Bob Collie, chief research strategist, Americas Institutional for Russell Investments, believes that chief financial officers prefer defined contribution plans over defined benefit plans because they mean less paperwork.

In a blog post this week, Collie talked about sifting through the annual reports of what he deems the $20 Billion Club, large U.S. corporations with worldwide defined benefit liabilities that exceed $20 billion. He pointed out that these companies used upwards of 10 pages of their 10-Ks talking about their DB plans, whereas only a sentence or two were dedicated to discussing their defined contribution plans. Most of these companies do have both types of plans.

"There is a breakdown of the expense associated with the plan, as well as analysis of the sources of gain and loss in the assets and liabilities and a description of the investments held in the plan. All of this is necessary because all of this is relevant to investors: the corporation is responsible for the balance of cost of the plan so the ups and downs of plan experience flow through to the economics of the corporation," he said. "Every dollar of gain or loss in the plan means a dollar less or a dollar more that the corporation is going to have to put in to ensure the benefits get paid. All of the complications and uncertainty of the DB plan finances flow through into the plan sponsor's financials."

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