Your pension fund healthy? Who knows?

[Focus]

Just got the annual funding notice for my (very small) pension. It's difficult to make out if the pension fund is healthy or not, thanks to a law passed by Congress that allows employees to use a 25-year average for interest rates instead of the previous two-year one.

In my plan, for example, things are either great (103% funding target attainment percentage, 25-year average) or just OK (82%, two-year average).

For those in the same boat, the best article I could find online on this is from two years ago:

Forbes: The Truth About Your Annual Pension Funding Notice

Because of the wide swing in the numbers shown above, I'm going more by this:

Another way to look at a plan’s funding status is to look at the fair market value—what the market says the assets are worth–divided by the liabilities. Congress allows plans to use actuarial values to determine funding status because actuarial values fluctuate less than market values. But the fair market value ratio really tells you how the plan is doing, Fuerst says.

The annual funding notices include this information for the end of the plan year in a separate paragraph typically headed “fair market value of assets.” GE, for example, as of Dec. 31, 2013 had $48,296,736,000 in assets and $53,150,133,000 in liabilities, which comes out to a 91% funded status.

In my fund's case, that ends up being roughly 85%. I hope that's OK, based on the idea that anything above 80% is stable. I'd be more comfortable if it was higher, though.

 

[target2019]

I wonder if spouse is missing this important information, too. We just discussed the funding percentage.

Yearly statement of personal estimate does not get into the percentages you mention. Do you see these numbers because pension payments have begun?

 

[Focus]

I wonder if spouse is missing this important information, too. We just discussed the funding percentage.

Yearly statement of personal estimate does not get into the percentages you mention. Do you see these numbers because pension payments have begun?

Perhaps the annual pension funding notice will arrive separately? My pension payments have begun, but I was receiving the notice before that.

 

[Greencheese]

Just got the annual funding notice for my (very small) pension. It's difficult to make out if the pension fund is healthy or not, thanks to a law passed by Congress that allows employees to use a 25-year average for interest rates instead of the previous two-year one.

In my plan, for example, things are either great (103% funding target attainment percentage, 25-year average) or just OK (82%, two-year average).

For those in the same boat, the best article I could find online on this is from two years ago:

Forbes: The Truth About Your Annual Pension Funding Notice

Because of the wide swing in the numbers shown above, I'm going more by this:



In my fund's case, that ends up being roughly 85%. I hope that's OK, based on the idea that anything above 80% is stable. I'd be more comfortable if it was higher, though.

Good thing my Soviet Union bonds are finally maturing

 

[MBSC]

FTAP with adjusted interest rates: 117.5%
FTAP w/o adjusted interest rates: 89.6%
Funded Percentage: 142.2%
Year end assets/liabilities: 113.26%

16 years until pension lump sum.

 

[Midpack]

Another potential reason to take a lump sum instead of a pension where possible.

 

[rayinpenn]

My pension (defined benefit) was converted years ago to a defined account plan. Even with the transition credits I thought for years that we took it on the chin. Funny thing 16 years later I am glad it happened.. How many retired and displaced employees ended up getting pennies on the dollar...

http://money.usnews.com/money/blogs...010/08/23/the-10-biggest-failed-pension-plans



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[rodi]

My pension definitely took a hit with the lump sum payouts they offered last year. (Lots of people took the lump sum, even though it was smaller than the amount needed to buy an equivalent SPIA.)

My small pension's numbers aren't so rosy

FTAP with adjusted rates: 88.98%
FTAP without adjusted rates: 66.45%

And significant shortfalls listed.

I know the lump sum is a big factor because the previous years funding (2014) was:
FTAP with adjusted rates: 98.93%
FTAP without adjusted rates: 69.67%

The 25 year interest rate smoke and mirrors trick came along just as they were being required to make catchup contributions due to underfunding. Their catchups are smaller with this 25 year interest rate deal.

The pension was frozen almost a decade ago - then in a company split - it went to the 1/2 of the company that I didn't work for... They were required to fix the underfunding as part of the company split in order to receive FTC and Justice Department approval for the split. (Motorola to Mot Solutions and Mot Mobility).

It's a small pension... so it won't break my retirement plans - but it's disconcerting to see it so poorly funded.

 

[Big_Hitter]

FTAPs have the funding balances (credits for making more than minimum required contributions) subtracted from the assets.

The best measure of funding on the AFN, IMO, is the 12/31 assets and liabilities shown in the last paragraph. For a calendar year plan, those liabilities are calculated using December rates with no averaging.

 

[scrabbler1]

I received my annual pension estimate about a week ago. Because my pension has been frozen since 2002, that part of the statement hasn't changed. I also have a small Cash Balance benefit which my old company began in 2002 to replace the frozen pension. I accumulated a small benefit in the last 7 years I worked there (2002-2008) although those were my part-time working years. That part of the annual statement rises slightly due to the small interest credit to boost its balance.


