The American Benefits Council testified before the ERISA Advisory Committee last month, describing the key motivations that have caused many employers to consider reducing their pension plan liabilities by "de-risking."
Craig Rosenthal, a partner with Mercer, testified on the Council's behalf, emphasizing that the legislative and regulatory environment for pension plans has made sponsorship increasingly difficult over the past few decades.
"If funding and accounting obligations can be stabilized and the spiraling up of Pension Benefit Guaranty Corporation premium obligations can be reversed, there would be far less reason for companies to de-risk," Rosenthal told the panel.
"There is no one-size-fits-all answer as to why some companies adopt de-risking approaches and others do not, nor is there a simple answer as to why companies that do de-risk do so in different ways," Rosenthal said. "As the EAC formulates its recommendations to the U.S. Department of Labor on this subject, we urge its members to consider that the best way to preserve defined benefit pension plans is to mitigate the complex financial challenges imposed on pension plan sponsors."
While it is difficult to predict what the future will bring, Rosenthal said that if the issues of funding, accounting obligations and PBGC premium obligations are not addressed, "it is possible that the volume of de-risking transactions will accelerate in the comng years, particularly when funding improves and/or interest rates rise."
Rosenthal's testimony is available on the Council website at
