A slight majority of pension industry executives approves of President Bush's proposed new benchmark for calculating pension liabilities, but few believe the change would save the defined benefit system.
On July 7, the administration proposed replacing 30-year Treasury bonds with corporate bonds as the benchmark for calculating pension liabilities under the Employee Retirement Income Security Act.
On July 18, however, a House committee approved a watered down version.
Of the 252 plan sponsors, consultants, money managers and other
service providers who responded to an informal poll by Pensions & Investments, about 55% approved of the overall proposal. However, only 35% of respondents who gave the proposal a positive approval rating believed it would actually revive the defined benefit pension system.
"The proposal is fine," wrote one plan sponsor. "But it does nothing to solve the problem (i.e., the mismatch of assets and liabilities)."
"Client sponsors need to be more realistic about earnings rates and liability rates and stop playing games," one consultant wrote. "Defined benefit plans are dead."
Only about half the money managers responding to the P&I poll supported President Bush's idea, while 60% of pension executives and other service providers approved.
The survey also asked whether the Bush administration proposal would make pension benefits more or less secure. A slim majority (54%) of respondents said the proposal would make pension plans less secure; 39%, more secure; and 7%, neither less nor more secure.
"The Bush proposal is a bad plan and a potential political mistake," one money manager wrote.
In the survey, plan sponsors were the largest group represented, comprising 46% of all respondents, with money managers at 24%, consultants at 15% and service providers at 12%.
Survey respondents had these additional comments:
"Given the actual asset mix of most plans, a better rule might be to use a mix of equity and fixed-income returns," wrote another money manager.
"DB plans need to be more user friendly to companies without compromising the security for participants," wrote one service provider.