PBGC Multiemployer Insurance Program May Fold Within the Decade
Over the next decade, the financial condition of PBGC’s Multiemployer Insurance Program is expected to steadily worsen, leaving very little chance that the program will remain solvent beyond the next decade.
The Pension Benefit Guaranty Corporation’s (PBGC)’s Multiemployer Insurance Program continues to face insolvency by the end of fiscal year 2025, according to findings in the FY 2017 Projections Report.
The agency’s insurance program for multiemployer pension plans covers over 10 million people. The new projections show a narrower range of years for the likely date of insolvency of the Multiemployer Program. The likelihood that the Multiemployer Program will run out of money before the end of FY 2025 has grown to more than 90%, and there remains a significant chance the program will run out of money during FY 2024. The likelihood the program will remain solvent after FY 2026 is now less than 1%. The narrower range in the new projections is based on the most recent available data on troubled pension plans.
Over the next decade, the financial condition of PBGC’s Multiemployer Insurance Program is expected to worsen. Projections made for FY 2027 show a wide range of potential outcomes, with an average projected deficit of about $89.5 billion in future dollars—an increase of more than $11.7 billion from last year’s projection for FY 2026. The insolvency risk and projected future deficits are very similar whether or not PBGC assumes multiemployer plans will continue to adopt benefit reductions or partitions under the Multiemployer Pension Reform Act of 2014.
About 130 multiemployer plans covering 1.3 million people are expected to run out of money over the next 20 years. Absent legislative changes, more and larger claims on the Multiemployer Program will lead to the program’s insolvency, the PBGC says. As insolvency nears, the specific year of insolvency becomes more predictable.
If the Multiemployer Program were to run out of money, current law would require the PBGC to decrease guarantees to the amount that can be paid from premium income, which would result in reducing guarantees to a fraction of current values. PBGC’s guarantee is the amount of retirement benefits that PBGC insures for each participant, which is capped by law. PBGC Director Tom Reeder recently told the Joint Select Committee on Solvency of Multiemployer Pension Plans that insolvency of the PBGC multiemployer program could result in participants in failed multiemployer plans receiving a very small fraction—an eighth or less, on average—of the current benefit guarantee level. In addition, the Society of Actuaries warns of ripple effects on the economy if many of these plans fail.
According to a PBGC announcement, President Donald Trump’s FY 2019 Budget contains a proposal to shore up PBGC’s Multiemployer Program. The budget proposes to create a new variable rate premium and an exit premium in the Multiemployer Program, estimated to raise an additional $16 billion in premium revenue over the 10-year budget window. The proposal includes a provision allowing for a waiver of the additional premium if needed to avoid increasing the insolvency risk of the most troubled plans.
On the other hand, PBGC’s Single-Employer Program, which covers about 28 million participants, continues to improve and is likely to emerge from deficit sooner than previously anticipated.
Last year’s report projected the program could potentially emerge from deficit by FY 2018 and was likely to emerge by FY 2022. The program forecasts have improved, with a larger chance of emerging from deficit by FY 2018 and emergence likely by FY 2019. The projections for FY 2027 show a wide range of potential outcomes, including the possibility for future deficits that could range in excess of $100 billion, but with an average positive FY 2027 net position of $26 billion in future dollars ($20 billion in today’s dollars). Improvements in the program’s financial position over the 10-year period are due to the general trend of better funding of pension plans and projected PBGC premiums exceeding projected claims.
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Principal Acquires Finance Tech Company to Offer Adviser Solutions; Voya Promotes Industry Veteran to Regional VP of Small-Mid Corporate Markets; CAPTRUST Board of Advisors Sees Leadership Changes; and more.
Capital Group, in an effort to expand its liability driven investment (LDI) team, has added Colyar Pridgen as senior LDI strategist, based in Los Angeles.
Prior to joining Capital, Pridgen was a senior LDI strategist at Standish Mellon Asset Management. Before that, he was a consultant and actuary at Willis Towers Watson. Pridgen obtained his bachelor’s degree in economics from Cornell University. He is a credentialed actuary (FSA, EA) and also holds the Chartered Financial Analyst designation.
