In 2012, Ford and General Motors blazed a new path for companies seeking to reduce pension obligations and balance sheet volatility. Both companies reportedly offered lump-sums to tens of thousands of vested retirees and former employees, as well as implementing other de-risking strategies. While these actions sparked interest among defined benefit plan sponsors, many sponsors were prevented from acting by persistently low interest rates and other factors which negatively affected plan liabilities and limited the benefits of stock market gains.
While waiting for more favorable circumstances to develop, many plan sponsors assembled plans and strategies to mitigate and manage the risks associated with their plans. Today, rising interest rates and strong stock market performance have improved funding ratios and created an environment in which plan sponsors can and are acting decisively.
