Plan Sponsors Act To Deal With Market Impact

May 16, 2001 ( - Two-thirds of defined benefit (DB) plan returns fell short of expectations last year, and while most plan sponsors took steps to address the situation, a wide variety of strategies were employed, according to a recent study.

Although nearly half (43%) of DB sponsors said that the stock market’s volatility had no measurable impact on their plans, nearly 1 in 5 (19%) reported a need to increase cash contributions and 16% reported an increase in FAS 87 pension expenses.  Nineteen percent didn’t know what impact the market had on their plan.

Taking Action

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When they did make adjustments for the turbulent markets, the Aon Consulting survey found that DB plan sponsors:

  • adjusted their asset allocation strategy (19%)
  • performed an asset-liability study (16%)
  • replaced mutual funds or managers (14%)
  • developed or amended their investment policy (12%)
  • added funds or managers to increase diversification (5%).
  • However, 34% of survey respondents took no explicit steps to deal with the situation.

Blame the Manager

But not everyone was driven to tinker with their plan. Among the less active sponsors were those running trustee-direct DC plans where 40% stuck with the status quo.

Confronted with the market’s challenges, fiduciary-directed DC plans were more likely to blame the investment manager.  Reactions included:

  • 22% added funds or managers
  • 13% swapped managers or funds
  • 11% conducted an asset/liability study
  • 9% develop/amend investment policy
  • 5% adjust the plan’s asset allocation strategy. 

To help participants cope with the market ups and downs, sponsors of participant-directed DC plans:

  • communicated to employees (32%)
  • added funds or managers to broaden diversification (22%)
  • replaced existing funds or managers (10%).

Once again, roughly 30% of these DC plan sponsors had not taken, nor planned to take – any action.

Participant “Driven”

Some sponsors may have stayed on the sidelines during the market turbulence, but participants have become “much more active” in seeking investment advice and information, according to Aon.

The survey found that the volume of calls and transactions soared in 66% of participant-directed DC plans during the year.

Survey respondents said that participants were looking for more:

  • 47% – information about fund performance
  • 45% – investment advice
  • 35% – more investment options
  • 20% – self-directed brokerage accounts
  • 16% – information about fund costs.

Said another way, over half were not interested in more information, advice or fund options – including self-directed accounts. And 90% were not ready to dig into more information on fund costs.

The full survey is at .