Gary Veerman, head of LDI Solutions at Capital Group, says, “We are very happy to have Colyar joining our team at Capital Group. Colyar’s experience and background make him an ideal addition to our growing LDI business. Companies are looking for LDI managers with leading fixed income platforms and an understanding of complex, long-term pension issues and our LDI team is growing with those priorities in mind.”
“I am very pleased to be joining Capital Group given its stellar reputation in the institutional space,” says Pridgen. “Capital Group’s fundamental credit research approach and LDI implementation experience are what plans will continue to need as they expand their LDI programs, and I greatly look forward to helping grow our presence.”
Principal Acquires Finance Tech Company to Offer Adviser Solutions
Principal Financial Groupwill acquireRobustWealth, a financial technology company. RobustWealth provides a suite of white label solutions for investment advisers including a digital advice platform, goal-based investment tools and client onboarding processes.
“We have to acknowledge people’s needs and wants: there is an unprecedented need for financial advice. And, in today’s fast-paced, always on, digital world, people have a strong desire for personalization, convenience and 24/7 access to their money,” says Tim Dunbar, executive vice president and chief investment officer. “The role of the financial adviser—a real person across the table—remains critical. But, we must combine the best of people with the best of technology to meet clients when, where and how they want to be met. Adding RobustWealth’s digital capabilities to Principal’s deep industry knowledge, asset management experience and technology creates a powerful force to help clients in their quest to save more, invest more and protect more for their financial futures.”
Principal has worked with RobustWealth since August 2017. The new Principal platform will seamlessly integrate an array of adviser practice features into one suite, including: automated rebalancing, billing/remittance, document vaults, electronic account opening, institutional quality goals-and-risk based investment portfolios, and the open architecture use of investment options.
“From employee culture to investment philosophy and a client-focused approach, Principal and RobustWealth have a lot in common.” says Mike Kerins, founder and chief executive officer of RobustWealth. “Together we will continue to evolve a digital advice platform that is sophisticated, but simple. Ultimately, these interactions combine our financial expertise with personalized digital advice that helps consumers meet their financial goals.”
RobustWealth will remain under the management of Kerins, as part of Principal. The RobustWealth platform will retain its open architecture philosophy and operate independently under a management committee within Principal. RobustWealth will continue to sell their platform to firms outside Principal as part of their growth strategy.
Voya Promotes Industry Veteran to Regional VP of Small-Mid Corporate Markets
Voya Retirement promoted Larry Boesch to the position of regional vice president, Northern Illinois market, for the company’s small-mid corporate market business.
In this role, Boesch will be responsible for developing distribution relationships and increasing retirement plan sales in the Northern Illinois territory. He will be working through all distribution channels, including retirement investment advisers (RIAs), broker dealer firms, banks, and independents serving employers with ERISA [Employee Retirement Income Security Act] plans up to $75 million in assets.
“I am extremely excited for the opportunity to leverage my previous Voya experience in a broader capacity, extending my skill set and learning to a larger market and across channels,” says Boesch.
Boeschis a veteran in the retirement industry and most recently held the position of regional vice president of sales for Voya Financial since June 2010.
“Larry’s history of success in helping to grow key markets and channels, developing familiarity with the Northern Illinois market and deep knowledge of Voya’s products and services will enable him to hit the ground running,” adds Frank Snodgrass, senior vice president, Small-Mid Corporate Markets at Voya. “Expanding our team with the addition of Larry to cover this significant market for Voya provides us with greater bench strength to become a leading retirement provider in the area.”
Boesch will be starting his new position at Voya on June 1 and is in the process ofrelocating to the Chicago-area.
CAPTRUST Board of Advisors Sees Leadership Changes
CAPTRUST Financial Advisors (CAPTRUST) has announced the appointment of Mark S. Wilson to its Board of Advisors.
