Updated with correction
Underfunded liabilities are again the most important risk factor facing U.S. corporate defined benefit plans, according to the 2012 MetLife U.S. Pension Risk Behavior Index survey.
Underfunding of liabilities was selected as the most important of 18 different pension fund risk factors 66% of the time. That number remained unchanged from last year.
Indeed, the top four risk factors remained unchanged from the 2011 survey. Sixty-five percent of the time they were asked to choose out of a set of four risk factors, respondents said asset and liability mismatching was their most important risk factor, up from 60% last year. The next two risk factors — asset allocation and meeting return goals — were relatively unchanged from last year, at 46% and 43%, respectively.
Actual progress in addressing these risks, however, has been “masked” due to macroeconomic factors and low discount rates that continue to affect the funded status of plans, said Cynthia Mallett, vice president, corporate benefit funding, at MetLife. But plan executives “have laid the groundwork” for effective action, and Ms. Mallett said she expects an increase in success when the macroeconomic environment calms.
“I would be hopeful that the top four risk factors would remain the same over the next year or two,” Ms. Mallett said in a telephone interview.
She noted the current response is a drastic turnaround from the first survey, released in 2009, that showed the overwhelming focus of plan sponsors was on total return and asset allocation.
The survey of 156 U.S. defined benefit plan executives was conducted in conjunction with Bdellium and Greenwich Associates from September through December.
A PDF copy of the entire report can be obtained from MetLife's website.