2026 PS Webinar: DB Plan Administration

With many corporate defined benefit plans reaching record funding levels, plan sponsors may be wise to consider the best ways to put those surpluses to use, according to panelists on PLANSPONSOR’s recent DB Plan Administration webinar.

Experts discussed trends in the DB plan sector, how to benchmark providers, and strategies for the ongoing management of DB plans—whether closed, frozen or active.

Considering a Cash Balance Plan

Shannon Maloney, the national practice leader for employee stock ownership plans and defined benefit plans at Strategic Retirement Partners, said adopting cash balance plans has become a popular alternative to terminating DB plans.

In a cash balance plan, all assets are held in a pooled account, and a participant’s benefit is determined by the terms of the plan document. The account balance grows through pay credits, often defined as a percentage of an employee’s annual salary, as well as through interest credits—based on the growth of investments in the plan—at either a fixed or variable rate.

According to October Three Consulting’s analysis of Form 5500s, from 2015 through 2024, the number of cash balance plans increased by nearly 70%—to roughly 25,000 from almost 15,000—while the number of traditional DB plans decreased by more than 50%—to about 13,500 from more than 27,000.

“I don’t know that I’d call it a trend yet, but a lot of creativity [in managing surpluses] is starting to be a trend,” said Shelly Graham, a vice president and wealth regional leader at Alight Inc. “The focus continues to be on running the account efficiently.”

Brian Donohue, a partner in October Three, says market-based cash balance plans have shown promise to deliver retirement income at a rate 15% to 30% lower than using a 401(k) balance to purchase an individual annuity.

In a market-based cash balance plan, interest credits are derived from the actual return on plan assets, as opposed to a traditional cash balance plan’s fixed rate of return or rate of return tied to a bond index. Almost 60% of all DB plans in the U.S. are now cash balance plans, according to October Three Consulting’s “Pension Trends 2025: Cash Balance Plans Take Over—and Market Interest Credits Surge,” and about 60% of those use a market-based crediting rate, up from about 10% in 2018.

But a cash balance plan may not be for everyone, Donohue cautioned.

“Pensions are still a scale business, so I’m not sure a pension design can be justified for a company with [only] 100 or 150 employes,” Donohue said. “Hundreds of [plans] are probably in a position to terminate right now, and maybe they don’t even know it. We’ve had this incredible run over the past decade in capital markets.”

Preparing for Termination

To proactively prepare for plan termination, frozen plans should focus on cleaning their census data, according to Donohue.

More than half (56%) of terminating plan sponsor respondents to an Aon survey published earlier this year said they were likely to implement data cleanup in the next two years or had already done so.

Cleaning data will “bring clarity to what [a sponsor’s] liabilities are, so [the sponsor] can understand, ‘Am I really in a position to terminate, or not?’” Donohue said.

In 2021, the Department of Labor issued guidance on the issue of missing participants, advising sponsors to maintain accurate census information. However, industry experts have emphasized that that keeping clean data is no easy feat—locating participants, especially through address changes and death audits—can be a significant undertaking.

Managing Active, Frozen Plan Assets

Maloney said the traditional 60/40 stock-to-bond investment strategy remains relatively common among active plans—but may not be the right solution for everyone. Plan sponsors of active plans, for example, might consider whether they aim to bolster or protect their funded status.

“Protecting the funded status, [sponsors] are going to use more of an [asset] immunization strategy,” Maloney said. They are “going to want to make sure the delta between market value and pension benefit obligations doesn’t grow.”

In addition, if a plan is frozen and well-funded, Maloney said sponsors should aim to protect the funded status, regardless of whether they are planning to maintain or terminate the plan.

“Frozen plans, especially hard frozen plans, are ‘zombie plans,’” Maloney said. “They’re plans that are dead, but no one’s planned the funeral.”

To prepare for a potential termination, however, sponsors should work with actuarial consultants and plan administrators to plan the funeral from an investment strategy perspective, Maloney said. Sponsors should make sure they are hedging risk correctly and may slowly transition the plan out of equities to protect the plan’s funded status.

Reevaluating Providers

Evaluating benefit providers is often an important part of managing an ongoing plan, according to the panelists.

Tom Demko, a partner in and managing director of Creative Planning LLC, said some warning signs that it may be time to evaluate a provider include when the provider: makes administrative mistakes, such as incorrect benefit calculations and many manual corrections; experiences cybersecurity issues; has actuarial delays; and fails to communicate properly.

Maloney named “consolidation” as another warning sign.

“If your provider has [been] bought or sold, or people are leaving your provider … that warrants at least a [request for information] to make sure you’re still with the right provider,” Maloney said. “It doesn’t mean that consolidation is bad, but it does mean that as a fiduciary, your company should reaffirm that they’re still with the right firm and that [the firm] is investing in things like cybersecurity and technology.”

Graham added that some sponsors stay with their providers due to “complacency.”

“A lot of times, these [providers] have been administering benefits for companies for a very, very long time, and moving away from your DB provider is a lot of work,” Graham said. “It’s a big, heavy lift.”

Demko said his goal when evaluating providers is typically only to make sure his client is paying the right amount for the services they are receiving.

“Chances are, you [have] a vendor that is very capable,” Demko said. “You might [just] not [be talking to] the right people [there or] be hearing all of their newest, greatest capabilities.”