preliminary taxable income (PTI)
 Pass-through business income  $   404,000  $  404,000
 Other income, e.g. W-2 or spouse         24,000        24,000
 Capital gains                –              –
 REIT dividends & public partnership income                –              –
 Retirement plan deduction [2]       (61,000)              –
 Self-employed health insurance deduction       (15,000)       (15,000)
 Deduction for employer FICA tax       (13,371)       (13,371)
 Standard deduction       (24,000)       (24,000)
 Preliminary taxable income (PTI)       314,629      375,629
 Qualified Business Income (QBI)
 Pass-through business income       404,000      404,000
 Retirement plan deduction [2]       (61,000)              –
 Self-employed health insurance deduction       (15,000)       (15,000)
 Deduction for employer FICA tax       (13,371)       (13,371)
 Qualified Business Income (QBI)       314,629      375,629
 Income for QBI deduction
 Adjusted PTI: PTI less capital gains       314,629      375,629
 QBI plus REITs & public partnership income       314,629      375,629
 Smaller of the two       314,629      375,629
 QBI deduction
 Full deduction percentage 20% 20%
 Adjusted % (phase-out) 20.00% 7.87%
 Times income for QBI deduction         62,926        29,562
 QBI deduction: limited to 20% of adjusted PTI         62,926        29,562
 Taxable income after QBI deduction       251,703      346,067
 Federal income tax [3]         48,988        74,120
 Tax savings  $     25,132

By contributing $61,000 to her own retirement account, Rachel has reduced her 2018 taxable income by $94,364 and her federal income tax by $25,132.  And that doesn’t even include her savings in state & local taxes.

What if Rachel’s firm is even more successful, so that her share of the profits is $556,000?  With the right demographics, it’s still possible to contribute enough to bring her income down to the $315,000 threshold.  To do that she’ll need a cash balance plan, which works especially well for professional firms.  Partners around age 50 can contribute up to $150,000 – in addition to the $61,000 401(k)/profit sharing contribution.  Older partners can contribute more than that: up to $280,000 cash balance at age 62 – for a total contribution of $341,000 (!) with 401(k) and profit sharing.

The next table shows this scenario for Rachel:

 With Cash Balance and 401(k)/PS Contribution  Without Cash Balance and 401(k)/PS Contribution
 Preliminary taxable income (PTI)
 Pass-through business income  $    556,000  $    556,000
 Other income, e.g. W-2 or spouse          24,000          24,000
 Capital gains                  –                  –
 REIT dividends & public partnership income                  –                  –
 Retirement plan deduction [2]     (211,000)                  –
 Self-employed health insurance deduction       (15,000)        (15,000)
 Deduction for employer FICA tax       (15,406)        (15,406)
 Standard deduction       (24,000)        (24,000)
 Preliminary taxable income (PTI)        314,594        525,594
 Qualified Business Income (QBI)
 Pass-through business income        556,000        556,000
 Retirement plan deduction [2]     (211,000)                  –
 Self-employed health insurance deduction       (15,000)        (15,000)
 Deduction for employer FICA tax       (15,406)        (15,406)
 Qualified Business Income (QBI)        314,594        525,594
 Income for QBI deduction
 Adjusted PTI: PTI less capital gains        314,594        525,594
 QBI plus REITs & public partnership income        314,594        525,594
 Smaller of the two        314,594        525,594
 QBI deduction
 Full deduction percentage 20% 20%
 Adjusted % (phase-out) 20.00% 0.00%
 Times income for QBI deduction          62,919                  –
 QBI deduction: limited to 20% of adjusted PTI          62,919                  –
 Taxable income after QBI deduction        251,675        525,594
 Federal income tax [3]          48,981        135,337
 Tax savings  $      86,356

This time, Rachel has reduced her 2018 taxable income by $273,919 and her federal taxes by $86,356  by contributing $211,000 to her own retirement accounts.  And that still doesn’t include her savings in state & local taxes.

Qualified retirement plans have always been a sweet deal for professional service firms.  And they just got a lot sweeter.  Just let us know if you’d like to take a look.

 

[1] It’s also limited to 50% of W2 pay in many cases.  To simplify this example, we’ve chosen a partnership-taxed LLC and other income that happens to equal the standard deduction.

[2] Assuming the same non-owner retirement plan contributions in both columns.  In real life, non-owner contributions are an important plan design component – but we’ve simplified them here.

[3] Simplified calculation ignoring AMT and non-standard deductions.

CERBT Audited vs. Reported Assets

For most California public agencies funding Other Post-Employment Benefits (OPEB) through CERBT, there is a small difference between the 6/30/2017 assets originally reported and the final audited assets (Fiduciary Net Position, or FNP).  Our clients have been asking what to do about it.

