MassMutual Custom Yield Curve Solution Offers More Transparency

Massachusetts Mutual Life Insurance Co. (MassMutual) is introducing new customized defined benefit (DB) plan yield curves to help plan sponsors measure their pension obligations in a more informed and transparent way.

The custom yield curves help plan sponsors determine an appropriate discount rate to measure liabilities for their pension and other post-retirement benefit obligations. MassMutual’s curve, which meets the pension and post-retirement benefit obligation requirements set by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC), offers plan sponsors and their auditors an alternative solution with greater transparency than similarly available benchmarks in the market, according to Sumit Kundu, consulting actuary at MassMutual who leads this initiative.

“That’s an important consideration in an environment where historically low interest rates and rising costs associated with pension plans are making it more difficult and more expensive for employers to keep sponsoring their DB plans,” Kundu says.

In introducing the yield curve, MassMutual is issuing a white paper that outlines its methodology and makes comparisons to other yield curves available on the market, which will be available on request from the plan sponsors and their auditors.

The introduction of the yield curve represents an enhancement of MassMutual’s support of DB plans, according to Kundu. Despite the erosion of defined benefit plans in the market, there are still approximately $8.2 trillion total in private and public DB pension assets in the United States as of September 30, 2016, according to the Investment Company Institute.

The need for a holistic set of solutions in the complex pension marketplace contributed to MassMutual’s decision in 2016 to create the Institutional Solutions unit, which provides plan sponsors and advisers with an array of actuarial and other plan services, including investment products tailored for DB plans (open and frozen), liability driven investing (LDI), actuarial funding and accounting strategies, plan administration, plan design consulting, pension buyouts and lump sum windows.