Managing the Risks of Defined Benefit Plans

We help our clients navigate and simplify complex de-risking issues while working collaboratively with investment advisors to execute the overall strategy.

When considering a de-risking path, it is important to consider all strategies in order to select the one that best fits the plan.

Pension De-Risking Strategies

Plan Design Changes

  • Reduce or change benefit accruals
  • Close plan to new entrants
  • Freeze future benefit accruals
  • Adopt a hybrid plan design, such as a cash balance or pension equity plan
  • Adopt a variable benefit plan design
  • Consider adjustments to 401(k) or 403(b) plans to manage total retirement benefit

Borrow-to-Fund Strategy

  • Borrow lump sum amount to fund unfunded vested benefits

Dynamic Portfolio Strategies—Creating the Glide Path

  • Reduces volatility in funded status, contribution, and accounting expense as funded status increases
  • LDI (liability driven investing)

Lump Sum Windows

  • One-time payment of participant’s entire pension benefit
  • Targets terminated participants with future benefits payable
  • PBGC premium savings

Annuity Purchase

  • Transfer liabilities and assets for a specified group of pension plan participants to an insurance company through an annuity contract

Plan Termination

All risks transferred for entire plan:

  • Regulatory risk
  • Operational risk
  • Demographic risk
  • Spread risk
  • Interest rate risk
  • Market risk

Typically takes 12 months

Our Publications

A Pension Sponsor’s Readiness Guide to Plan Termination

Pension Plan Termination