SEI: Consider Investment Management Before Closing DB Plan

August 3, 2006 ( - A new white paper from SEI suggests plan sponsors considering freezing or closing their defined benefit plans must perform more comprehensive plan design studies or risk significant financial burdens for their organizations.

The white paper warns that traditional plan design studies should include full consideration of the overall financial risk management of the plan and the interaction between the plan finances and sponsor finances, according to an SEI press release on its report.

“While the matching of plan assets and liabilities continues to be crucial in the management of pension plans, incorporation of investment management into the design study is a new concept. We’ve found that a failure to simultaneously consider changes to investment management strategies when considering [plan] design changes can negate the benefits of the change itself,”saidJon Waite, Chief Actuary, SEI’s Global Institutional Group and author of the paper, in the release.

Waite said the experiences of plan sponsors SEI studied indicate the common practice of implementing design changes without informing those responsible for investment management for the plan is no longer acceptable.

SEI’s research considers the experiences of six different plan sponsors and identifies common benefits of a more comprehensive plan design analysis that includes the interplay of assets and liabilities, the overall impact of the change on corporate finances and how new investment and risk management strategies are implemented, the release said. Its report provides real world examples to help illustrate specific risks and outlines key strategies to help plan sponsors gain a thorough understanding of all options that exist when considering plan design changes.

A copy of the white paper, “Pension Freeze Frame: Before Making Plan Changes, Design Studies Need to be Expanded,” can be requested by emailing .