While on the way to the airport, I noticed a billboard for a local casino company that read, "Risk Is Its Own Reward." Because I was headed to a conference about pension de-risking, this struck me as humorous and a sign that this article should address the very different responsibilities plan sponsors now have concerning frozen defined benefit plan management.

Although sponsors are always tasked with protecting participants' accrued benefits, we now have increased responsibility regarding managing a large amount of risk for the company. Plan sponsors have always managed risk for DB plans. However, now you may be faced with a huge frozen risk — an iceberg that can sink you as you attempt to navigate the regulatory, accounting and actuarial guidelines and the financial markets.

An entire niche market has evolved to address plan sponsor pension de-risking. Liability driven investing is a common first possible step, but you should also begin investigating some of the new and interesting approaches, including dynamic investment policies and outsourcing investment management. If you are responsible for a frozen pension plan or even an active pension plan, you need to explore what is happening in the marketplace. Develop a strategy and process to manage your risk and eventually terminate your frozen plans. Think about a glide path that will bring you to your end game and then develop a step-by-step process that will get you there. Here are some considerations:

• Define your end game if you have not already done so.

• Do you allow lump sum payments? Review your plan document and financial position, and determine if it is possible to pay out some of your terminated vested participants to take that risk out of your plan.

• How fast does your asset allocation adjust to the swiftly changing financial markets? Develop triggers in advance for when markets provide an opportunity for de-risking.

• Do you have a funding policy? Do your stakeholders know what it is?

• Do your actuaries and financial advisors provide an integrated solution or a siloed approach?

Get advice to help evaluate your DB plans and to document and align objectives among stakeholders — HR, finance, legal and others, depending on your organizational structure. The risk and reward for your company may be significant. Your inaction may be extremely costly.

Risk may be its own reward for a $10 hand of blackjack, but for frozen pension plan management, de-risking is the name of the game.

Contributing Editor Mary Nell Billings is director of benefits, Americas, for Hilton Worldwide, headquartered in McLean, Va. She holds both a BBA and MBA in accounting and finance from the University of Memphis. She can be reached at Mary.Nell.Billings@hilton.com.

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