Thursday, December 23, 2010

Managing Risk is Top Goal for DB Sponsors

I've been beating this into your head since I started this blog: risk management is the #1 priority for sponsors of defined benefit plans. According to the Towers Watson Forbes Insights 2010 Pension Risk Survey (you can read it for yourself here: ), 63% of plan sponsors say they will focus on managing risk and 14% say they will focus on higher returns.

Here are some of the survey findings that I found interesting:

  • 29% of plan sponsors are now making only the minimum required contribution to their DB plan(s) compared to 21% before the financial crisis.
  • 8% of sponsors make ad hoc funding decisions. 15% did before the financial crisis.
  • 36% (compared to 26% before the crisis) fund to explicit funding targets
  • Accounting harmonization will cause 48% of plan sponsors to reconsider their commitment to DB plans, 52% to lower their equity exposure and 48% to adopt some sort of LDI strategy.
  • Roughly 40% said that the financial crisis increased their employees' appreciation for DB plans.
If only Congress would recognize this and give us legislation that protects pensions instead of killing them.

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