"There is no question, employers are looking for new ways to aggressively manage their pension volatility," explained
"Over the past few years, we've seen fewer pension plan sponsors closing their plans to new entrants or freezing the benefits for current participants," said Austin. "However, employers remain under increasing pressure to manage plan volatility and are planning both smaller actions and bolder moves to manage that risk."
As a first step in their broader de-risking efforts,
"While the economic environment makes it imperative for DB plan sponsors to manage pension risk in some way, it's critical that they approach it in a thoughtful manner," stressed Austin. "The right de-risking strategy for one plan may not be an appropriate approach for another—most importantly, employers need to consider the funded status of their plans. For example, plans that are over funded will likely take measures to lock in this position and erase future volatility through actions such as offering lump-sum windows. An underfunded plan will need to take an approach that attentively addresses volatility such as implementing a glide path investment strategy that will de-risk the plan as the funded position improves."
"Plan sponsors are taking a more holistic view of their pension plan by looking at the overall funded status of the plan and not focusing on the liabilities or assets individually," explained Austin. "A glide path approach provides an easy link between the two. Additionally, this approach allows plan sponsors to have a long-term strategy in place that will systematically eliminate risk over time."
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