Defined benefit plan sponsors are concerned that pension reform may lead more companies to freeze or terminate their plans, according to the results of a poll by SEI Investments at its Pension Industry Forum earlier this month.
More than half of the 26 attendees surveyed said they expect more plans to be frozen or terminated in the next several years. Nearly three-quarters of respondents thought that in the long term, pension reform will be counterproductive and will lead to more frozen or closed pension plans.
The potential for reduced smoothing and the elimination or restriction of credit balances were also identified as primary sources of concern.
Plan sponsors think financial and human resources executives need to "fully understand the risks and complications involved in closing or freezing a pension plan," according to a news release issued about the Feb. 9 forum. "Executives cited real-world examples of breakdowns in communications, investment management and administration and noted that some plans ended up in worse shape years after the plan was closed or frozen."