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Study: Reducing Duties a Priority for Many DB Plan Sponsors

Fiduciary Rules and Practices

A majority of pension plan sponsors in a recent study are seeking to reduce their roles and responsibilities with their plans.

Almost two-thirds plan to outsource some or all of their plan-related investment responsibilities and more than 60% plan to terminate their plans in the next five years, according to “Pension Management: Creating a Roadmap to Success,” the Mercer and CFO Research 2019 risk survey.

Other findings include:

Pension Benefit Guaranty Corporation (PBGC) premiums are increasingly influential as a catalyst in making contributions that exceed the minimum required. This, Mercer says, is a means to improve funding levels and reduce PBGC premiums. The percentage in their research that has been engaging in that practice has been steadily growing:


Year % Contributing More than the Minimum
2015                                           57
2017                                           73
2019                                           85

A stronger majority is partially or fully outsourcing chief investment officer duties. Just over two-thirds are doing so now, the study found, 15 percentage points more than just two years ago.

Annuity buyouts and de-risking are growing in popularity. The sponsors who consider themselves likely to transfer some or all of their retiree obligations from the plan through the purchase of an annuity has grown from 56% in 2017 to 70% now. A strong majority — 84% — either are using “a dynamic de-risking strategy or plan to, and more than 50% plan to take steps toward that. And 76% say that offering a lump sum cash out option this year or next is likely or very likely.

Mercer’s Matt McDaniel, Partner, US Financial Strategy Group attributes these trends to heightened market volatility and uncertain costs, reports Mercer in “Defined Benefit Plan Sponsors Reassessing Long-term Goals Due to Volatile Markets and Uncertain Costs.” Said McDaniel, “We are seeing many sponsors take a critical look at their strategic roadmap, including the supporting policy actions and governance structures that will guide them into the future. There was an acceleration of such activity in the past two years, and plan sponsors expect continued evolution in the next few years.”