Compliance January 13, 2017

Firm Accused of Failing to Forward Employee Retirement Plan Contributions

The DOL has filed a lawsuit seeking $82,000 to restore retirement and health plan contributions, plus interest.
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The U.S. Department of Labor (DOL) has filed a complaint in the U.S. District Court of Colorado against Central Security Communications Inc., CEO Robert Millikin and fiduciary Howard Klinger to restore more than $82,000 owed to the company’s retirement and health plans, as well as additional lost income.

The lawsuit asserts that the company, Millikin and Klinger violated the Employee Retirement Income Security Act (ERISA) by not making employee retirement contributions and health insurance premium payments on behalf of the employee retirement and health plans. The lawsuit also alleges the defendants did not collect delinquent outstanding loan repayments owed to the retirement plan.

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The DOL seeks a court order that would require the company, Millikin and Klinger to restore all plan losses with interest; appoint an independent fiduciary to administer the plans; and bar Millikin and Klinger from serving as fiduciaries to any employee benefit plan.

Data & Research January 13, 2017

Possibility DB Funded Status Could Improve in 2017

“If interest rates continue to climb, the funded ratio could make some major gains,” says Zorast Wadia, at Milliman.
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As other consultants have noted, Milliman’s Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans, finds defined benefit (DB) plan funded status came almost full-circle in 2016.

In December, the funded status for these pension plans improved by $13 billion due to robust investment returns of 1.17%, and the funded ratio increased from 80.3% to 81.0% to close out the year.

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Milliman notes that overall, interest rate declines characterized 2016, with the end of August marking the lowest discount rate (at 3.32%) in the PFI’s 16-year history. Since that point and coincident with the conclusion of the U.S. presidential election, interest rates have steadily increased. 

So, looking forward, under an optimistic forecast with rising interest rates (reaching 4.59% by the end of 2017 and 5.19% by the end of 2018) and asset gains (11.2% annual returns), Milliman says the funded ratio would climb to 93% by the end of 2017 and 106% by the end of 2018. 

However, under a pessimistic forecast (3.39% discount rate at the end of 2017 and 2.79% by the end of 2018 and 3.2% annual returns), the funded ratio would decline to 74% by the end of 2017 and 68% by the end of 2018.

“Going into 2017, rumors of potential multiple interest rate hikes by the Federal Reserve have plan sponsors and pension practitioners closely watching market activity. If interest rates continue to climb, the funded ratio could make some major gains,” says Zorast Wadia, co-author of the Milliman 100 Pension Funding Index.

To view the complete Pension Funding Index, go to http://us.milliman.com/PFI.

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