Even the State of California has the same issue.  We’ve discussed it with the State Controller’s Office, and they’ve chosen to go with the amount originally reported by CERBT for the State’s CAFR.

Many of our clients have chosen the State’s approach, because their OPEB actuarial valuations were completed before the audited assets were announced by CalPERS in a 3/27/2018 circular letter.

Most of the differences in audited vs. reported assets are quite small.  Your options include:

  1. using the CERBT assets originally reported, or
  2. waiting to finalize your OPEB actuarial valuation until audited CERBT assets are available.

If you ever want to change from option 1 to option 2 (or vice versa), you’ll need a one-time adjustment to your FNP reconciliation.  Either way, you’ll want to check with your auditor.

2018 PEPRA compensation limits

The 2018 PEPRA compensation limits are $121,388 for Social Security members and $145,666 for non-Social Security members.

These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later.  “Classic” members hired from 1996 through 2012 are subject to the higher §401(a)(17) pay limit that applies to private sector employees.

Each year, the California Actuarial Advisory Panel (CAAP) publishes an “unofficial” calculation of the PEPRA compensation limit.  The 2018 limits are published on the State Controller’s Office website at Agenda Item #4 – Draft CAAP 2018 PEPRA Limit Letter November 21, 2017.

CalPERS usually publishes the limits in late February or early March.  The 2017 PERS notice is at https://www.calpers.ca.gov/docs/circular-letters/2017/200-010-17.pdf.  Update 1/16/2018: the 2018 PERS notice is at https://www.calpers.ca.gov/page/employers/policies-and-procedures/circular-letters.  Search for letter #200-001-18.

We’ve confirmed all of the PEPRA calculations in the CalPERS and CAAP letters.  Here is a complete set of the PEPRA compensation limits through 2018:

PEPRA Compensation Limit
Year Social Security Members Non Social Security Members
2013 113,700        136,440
2014 115,064        138,077
2015 117,020        140,424
2016 117,020        140,424
2017 118,775        142,530
2018 121,388        145,666

What’s the Impact of 2018 IRS Retirement Plan Limits?

The IRS Notice 2017-64 just announced the 2018 retirement plan benefit limits, and there are many changes since 2017. What does it all mean for employer-sponsored retirement plans? Below is a table summarizing the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.

Qualified Plan Limit 2016 2017 2018
415 maximum DC plan annual addition $53,000 $54,000 $55,000
Maximum 401(k) annual deferral $18,000 $18,000 $18,500
Maximum 50+ catch-up contribution $6,000 $6,000 $6,000
415 maximum DB “dollar” limit $210,000 $215,000 $220,000
Highly compensated employee (HCE) threshold $120,000 $120,000 $120,000
401(a)(17) compensation limit $265,000 $270,000 $275,000
Social Security Taxable Wage Base $118,500 $127,200 $128,400

 Changes affecting both DB and DC plans

  • Qualified compensation limit increases to $275,000. Highly-paid participants will now have more of their compensation “counted” towards qualified plan benefits and less towards non-qualified plans. This could also help plans’ nondiscrimination testing if the ratio of benefits to compensation decreases.
  • HCE compensation threshold remains at $120,000. This is the fourth year in a row that the HCE compensation limit has been stuck at $120,000. When this threshold doesn’t increase to keep pace with employee salary increases, employers may find that more of their employees become classified as HCEs. This could have two direct outcomes:
  • Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests.
  • More HCEs means that there are more participants who must receive 401(k) deferral refunds if the plan fails the ADP test.

Note that there is a “lookback” procedure when determining HCE status. This means that the 2019 HCEs are determined based on whether their 2018 compensation is above the $120,000 threshold.

DC-specific increases and their significance

  • The annual DC 415 limit increases from $54,000 to $55,000 and the 401(k) deferral increases to $18,500. Savers will be glad to have more 401(k) deferral opportunity, albeit a modest $500 increase. Even though these deferrals count towards the total DC limit, employers can also increase their maximum profit sharing allocations. Individuals could potentially get up to $36,500 from employer matching and profit sharing contributions ($55K – $18.5K) if they maximize their DC plan deductions.
  • 401(k) “catch-up” limit remains at $6,000. Participants age 50 or older still get a $6,000 catch-up opportunity in the 401(k) plan, which means they can effectively get a maximum DC deduction of $61,000 ($55K + $6K).