Wilson is past chairman of Kimley-Horn and Associates, Inc., where he joined in 1989. In 1992, he became chief financial officer. As president (2002-2009) and chairman (2009-2015), he oversaw years of strong growth for the firm and its initial ranking amongFortune‘s “100 Best Companies to Work For,” where Kimley-Horn has now appeared 11 times.
“Those familiar with CAPTRUST know that our company culture is the foundation on which we stand and serve our clients every day,” says CAPTRUST CEO, J. Fielding Miller. “Mark shares these values and successfully led amazing growth at Kimley-Horn. We are honored to welcome him and his unique expertise to our Board of Advisors.”
Formed in 2005, the CAPTRUST Board of Advisors is composed of prominent business leaders from varying fields of expertise, including employee benefits law, technology, marketing, business finance, and the retirement industry at large. Leveraging the Board’s collective wisdom enables CAPTRUST to withstand ongoing growth opportunities and enhance its service offerings.
Charlie Ruffel, executive chairman and managing partner of Kudu Investment Management, a New York City-based fund that takes minority stakes in asset management firms, will step off the Board to focus on the growth of Kudu, but will remain a trusted counsel to CAPTRUST leadership.
“I want to thank Charlie for his many years of service and friendship to our leadership team at CAPTRUST. We are grateful for his expertise and counsel as a member of our Board, and look forward to working with him in this new capacity for years to come,” adds Miller.
T. Rowe Price to Close Tampa Office in 2019
T. Rowe Price Group announced that it will not be renewing its office lease in Tampa, Florida, and plans to close its Tampa Operations Center in June 2019, consolidating into the firm’s two other sites servicing individual investors and retirement plan participants. The remaining locations are owned multi-building campuses in Owings Mills, Maryland, and Colorado Springs, Colorado.
According to the company, the decision was made after careful consideration and responds to a growing client preference to engage digitally after the firm saw success in its digital transformation and technology innovations.
Currently, about 400 associates work in theTampaoffice, with the majority in phone support and other client service roles. Approximately 30 associates with assigned client relationships, including regional relationship managers and members of the retirement plan employee meeting team, will remain in the area working remotely. All other associates are being encouraged to consider relocation by pursuing roles at other sites. The firm continues to hire inMarylandandColoradoand also plans to transfer approximately 220 positions fromTampato these locations. Given ongoing efficiency efforts and through the site consolidation, the firm ultimately expects that approximately 150 positions will not be replaced during this period. The firm will provide associates with appropriate resources and dedicated transition support.
“This strategic business decision was difficult because of the significant impact it will have on our Tampaassociates,” says William J. Stromberg, president and CEO. “We are grateful for the many contributions they have made to our clients, the firm, and the community. By sharing this news well in advance we hope to provide them with ample opportunity and support to plan for the transition.”
Trinity Pension Consultants Promotes Consultant
Trinity Pension Consultants,Ohio’slargest third-party administration (TPA) firm focusing exclusively on qualified retirement plans, announced the promotion ofThomas Carlineto regional retirement plan consultantfor all of its Cincinnati, Ohio, and Kentucky clientele.
Carline has served as a Trinity retirement plan consultant since 2013, most recently as the lead consultant for theKentuckymarket. Based inLouisville, Kentucky, he will continue to serve this territory while also spending time in Trinity’sMason, Ohio, sales office.
“Tom has provided key strategic recommendations on complex cases nationwide,” saysKevin Bergdorf, Trinity principal and founder and author of “The Cash Balance Conversion.” Bergdorf, who spearheaded the firm’s expansion intoKentuckyin 2014, adds, “He is a creative problem-solver with experience in all aspects of the qualified retirement plan space. Tom will be a true asset toCincinnati business owners and financial advisers alike.”
Prior to Trinity, Carline worked as a financial adviser and an investment consultant at the Kemelgor Financial Group and PNC Investments, respectively. He holds a B.S. in Finance from TheOhio State Universityand is a current member of the American Society of Pension Professionals & Actuaries.