Retirement Update

Retirement Update – July 2018

by | Jul 9, 2018 | Industry Updates

Key Takeaways:

✔ Discount rates on corporate bonds rose approximately 12-13 basis points as credit spread widened, picking up after a flat May to continue 2018’s upward trend.  Movement of treasury rates was mixed, with small increases on shorter rates, and modest drops on the longer treasuries.

✔ Trade war concerns weighed on markets, especially those outside of the US particularly emerging market equities.  Strong fundamentals in the US helped domestic equities return almost 1% despite the Fed raising interest rates again in June.

✔ The combination of mixed equity returns and rising interest rates in June should result in flat, or perhaps slight improvement in funded status for most plans.

June 2018 Summary

Rising rates should provide continued good news for many plans, especially those which are more heavily invested in equities, since liabilities will have fallen while assets grew modestly. The FTSE (formerly Citi) Pension Liability Index is now at its highest month-end value since January 2017. This is an ideal time for plan sponsors who are in the process of an annuity purchase as they are able to capitalize on the high rates.

Discount Rates & Asset Returns

Discount rates saw a slight uptick from the prior month increasing just over 0.10%. This now puts pension plan discount rates approximately 0.50% ahead of where we ended 2017.

The continuing rally in USD against most currencies and trade war concerns weighed on equity markets, especially foreign and particularly emerging markets. Continuing strong fundamentals in the US allowed the Fed to raise interest rates again. Investment grade credit spreads widened causing corporate bonds to fall.

What’s New at R&M?


River and Mercantile Solutions Adds Two Managing Directors


R&M announced in June the appointments of Tom Cassara and David Rosenblum as Managing Directors and members of the US Leadership Team. Tom and David will open an office in New York City as part of the expansion of the firm.

Click here for more information on Tom and David and the newest River and Mercantile Solutions office.

Ask R&M!



I’m trying to position my plan for a plan termination in the near future. Is a lump sum window a good idea? What else should I be considering?


While there are exceptions, a lump sum window would not be a good idea right now for plan sponsors, at least from a cost perspective. With rising discount rates throughout this year, 2019 lump sums appear as if they will be noticeably less expensive than a lump sum in 2018. Plus, there will also be a small savings on 2019 lump sums due to the mortality table that will be used. While you’ll want to be sure that these factors will apply for your plan, a lump sum window in 2018 would appear to be less than ideal from a timing perspective. So what can you do now to prepare for that ultimate plan termination? Take a look at the plan document. There are a number of items that can easily be changed to allow for much smoother sailing once the termination process begins. Since there are restrictions on what can be amended after the official plan termination date, you’ll want to get a review of the plan document completed well ahead of the beginning of the termination. Contact River and Mercantile if you’d like to know more, or if you would be interested in a complete Plan Term Readiness Assessment.


Have a question for R&M? Please submit it to and look for a possible answer in next month’s update!


SECURITY INDICES: This presentation includes data related to the performance of various securities indices.  The performance of securities indices is not subject to fees and expenses associated.  Investments cannot be made directly in the indices.   The information provided herein has been obtained from sources which River and Mercantile LLC believes to be reasonably reliable but cannot guarantee its accuracy or completeness.

CONFIDENTIAL:  For addressee use only, not to be disclosed to any other person without express consent from River and Mercantile LLC.  Past performance cannot be relied upon to predict future results.  River and Mercantile LLC is an investment advisor registered with the US Securities and Exchange Commission.

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