The majority of U.S. corporations with defined benefit plans will be prioritizing risk management in 2014, according to an Aon Hewitt survey.
According to the survey, “2014 Hot Topics in Retirement: Building a Strategic Focus,” 76% of companies with DB plans expect to “adjust equity exposure and/or overall allocation of plan assets” in managing risk this year.
Sixty-two percent of plan sponsors intend to “adjust plan investments to better match the characteristics of the plan's liabilities,” according to the survey.
Rob Austin, director of retirement research at Aon Hewitt, said in a telephone interview that employers with DB plans are looking very hard at their funded status.
“The most interesting (result in the survey) is how many employers are monitoring their plans' funded status on a daily basis,” Mr. Austin said. “We're seeing 12% of employers are doing that right now. From an actuarial standpoint, from a DB perspective, it wasn't that long ago we did that once a year.”
“They want to be able to track it and take action when the market moves. They want to be nimble,” Mr. Austin said.
Another point of interest is the continuing talk of lump-sum windows. Of the 223 U.S. employers that answered the question, 14% said they were “very likely” — and 29% “somewhat likely” — to “add or liberalize a temporary lump-sum option (a 'window') for terminated vested participants and/or retirees,” according to the survey.
Ninety-eight percent of the 402 U.S. employers surveyed in the fall of 2013 offer a defined contribution plan to new employees, while 29% offer a defined benefit plan to new employees.
Of those companies that still have open DB plans, 73% plan to continue with the current plan as is in 2014, while 13% plan to freeze benefit accruals for some or all participants, 6% plan to close the plan to new employees, and 5% plan to reduce benefits but continue to offer a DB plan to current and future employees.
