The creation of a custom yield curve underscores MassMutual’s
ongoing commitment to the defined benefit marketplace
SPRINGFIELD, Mass. – Massachusetts Mutual Life Insurance Co. (MassMutual), as part of its commitment to the defined benefit (DB) pension plan marketplace, is introducing new customized pension yield curves to help plan sponsors measure their pension obligations in a more informed and transparent way.
“By introducing custom yield curves, MassMutual is enhancing its support of DB pension plan services, bringing better tools for plan management and providing greater transparency for determining pension obligations,” according to Steve Mendelsohn, MassMutual’s national practice leader for defined benefit actuarial services. “The yield curve provides an improved benchmark to calculate the value of pension liabilities that gets reflected in plan sponsor’s balance sheet and profit and loss statement.”
MassMutual is introducing custom yield curves to help plan sponsors determine an appropriate discount rate to measure liabilities for their pension and other postretirement benefit obligations. MassMutual’s curve, which meets the pension and postretirement benefit obligation requirements, set by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC), offers plan sponsors and their auditors an alternative solution with greater transparency than similarly available benchmarks in the market, according to Sumit Kundu, consulting actuary at MassMutual who leads this initiative.
“That’s an important consideration in an environment where historically low interest rates and rising costs associated with pension plans are making it more difficult and more expensive for employers to keep sponsoring their DB plans,” Kundu said.
In introducing the yield curve, MassMutual is issuing a white paper that outlines its methodology and makes comparisons to other yield curves available on the market, which will be available on request from the plan sponsors and their auditors.
The introduction of the yield curve represents an enhancement of MassMutual’s support of DB plans, according to Kundu. Despite the erosion of defined benefit plans in the market, there are still approximately $8.2 trillion total in private and public DB pension assets in the United States as of Sept. 30, 2016, according to the Investment Company Institute.*
“We see tremendous opportunity to offer enhanced consulting services and other support to DB plan sponsors and participants,” Kundu said. “MassMutual has several competitive advantages as companies that sponsor DB plans look for financially strong and experienced investment and actuarial consulting partners.”
The need for a holistic set of solutions in the complex pension marketplace contributed to MassMutual’s decision in 2016 to create the Institutional Solutions unit, which provides plan sponsors and advisors with an array of actuarial and other plan services, including investment products tailored for DB plans (open and frozen), liability driven investing (LDI), actuarial funding and accounting strategies, plan administration, plan design consulting, pension buyouts and lump sum windows.
MassMutual manages more than $16 billion in DB assets for more than 400,000 plan participants as of Dec. 31, 2016 and provides recordkeeping, investment management and actuarial services. In addition, MassMutual has been in the retirement plans business for 65 years, serving more than 35,000 sponsors and approximately three million participants of both DB and defined contribution plans.