Plan sponsors looking into freezing or closing their pension plans should avoid traditional plan asset-liability studies and get money managers involved in planning to help avoid significant financial burdens, according to a white paper released today by SEI Investments.
The study, "Pension Freeze Frame: Before Making Plan Changes, Design Studies Need to be Expanded," suggested that company officials need to better incorporate investment management issues into liability studies.
An asset-liability study typically is performed by the plan's actuary to address issues such as liability growth and the impact of deficits or surpluses, cost reductions and risks associated with alternative plan types among other factors, according to the paper. Additional manager input could help some plans better analyze overall financial risk management and the impact of plan finances on the sponsor.
"In the past, it was very common for plan sponsors to make design changes and not even inform those responsible for investment management," Jon Waite, chief actuary of SEI's global institutional group and author of the paper, said in a statement announcing the study's findings. "Today, based on the experiences of some plan sponsors, this is clearly unacceptable, and plan design studies need to expand."
The study focused on six pension plans with average assets totaling $120 million.