Organizations with closed defined benefit(DB)pension plans are interested in the idea of offloading the responsibility for these plans, according to a survey.
Morneau Sobeco’s latest 60 Second Survey finds that amongst organizations that already have closed off their DB plans, 67% indicated that they would be interested in offloading the management of their plan to a third party.
“Employers are much more likely to offload a closed DB plan to a third party than a plan that is still a going-concern,” says Fred Vettese, Morneau Sobeco’s chief actuary. “That is because closed plans play a diminishing role within the organization’s overall compensation program, but still require a great deal of hands-on effort to manage them.”
Based on the survey responses, the biggest stumbling block to offloading is that the idea is still new and there are unanswered questions as to how it would work. Nearly 30% cited this as the biggest hurdle. Another perceived obstacle is fear that the management duties would be offloaded but not the liability.
“Traditionally, the only way to offload was to an insurance company by purchasing annuities but this is usually seen as an expensive way to do it,” he adds. “We expect to see new types of service providers entering this field as DB plans continue to be closed to new hires.”
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