In 2013, plan sponsors will once again focus on risk management strategies that better reduce funding volatility as the top priority for their organizations. Implementing a liability driven investing (LDI) strategy to better match duration came in second on respondents’ list of priorities.
Asked which of the given risk-reduction strategies their organizations are considering for 2013, 63% selected liability driven investing, 47% chose lump-sum payments to term vested participant, 31% said closing or freezing accruals, 16% selected terminating the plan, and 14% chose annuitization through an insurance provider.
The rest of the top 10 priorities selected by defined benefit (DB) plan sponsors are:
- Provide senior management and board with long-term pension strategy;
- Minimize pension operating costs;
- Develop a strategy to aggressively improve plan funded status;
- Implement a glidepath with automatic triggers that react to market conditions;
- Stress-test the portfolio for its ability to withstand various market scenarios;
- Review governance structure and decisionmaking process;
- Terminate or begin the process to terminate the pension plan; and
- Change the plan’s funding policy, contribution schedule and/or timeline.
Thirty-five percent of respondents to the poll said “increased interest rates” would be their No. 1 pension wish for the upcoming year. While only 2% of polled pensions are currently in the termination stage, 25% of participants said a “fully terminated plan” would top their pension wish lists, followed by 16% who said a “fully funded plan.” Twelve percent chose “limited funding volatility,” and 10% selected “minimal cash contributions.”Survey results may be requested from www.seic.com/DBOutlook2013.
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