DB-specific increases and their significance

  • DB 415 maximum benefit limit (the “dollar” limit) increases to $220,000. This is the second straight year we’ve seen an increase in the DB 415 limit, after three years of static amounts. The primary impact is that individuals who have very large DB benefits (say, shareholders in a professional firm cash balance plan) could see a deduction increase if their benefits were previously constrained by the 415 dollar limit.
  • Social Security Taxable Wage Base increases to $128,400. This is a modest $1,200 increase from the prior limit. With regards to qualified retirement benefits, a higher wage base can slightly reduce the rate of pension accruals for highly-paid participants in integrated pension plans that provide higher accrual rates above the wage base. [Note: the taxable wage base was originally published as $128,700 by the Social Security Administration in October 2017 but later updated to $128,400 in November 2017.]

2017 Pension Lump Sums Are Looking More Affordable

How quickly things change! A month ago we were anticipating very expensive 2017 lump sum costs for defined benefit (DB) pension plans due to continually low interest rates. However, rates have been on a strong rebound since the election and now 2017 lump sums are looking much more affordable.

The IRS recently released the November 2016 417(e) interest rates which are used by many DB plans as the reference rates for lump sum payments. These three segment rates are 20 to 35 basis points higher than the October 2016 rates, though overall they are still lower than the November 2015 rates.

This post shares a brief update of the impact these rates could have on 2017 lump sum payout strategies.

Glass Half Full: 2017 Lump Sum Costs Are Going Up, But Less Than Expected

The table and chart below show the possible difference in lump sum values at sample ages assuming payment of a $1,000 deferred-to-65 monthly benefit. The calculations compare the November 2015 rate basis to the November 2016 basis.

Although the projected 2017 lump sum costs are still higher than 2016, the increases are only half of what we were expecting a month ago. It remains to be seen if rates continue their upward trend, but the reduction in anticipated lump sum cost increases may encourage more plan sponsors to embrace pension risk transfer (PRT) strategies like lump sum windows for terminated vested participants.

The November lump sum rates aren’t the end of the story for 2017 PRT opportunities either. If rates continue to increase, then plan sponsors will want to consider using a different reference period for the temporary lump sum window to reflect the higher rates. Even if rates don’t rise anymore, 2017 will likely be the last year to pay lump sums without reflecting new mortality assumptions in 2018.

2016 Pension Accounting Preview: a Positive Outlook

Many defined benefit (DB) plan sponsors are aware that interest rates dropped significantly in the first half of 2016 but staged a remarkable rise since the November election. Combined with relatively strong equity returns, 2016 year-end pension disclosures may not be as bad as expected 6 to 8 weeks ago.

Discount Rate Analysis

Using the November 2016 Citi Pension Liability Index (CPLI) and Citi Pension Discount Curve (CPDC) as proxies, pension accounting discount rates are down by about 20 basis year-to-date. Although they’re not quite up to 2015 year-end levels, the rebound (from almost 90 bps lower than last year) is welcome relief to pension plans.

In the chart below, we compare the CPDC at three different measurement dates (12/31/2014, 12/31/2015, and 11/30/2016). We also highlight the CPLI at each measurement date. The CPLI can be thought of as the average discount rate produced by the curve for an “average” pension plan.

nov-2016-citigroup-curve

Net Effect on Balance Sheet Liability

The other half of the pension funded status equation is the plan asset return. Like discount rates, it’s been a bumpy year but it appears to be ending in the right direction. Domestic stock indices are doing well and a balanced portfolio is likely at or above its expected return.

Depending on the starting funded status, the change in pension liabilities and assets can have a leveraging effect on the reported net balance sheet asset/liability.

Below is a simplified illustration for a plan that was 80% funded on 12/31/2015. We assume a 5% increase in pension liability during 2016 and then compare the funded status results under two asset scenarios: (1) Assets 5% higher than 12/31/2015 and (2) Assets 8% higher than 12/31/2015.

illustration-of-change-nov-16

In the first scenario, the plan’s funded percent remains constant at 80% even though the dollar amount of pension debt increases by about 5%. In the second scenario, the funded status actually improves slightly both on a percent and dollar basis.

Conclusions

So, what should plan sponsors be considering over the next month as we approach year-end? Here are a few ideas.

  • The 2016 Society of Actuaries mortality table updates will likely be recommended for use at year-end. Those tables should decrease pension liabilities slightly for most plans.
  • Don’t forget to measure settlement accounting if you completed a lump sum window in 2016! Some small and mid-sized plans may not be familiar with this requirement, and it can significantly increase your 2016 pension accounting expense.
  • Using the Citi above-median yield curve could increase discount rates by roughly 12 basis points.
  • Now may be a good time to consider strategies that lock in some of this year’s investment gains. These could include exploring an LDI strategy to more closely align plan assets and liabilities, or offering a lump sum payout window for terminated vested participants in 2017.