Benefits January 9, 2007

DB Sponsors: Pension Staff Time Not Optimized

January 9, 2007 (PLANSPONSOR.com) - Even though most defined benefit plan sponsors in a recent poll acknowledged their pension staff members should be focusing on risk management, too often those employees are tied up with other tasks.
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A SEI Investments Co. news release about its latest Quick Poll said almost half of the participating plan sponsors feel that new pension rules demand attention in areas where internal resources are not currently focused.

According to the announcement, more than half said their pension staff is currently spending most of its time researching new investment products and selecting managers recommended by a consultant. That work is being done in a significantly more complex regulatory environment, the DB sponsors said, citing:

  • reductions in smoothing;
  • the 100% funding target;
  • new accounting rules; and
  • revised yield curve discounting.

In turn, plan sponsors are considering new investment products and asset allocation strategies which are causing them to realize current processes need to change.

The survey also asked respondents where they feel their internal pension investment resources could be redirected to best manage new funding rules. Only 6% felt internal resources should spend the most time completing the evaluation, selection and termination of managers that are recommended by a consultant.

While half said their organization is considering adding new investment products in response to reform, a quarter of those polled felt their company should free up resources and outsource the researching of investment products.

“CFOs realize that they need to take an objective-based risk management approach to their plan,” said Jim Morris, senior vice president, Retirement Solutions for SEI Global Institutional Group, in the news release. “However, what many of them have is a consultant-driven, asset-only based process. Pension reform serves as an opportunity for them to re-think their core competencies and to realign their resources to address the needs of the organization.”

Some 92 US executives responsible for managing defined benefit plans ranging from $30 million to over $5 billion in assets participated in the poll. A complete survey summary is available by e-mailing seiresearch@seic.com .

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