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Asset Management CultureApril 7, 2020

Pennsylvania SERS Waives Minimum Required Payments from DC Plan

Permitted under the CARES Act, the provision allows portfolios to recover from stock market downturns.

By Sarah Min

Board members at the Pennsylvania State Employees’ Retirement System (SERS) made several changes on Friday for participants in the system’s deferred compensation (DC) plans, including waiving required minimum payments for the rest of the year and offering coronavirus relief.

Typically, retirees age 72 and older must withdraw a minimum amount every year to avoid a tax penalty. But a recent provision under the CARES [Coronavirus Aid, Relief and Economic Security] Act, the federal fiscal relief package, dropped those required minimum payments from retirement plans.

Pennsylvania SERS additionally said it may pull balances from any payments already issued this year within two months of distribution.

“No minimum distribution payments will be made for the remainder of the year and any minimum distributions already issued may be rolled back into the plan within 60 days of the distribution,” read a release from the fund.

The change under the CARES Act is intended to help portfolios to recover from the recent stock market downturn, which erased about 20% from equity markets last month. That would be a boon to Pennsylvania SERS, which was just 56% funded in 2018.

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It could also help some retirees who would prefer to leave their funds to grow in the plan. The deferred compensation plan (also known as defined contribution) has $3.9 billion in assets for some 57,000 voluntary participants. By comparison, the defined benefit plan in the same Pennsylvania SERS system is worth $30.9 billion, as of January.

To help those in need, the state retirement system will now offer early distribution withdrawals for all members in the defined contribution plan impacted by COVID-19. The coronavirus-specific payments, which are free of any tax penalty, can be repaid within three years.

Plan participants can receive a distribution up to $100,000—or the balance of their account—if they or their spouse or dependent were diagnosed with the disease. Members who are furloughed, quarantined, laid off, or had work hours reduced can also get the payment.

Parents who are unable to work for lack of child care, or members who have had to close a business or reduce hours also can choose the early distribution.

In a statement, SERS Executive Director Terri Sanchez said: “While participants will need to very carefully balance their retirement readiness and current living needs, this provision could be a real lifeline for many.”

Barclays Joins the Carbon Neutrality by 2050 Movement

The UK-based bank has indicated it wants to align the principles of all its financing activities with that of the Paris climate agreement.

By Steffan Navedo-Perez

Barclays Bank is working toward being carbon neutral across the activities it finances by 2050 to be in line with the Paris Agreement.

The bank’s pledge, deemed still as an ambition and not a full-on commitment, joins a recent trend of industry participants who have pledged to do the same, including the San Francisco Employees’ Retirement System, the Netherlands’ ABP $515 billion pension fund, and a collective of institutional investors overseeing $2.4 trillion in assets under management called the Net-Zero Asset Owner Alliance.

“The alignment of Barclays’ portfolio will start with the energy and power sectors, and will cover all sectors over time,” the bank said in a statement. “Barclays will provide the transparent targets required to judge its progress and will report on them regularly, starting from 2021.”

The decision is up to further approval from its shareholders, particularly from those associated with the group called ShareAction, an organization that wants to “make ordinary savers and institutional investors work together to ensure our communities and environment are safe and sustainable for all,” the group wrote on its website.

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In a January proposal, ShareAction wrote to Barclays to encourage it to adopt a carbon net-neutral resolution.

“To promote the long-term success of the company, given the risks and opportunities associated with climate change, we as shareholders direct the company to set and disclose targets to phase out the provision of financial services … to the energy sector, and electric and gas utility companies that are not aligned with … the Paris Agreement,” ShareAction said in its letter to Barclays.

The group promoted research concluding that a 2 degree Celsius rise in global temperatures will pose a serious economic risk to companies whose revenue streams are highly associated with the fossil fuel industry.

“As a systemically important global bank, the financing and underwriting activities of Barclays will influence whether or not the Paris goals are met,” ShareAction added.

The institutional investor group said its members will work with the companies it engages with to reduce their carbon footprint as a result of their business operations. Barclays’ statement did not reveal similar details.

Europe’s Largest Pension Fund Vows to Be Climate Neutral by 2050

Pension Funds, Insurers Commit to Carbon-Neutral Investments by 2050

Tags: bank, Barclays, Carbon Emissions, financing, green, Paris agreement

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