Officials of large U.S. corporate pension plans are taking a broader view of risk management, ranking the measurement of liability-related risk and pension plan underfunding as their first and second priorities in 2010, according to a MetLife survey.
The 2nd Annual MetLife U.S. Pension Risk Behavior Index, a survey of 166 corporate plan sponsors, found that executives overseeing corporate plans are no longer largely concentrating on assets, Cynthia Mallett, vice president of product and market strategies in MetLife's Corporate Benefits Funding group, said in a telephone interview. She noted that in 2009, “asset allocation” and “meeting return goals” occupied the top two spots. Those two categories dropped to fourth and 14th places, respectively, this year.
Ms. Mallett said executives overseeing the plans began to realize in 2009 that simply updating their asset allocation strategies would not be sufficient to get their plans fully funded.
“They couldn't diversify out of the problem,” she explained, noting that most asset classes declined at the same time in late 2008 and 2009.
Considered relatively unimportant in 2009, “early retirement risk,” “mortality risk” and “longevity risk” also climbed the ranks of priorities this year.
The differential between risk factors selected as “most” and “least important” narrowed significantly, with the range between the two categories dropping to 8% this year from 51.5% in 2009, a change Ms. Mallet called a democratization of risk factors.
“It points to this being a year of education and awareness,” she said. “People aren't as comfortable with the new framework (of the overall economy), so there's a tendency to consider everything.”
The full study is available at www.metlife.com/pensionrisk.