Multiemployer Pension Lifeboat Sinking Fast

The Pension Benefit Guaranty Corporation (PBGC)’s multiemployer insurance program, which covers over 10 million people, remains in “dire financial condition,” and has not veered from its trajectory to become insolvent by the end of fiscal year 2025, according to the agency’s latest projections report.

“This year’s projections for PBGC’s Multiemployer Program continue to show a very high likelihood of insolvency during FY 2025, and that insolvency is a near certainty by the end of FY 2026,” said the PGBC in its report.

The PBGC also said that about 125 of the 1,400 multiemployer plans that it insures are in critical and declining status, and will be unable to raise contributions sufficiently to avoid insolvency during the next 20 years.

The projections report, which is required by the Employee Retirement Income Security Act (ERISA), is the PBGC’s annual actuarial evaluation of its future operations and financial status. The report provides estimates of the future status of insured pension plans and their effect on PBGC’s financial condition, and is based on hundreds of different economic scenarios.

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“Absent changes in law, the financial condition of PBGC’s Multiemployer Insurance Program will continue to worsen,” said the PBGC. “More and larger claims on the multiemployer program over the next few years will deplete program assets and lead to the program’s insolvency.”

Meanwhile, the PBGC’s projection for the single-employer program, which covers approximately 26 million participants, shows that it continues to improve, but remains exposed to “a considerable amount of underfunding in plans sponsored by financially weak employers.” Plans whose sponsors’ credit quality is below investment grade have unfunded liabilities of approximately $175 billion.

The agency also said the single employer program emerged from a negative net position or “deficit” last year for the first time since 2001. However, while the program is expected to continue to improve, it is “not assured, and the program remains vulnerable to an unexpected downturn in the economy,” said the PBGC.

If the multiemployer program runs out of money, current law would require PBGC to decrease guarantees to the amount that can be paid from the multiemployer program’s premium income. The PBGC said this would result in cutting guarantees to a fraction of current values.

The PBGC noted the president’s fiscal year 2020 budget contains a proposal to shore up the multiemployer program. The budget proposes to create a new variable rate premium and an exit premium for the program, and would raise an additional $18 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.

“At this level of premium receipts, the program is projected to remain solvent over the next 20 years,” said the budget report.

Tags: Insolvency, PBGC, Pension

Hirtle Callaghan Appoints Endowment Veteran Stephen Vaccaro as Director of Private Equity

Hirtle Callaghan announced that Stephen Vaccaro has joined the firm as director of private equity.

Vaccaro is working closely with Hirtle Callaghan’s investment team to oversee private equity investment efforts on behalf of the firm’s family, endowment, foundation, health care, and pension clients. He reports to Dan McCollum, deputy chief investment officer, who leads the firm’s manager selection. Vaccaro also serves as a member of Hirtle Callaghan’s investment policy committee and investment strategy committee.

Vaccaro joins Hirtle Callaghan from the University of Pennsylvania’s office of investments, where he focused for eight years on growing the private equity investment program for the university’s $13 billion endowment and $2 billion pension fund. As a senior team member, Vaccaro played an active role in investment committee discussions across public equity, private equity, real assets, and absolute return strategies.

Prior to joining the University of Pennsylvania, Vaccaro was a senior team member at Princeton University’s $26 billion endowment, where he worked in private investments across buyouts, venture capital, natural resources, and real estate. Vaccaro holds a Bachelor of Arts from Vanderbilt University and an MBA from Yale University. He is also a CFA charter holder.

XPS Pensions Group Appoints James Leeming as Head of Investment in Manchester

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XPS Pensions Group (XPS) announced the appointment of James Leeming as partner and head of investment at its Manchester office, driving growth of the firm’s investment consulting services.

Leeming has over 13 years of specialist investment experience helping pension schemes manage their investment risk and deliver to their objectives. Prior to moving into investments, he qualified as an actuary with significant knowledge and expertise in pensions liability risk. Leeming joins from JLT Group, where he was a director within the employee benefits practice.

XPS Pensions Group is the largest pure pensions consultancy in the UK specializing in pensions actuarial, investment consulting, and administration services. Leeming joined XPS August 5.

Zulfiqar Ali joins PGIM Fixed Income as Senior Portfolio Manager

PGIM Fixed Income has hired Zulfiqar Ali as a senior portfolio manager focusing on Latin America hard currency sovereign and quasi-sovereign bond positions across emerging markets strategies. Ali will report to emerging markets co-heads David Bessey and Cathy Hepworth, and will be based in Newark, New Jersey.

Ali was most recently a senior portfolio manager in emerging markets fixed income for Fort Washington Investment Advisors. Prior to Fort Washington, Ali was a policy advisor in emerging markets for SGH Macro Advisors, where he conducted emerging markets sovereign policy research.

“Ali’s knowledge and experience across emerging markets, as well as familiarity with our firm and our team, make him an outstanding addition as we seek to add alpha-generating ideas from Latin American fixed income markets,” said Hepworth.

Ali received a Bachelor of Arts with honors in economics, international relations, and political science from Brown University, and an MBA from Oxford University Said Business School.

Tags: Hirtle Callaghan, People Moves, PGIM, XPS Pensions Group