The mood amongst the defined benefit (DB) plan sector is decidedly pessimistic, and many plan sponsors are looking to make changes over the next 12 months in an effort to improve their financial situation, according to a survey.
Morneau Sobeco’s 60 Second Survey finds that 75% of respondents said they were either somewhat concerned or very concerned about the financial status of their plans.
Thirty-nine percent of those concerned identified poor stock market performance as the cause of their woes, while 27% said they expected future fund returns to be lower. Low solvency discount rates and pending changes to accounting rules were also named as significant factors.
More than half of respondents indicated they were ready to take remedial action over the next 12 months, with 27% looking at switching to alternative investments and 24% considering liability-driven investing.
Of these plans, half are considering structural changes to some extent. Twelve percent are looking at moving from DB to defined contribution plans, while another 12% say they may increase employee contribution levels. A further 22% are considering changes to reduce cost or volatility, but will remain within the DB structure.
“We note there has been a growing interest in DB plan designs that reduce the employer’s overall exposure to cost uncertainty,” Morneau Sobeco said in a statement.
The survey was based on data from 130 respondents consisting of both closed and continuing DB plans.
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