养老基金目标和战略

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 12,2004,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.,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.,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 2001.,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 2002-2003 by raising the interest rate cap to 120%.,Current Situation,Lets compare assumptions in the late 1980s vs.today:,*,Potentially increases to about 6.4%with interest rate relief.,1988,2004,average contribution,interest rate,8.4%,8.3%,30-year Treasury yield,9.0%,5.1%,maximum current,liability rate,10.1%,5.5%*,Current Situation,Heres what those changes imply in terms of valuation results and,contribution requirements:,1988,2004,2004,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,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.,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.,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.,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).,Lessons Learned,Other possible funding targets:,FFL to avoid variable premium,ABO to avoid additional balance sheet liability.,Lessons Learned,While 2003 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 con