PLANSPONSOR - August/September 2020 - 40
DB FOCUS
An Unstable Time for Funding
In light of the impact of COVID-19, more funding relief is needed
A
long with the nation's physical
and economic health, the COVID19
pandemic has buffeted the
actuarial fitness of U.S. corporate defined
benefit (DB) plans, in the form of their
funding ratios. Aon, a global provider of
insurance and retirement solutions, publishes
daily estimates of the funded status
of DB plans at companies in the S&P 500,
and those reckon that these plans started
2020 at 87% funding, after bouncing
between 83% and 90% last year.
CARES Act: Short-Term Fix
Then along came COVID-19. The sharp
drop in stock prices that started in February
drove funding as low as 81% by the end of
March. DB plans were not likely a top-ofmind
concern for the U.S. Congress in
designing early COVID-19 relief packages,
but legislators did find some room for
them in the Coronavirus Aid, Relief and
Economic Security (CARES) Act, signed
into law March 7. The act does not provide
DB plan sponsors with much-deferral
of contributions and paperwork for a few
months-but it is a fix for the short term.
The industry is hoping, though, that in
prospective relief bills, Congress will help
address longer-term problems and mitigate
the rising costs of managing DB plans in
the next few years.
" What was interesting about the
CARES Act was it did not accomplish
much, " says Michael Clark, a managing
director and consulting actuary in the
Denver offices of consulting firm River and
Mercantile. " It didn't remove any funding
requirements, though it did push them out
to the end of 2020. " The CARES Act also
40 PLANSPONSOR.COM August - September 2020 Art by A. Richard Allen
allows sponsors to defer filing their Form
5500 and other paperwork, though interest
will have to be paid on the deferred contribution.
Clark adds, " Reading between the
lines, it seems like Congress said, 'We
know there are going to be some immediate
hardships and cash flow constraints,
but let's see how this plays out, and rather
than enact any substantial relief let's just
push out the timing to the end of the year.' "
" If we see the S&P 500 down at
the 2,200 level again, we'll see funding
relief, " says Brian Donohue, a Chicagobased
partner and actuary with consultants
October Three.
Sponsors can probably look forward
to unintended consequences of the speedy
legislation. " We have guidance from the
IRS on contributions by year end, but
we don't have guidance yet on what that
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PLANSPONSOR - August/September 2020
Table of Contents for the Digital Edition of PLANSPONSOR - August/September 2020
2020 Plan Sponsor of the Year Winners
New Support for HR Teams
Social Security Demystified
An Unstable Time for Funding
Rethinking Fixed Income
Winning Ways in the Pandemic
PLANSPONSOR - August/September 2020 - Cover1
PLANSPONSOR - August/September 2020 - Cover2
PLANSPONSOR - August/September 2020 - 1
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PLANSPONSOR - August/September 2020 - 2020 Plan Sponsor of the Year Winners
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PLANSPONSOR - August/September 2020 - 34
PLANSPONSOR - August/September 2020 - 35
PLANSPONSOR - August/September 2020 - New Support for HR Teams
PLANSPONSOR - August/September 2020 - 37
PLANSPONSOR - August/September 2020 - Social Security Demystified
PLANSPONSOR - August/September 2020 - 39
PLANSPONSOR - August/September 2020 - An Unstable Time for Funding
PLANSPONSOR - August/September 2020 - 41
PLANSPONSOR - August/September 2020 - Rethinking Fixed Income
PLANSPONSOR - August/September 2020 - 43
PLANSPONSOR - August/September 2020 - 44
PLANSPONSOR - August/September 2020 - 45
PLANSPONSOR - August/September 2020 - 46
PLANSPONSOR - August/September 2020 - 47
PLANSPONSOR - August/September 2020 - Winning Ways in the Pandemic
PLANSPONSOR - August/September 2020 - Cover3
PLANSPONSOR - August/September 2020 - Cover4
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