Data & Research September 16, 2013

Wisconsin Shines Brightest in Pension Ranking

Morningstar's municipal credit analysts found that based on two key funding metrics, the state of Wisconsin has the strongest-funded state pension plan system while Illinois has the weakest among all 50 states.
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According to the 2013 edition of its research report, “The State of State Pension Plans,” Wisconsin’s funded ratio is 99.9%, a 0.1% increase from last year, and the liability per capita is $18, which fell $3 from 2012. Illinois continues to have the weakest-funded state pension system, with a 40.4% funded ratio, falling 3% since last year, and a liability of $7,421 per capita, an increase of more than $900 from 2012.

Puerto Rico’s pension system is weaker than Illinois’, with a funded ratio of 11.2% and a liability of more than $8,900 per capita. According to the commonwealth, all three of its pension plans are projected to deplete their assets over the next few years, but recently passed reforms may mitigate the losses.

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Twenty-six states and Puerto Rico fall below Morningstar’s fiscally sound threshold of a 70% funded ratio. Puerto Rico has the lowest funded ratio; twelve states have an aggregate funded ratio of 80% or more, led by Wisconsin for the second year in a row.

Morningstar's pension plan analysis focused on two key metrics:

• Funded Ratio: the ability of a pension plan to meet its obligations, which is calculated by dividing the pension plan's assets by its liabilities; and

• Unfunded Actuarial Accrued Liability (UAAL) Per Capita: the unfunded liability per capita, representing the amount each person in the state would need to pay to fully fund this unfunded liability.

Seven states have a UAAL of less than $100 per capita. Wisconsin has the lowest UAAL per capita for the second year in a row. Thirteen states have a UAAL under $1,500 per capita, which is Morningstar's threshold for "Good" unfunded liability levels, and Alaska had the highest UAAL per capita for the second year in a row, currently more than $10,000.

The report also includes a discussion of trends, pension reform, recent bankruptcies, shortcomings in disclosure and transparency, and federal legislation. Morningstar analysts also compiled aggregate pension data by state, including assets, funded ratio and UAAL per capita, along with individual pension plan data by state.

An excerpt of "The State of State Pension Plans 2013" is available at http://global.morningstar.com/Pensions2013. For a video and article highlighting this year's research findings, please visit http://www.morningstar.com/goto/StatePension. For more information about Morningstar's analysis of government pension plans, the company's "State and Local Pensions 101" overview is available at http://global.morningstar.com/pensions101.

Products September 16, 2013

Genworth Unveils Small-Market Plan

Retirement Connections was rolled out by Genworth Wealth Management as a product for independent financial advisers who want to expand into retirement. 
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The plan is designed to meet the varied challenges and demands that business owners face in providing simple but sophisticated retirement plan choices to their employees. Pointing out that Americans already have increasingly low confidence in their retirement readiness, Michael Kim, senior vice president, Genworth Wealth Management, said that the plan allows advisers to offer business owners a compelling solution to help them attract and retain valuable employees.

“The retirement plan market is steadily growing, and the vast majority of plans are small- to mid-size—the sweet spot for advisers,” Kim said. “By expanding into plan services, advisers may see opportunities open up for financial planning services and IRA rollovers.”

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Advisers can offer the following to small-business owner clients:

A range of choice to participants, from low-cost exchange-traded funds (ETFs) to target-risk turnkey investment solutions;

Shared fiduciary responsibility with Genworth Wealth Management, the Employee Retirement Income Security Act (ERISA) Section 3(38) investment manager that assumes liability for the investment selections and monitoring; and

A team of specialists to support every aspect of the plan.

“Broker/dealers we work with are finding this solution attractive because of the investment manager fiduciary responsibility delegation as well as the integrated offering,” said David Pologe, director of strategic accounts for Genworth Wealth Management.

“We’ve integrated the third party-administrator and recordkeeper so advisers and their clients have a single point of contact for plan administration,” Kim said. “Given how time-pressed advisers are, this was important in building our offering.”

More information is available at Genworth’s site. 

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