According to "Balancing Costs, Risks, and Rewards: The Retirement and Employee Benefits Landscape in 2013" (CFO Research and Prudential Financial, Inc. - July 2013), numerous changes are underway. The opinions of senior financial executive survey takers validate the continued twin interest in expanding defined contribution plan offerings and managing the liability risk of existing defined benefit ("DB") plans. The strategic import of benefits as a way to attract and retain talent is recognized by "nearly all respondents in this year's survey." Regarding the restructuring of traditional pension plans, this report states that nearly four out of every ten leaders have frozen one or more DB plans yet recognize the need to manage risk for those plans as well as for active plans. Liability-driven investing ("LDI") programs are being adopted by "many companies". Transfer solutions are being "seriously" considered by roughly forty percent of companies represented in the survey. Almost one half of respondents agree that a return to managing its core business could be enhanced by doing something to address pension risk.
None of these results are particularly surprising but it always helpful to take the pulse of corporate America with respect to ERISA and employee benefit programs. I have long maintained that the role of treasury staff will accelerate. There are numerous corporate finance implications associated with the offering of non-wage compensation. As I have added in various speeches and articles echoing what numerous ERISA attorneys cite (and I am not an attorney), plan sponsors must carefully weigh their fiduciary responsibilities to participants against those of shareholders in arriving at a particular decision.
For a copy of the study, click here.
Interested readers may also want to check out the reference items listed below:
- "Applied to Pensions, Risk is a Four Letter Word" by Dr. Susan Mangiero and Nancy Ross, Esquire (CFO, November 8, 2012);
- "Pension De-Risking for Employee Benefit Plan Sponsors" (Strafford Continuing Legal Education, January 16, 2013); and
- "Pension Plans: The $20 Trillion Elephant in the (Valuation) Room" (Business Valuation Update, Vol. 19, No. 7, July 2013).
If you have further comments or questions, click to email Dr. Susan Mangiero.