And a few days ago I received the annual pension funding report (BTW thank you, Focus, for starting a thread on this topic). Looks like my pension plan is in good shape. All its ratios discussed in this thread are at least 96% with the FTAP w/o adjusted interest rates being 96%. I'd have to dig out prior year's statements to see what it was before 2015 although I'm not terribly curious. I am now 12 years away from the pension and I can start taking out of the smaller Cash Balance account sooner than that.

 

[Bigdawg]

23 years military. If my pension isn't safe then none of them are. Did you all fund my pension by April 18th? Hope so. Good luck to you all.

 

[Focus]

The best measure of funding on the AFN, IMO, is the 12/31 assets and liabilities shown in the last paragraph. For a calendar year plan, those liabilities are calculated using December rates with no averaging.

What would be considered a good minimum percentage of assets to liabilities? I know 80% is the government's threshold for the other formula, but that sounds low to me.

And a few days ago I received the annual pension funding report (BTW thank you, Focus, for starting a thread on this topic).

Hey, my pleasure, as long as the thread doesn't end up depressing me too much!

 

[Matthew J]

I'm really lucky. I work for the state of Ohio. Our pension system has to be funded 30 years out. What that means legally is that they have to have assets to pay for the next 30 years of payments. Currently my pension fund is in the 90% range of having enough assets to pay out for the next 30 Years.

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[Matthew J]

I feel lucky because even though our benefits are less than what is Promised in other places like other cities and states I at least know that the assets are there per state law.

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[Hermit]

My megacorp shows the numbers with and without adjustment for 2013, 2014, and 2015. The new adjusted interest rates only lowers their minimum required contribution by a bit over a billion dollars - loose change!

 

[devans0]

I'm 98% funded up from 75% funded under old accounting. Whew, I feel much better now.

 

[Shanky]

I know from personal experience a pension can go from OK (85%+), to insolvent / PBGC in a few short years.

 

[ERD50]

I know from personal experience a pension can go from OK (85%+), to insolvent / PBGC in a few short years.

That might not be such a big difference? I thought PBGC required 80% funding, so if the company couldn't meet that (or some kind of plan to meet it), it would be turned over to PBGC? So going from 85% to 80% isn't that big of a change.

Though of course, a company can go from fine to bad very quickly.

-ERD50

 

[Ed_The_Gypsy]

Good thing I only get $440/mo in defined benefit. I won't miss it.

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[Focus]

Another potential reason to take a lump sum instead of a pension where possible.

Or to take it earlier rather than later. It was certainly a factor in my decision to start taking the pension at 55 instead of 65. But it was an easy decision. There wasn't enough of a monthly increase built in for waiting 10 years and taking on the additional risk. Every calculator I used indicated there was no advantage to waiting. Social Security is another matter -- I don't plan to draw from that until I'm 70.

Good thing I only get $440/mo in defined benefit. I won't miss it.

My pension payment isn't that much more, but I'd certainly miss it. I figure it's covering my health insurance until I qualify for Medicare.

 

[dixonge]

We consider ourselves *very* fortunate in this regard. TCDRS - rock solid.

 

[imoldernu]

Am sure that everyone who has, or is expecting a pension in the private sector, is familiar with the PBGC. Here's the Q&A FAQ page on the website, which provides a quick overview of what to expect "in the event of"...

FAQs - Insured Plans & Benefits at Pension Benefit Guaranty Corp

 

[W2R]

I'm a retired federal employee, so I think I'm probably OK in this regard. On the other hand, there is a lot of public resentment directed at federal benefits these days, including retirement, so who knows? Hopefully if there are any changes in the future, existing retirees would be grandfathered. My FERS "annuity" (=pension) is only in the mid 3 figures each month, but I do appreciate having that regular monthly deposit.

 

[brett]

In our jurisdiction we are entitled to a pension plan statement every two years.

The health of the fund is expressed in two ways. The first is funding percentage assuming an ongoing plan.

The second is the level of funding based upon an immediate wind up and payout of commuted values.

These two percentage funding ratios are always slightly different but they do provide and reasonable insight into the health of the plan.

 

[Focus]

Am sure that everyone who has, or is expecting a pension in the private sector, is familiar with the PBGC. Here's the Q&A FAQ page on the website, which provides a quick overview of what to expect "in the event of"...

FAQs - Insured Plans & Benefits at Pension Benefit Guaranty Corp

Thanks for linking to that. The concern, of course, is this:

U.S. GAO - High Risk: Pension Benefit Guaranty Corporation Insurance Programs

PBGC’s financial future is uncertain, due in part to a long-term decline in the number of traditional defined benefit plans....

At the end of fiscal year 2014, PBGC’s net accumulated financial deficit was $61.8 billion—an increase of over $26 billion from the end of fiscal year 2013—and PBGC estimated that its exposure to future losses for underfunded plans was $184 billion. This dramatic increase in PBGC’s deficit was attributable to a crisis in the multiemployer program, the smaller of its two programs...