Controlling funding status volatility top priority of DB plan sponsors

Controlling funding status volatility is the top priority of pension plan sponsors this year, according to a quick poll by SEI.

Plan sponsors identified the need to implement a liability driven investing strategy as the second most important priority for their organizations, up two spots from last year’s poll. Providing senior management and board members with a long-term pension strategy rounded out the top three priorities for plan sponsors in 2013.

“Having felt the impact of low interest rates on their pension liabilities again last year, many plan sponsors will focus on risk management and liability reduction strategies to combat volatility and improve plan funding in 2013,” said Jon Waite, director of investment management advice and chief actuary for SEI’s Institutional Group.  “As pension investment management grows in complexity, plan sponsors are seeking more sophisticated strategies to reduce pension risks and mitigate the impact of pension expense on overall corporate finances.”

Poll participants were also asked to identify which specific risk reduction strategies they are considering for the upcoming year. Plan sponsors continue to reaffirm the importance of an LDI strategy in managing their pension, with 63 percent of participants selecting it as the top risk reduction strategy for 2013. Almost half (48 percent) of poll participants said they would consider lump sum payments to term-vested participants. Annuitization ranked as the least popular risk reduction strategy at 14 percent.

Conducted in December 2012, the Quick Poll surveyed 55 executives overseeing U.S. corporate defined benefit plans ranging from $25 million to $10 billion in assets. None of the participating organizations were institutional clients of SEI.

SEI’s Institutional Group provides outsourced fiduciary management investment services.

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