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Risks Concern Plan Sponsors

While traditional defined benefit plans are a very cost-efficient means of attracting and retaining talent, their inherent financial risks have become an increasing concern for plan sponsors, says Ronald Olsen, senior vice-president, benefit consultant, at Sibson Consulting. In the commentary ‘Will 2014 Be the Pension World’s “Year of the Great Rotation?’, he says for nearly a decade, consultants have been talking about the importance of “de-risking.” However, a recent pension risk transfer “mega-deal” in Canada may be a sign that the rotation to strategies designed to manage the inherent financial volatility of defined benefit pension plans has now begun in earnest. These means pension funds may be moving from “asset-only” pension risk management to “balance-sheet” risk management of defined benefit pension plans. A de-risked DB plan, alone or in combination with a target benefit pension plan that de-couples risk pooling from guarantees, can be a cost effective, low risk, and efficient means of delivering a key element of compensation not otherwise available to Canadian workers, he says.

Courtesy of Benefits and Pensions Monitor website News Alerts 

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