Benefits

Sponsors Retain Confidence in DB Plans

December 13, 2013 (PLANSPONSOR.com) – A recent analysis from Russell Investments indicates that some companies still have confidence in their pension plans.

By Kevin McGuinness editors@plansponsor.com | December 13, 2013

The analysis, “Did MAP-21 Decrease Pension Contributions?,” examines the impact the Moving Ahead for Progress in the 21st Century Act (MAP-21) has had on companies' funding of defined benefit (DB) pension plans.

MAP-21 was enacted in July 2012. One provision of the law offers pension funding relief to corporate DB plan sponsors by decreasing mandatory tax-deductible minimum required contributions (MRC).

The analysis indicates that despite the fact companies were not required to contribute as much to their pension plans as before MAP-21 was enacted, many made contributions higher than the MRC.

In addition, the analysis finds that despite MAP-21 allowing them to delay making contributions for several years, many companies did not exercise this option. This leads the authors of the analysis to believe that companies have a long-term view of their pension plan’s place within their organization, as well as a view that funding would ultimately be required.

More specifically, in reviewing pension funding data listed in companies’ Form 5500 Schedule SB, the authors of the analysis found that 42% of DB plan sponsors elected to contribute above the “pre-MAP-21” MRC, 23% contributed well beyond the MRC (at least 20% more) and 35% paid in line with the MRC or paid no contribution. In addition, the analysis reveals that 31% of plans had no MRC for 2012, but that 60% of them still chose to fund the plan.

“For our analysis, it is likely that many plan sponsors have chosen to fund the pension plan, regardless of the impact of MAP-21,” say the authors.

The analysis was written by: James Gannon, director of Asset Allocation and Risk Management at Russell; Justin Owens, asset allocation strategist at Russell; and Joshua Barbash, asset allocation strategist at Russell.

The full text of the analysis can be found here.

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