Current Issue

Subscriber only, premium content. Tuesday, September 27

What companies need to know about reducing their pension plan risks

Employers face the challenge of minimizing pension plan risks triggered by historically low interest rates, volatility in the equities markets and increasing administrative costs.

  1. Identify & Analyze

    What problems employers face offering traditional defined benefit plans

  2. Evaluate & Implement

    Steps employers can take to reduce the risk of their pension plans

  3. Monitor & Adjust

    The results of reducing pension plan risks

Employers will have to put tens of billions of dollars in extra contributions into their pension plans next year as plan assets have tumbled due to the equities market slump and liability values have surged due to low interest rates. ›› More

Pension plan funding levels among large, publicly held U.S. employers sank to a new low last year as falling interest rates fueled a rise in the value of plan liabilities while mediocre investment results held down plan asset growth, according to a Milliman Inc. survey released last week. ›› More

DETROIT—The funded levels of General Motors Co.'s U.S. pension plans declined in 2011 as lower interest rates, which boosted the value of plan liabilities, offset strong investment results. ›› More

DEARBORN, Mich.—The funded status of Ford Motor Co.'s U.S. pension plans slumped in 2011 as investment returns dropped sharply from the prior year. ›› More

The number of Fortune 1000 companies that have frozen one or more of their pension plans has surged since 2004, with the pace of freezes showing no sign of slowing, according to consulting firm Towers Watson & Co. in New York. ›› More

Long before employers began to analyze and implement such pension plan risk-reduction strategies as “buyins and “buyouts” and large-scale conversions from annuities to lump-sum benefit payments, they began to deploy a more basic strategy: freezing their defined benefit plans. ›› More

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Decline in discount rates drives pension plans to record deficits in 2011

A Milliman, Inc. study details how falling interest rates have fueled big increases in pension plan underfunding and employer contributions to fund those soaring liabilities.

Verizon Communication Inc. management retirees may go forward with their federal lawsuit related to the pension buyout deal Verizon purchased from Prudential Insurance Co. of America, according to a U.S. District Court ruling last week. ›› More

For years, employers have been considering whether offering pension plan participants the option to convert their monthly annuity payments into a lump-sum cash benefit made financial sense. ›› More

DEARBORN, Mich.—Ford Motor Co. said Friday it will offer 90,000 U.S. salaried retirees and former employees the option to take their monthly pension benefit as a lump-sum payment, a move that may the first of its kind. ›› More

General Motors Co.'s purchase of a giant group annuity to help it shed $26 billion in pension plan liabilities is leading other employers to examine whether the same strategy to reduce pension risk makes sense for them. ›› More

HICKORY, N.C.—More employers are likely to follow a North Carolina manufacturer's lead in using an innovative product to transfer pension plan risk to a third party but still offer the plan to its employees, experts say. ›› More

Although General Motors Co. and Ford Motor Co. have reduced the risk of their pension plans through offering a lump-sum payment option to some plan participants, not all employers are in the financial position to immediately follow suit. ›› More

In 1989, BP America Inc. converted its existing final average pay pension plan to a cash balance plan, becoming one of the first major employers to adopt what was then a still relatively new plan design. ›› More

The risks and costs associated with offering a defined benefit pension plan have never been greater. This photo gallery details the various risk reduction strategies being employed by employers today. ›› More

The pension funds of General Motors Co. and Ford Motor. Co. were the first to venture down the road of lump-sum payments, but a 2012 federal highway law has turned that road into an expressway with at least 10 other companies following suit. ›› More

In another corporate move to reduce pension liability risk, Verizon Communications Inc. said Wednesday that it is buying a group annuity to provide benefits to about 41,000 Verizon management retirees. ›› More

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Pricewaterhouse Coopers Report: Risk Budgeting Demystified

Read Pricewaterhouse Coopers' report on managing pension benefits and reducing pension plan risks.

IRS rules on lump-sum pension benefit conversion

In its first guidance on the issue, the IRS in two private letter rulings, says giving retirees the ability to convert the monthly pension benefit they receive from their former employers into a lump-sum benefit does not violate federal pension…

A trailblazing pension risk-reduction program has significantly reduced the size of General Motors Co.'s U.S. pension plans. ›› More

The employee demographics at BP America Inc. are probably not much different than other petroleum companies, says Rick Dorazil, BP's vp-total reward, Western Hemisphere. ›› More