The evolution of pensions in the U.S., for many DB plans, has included a transition from an open plan to one that is closed or frozen. From there, plan sponsors generally embark on a journey toward one of two states: hibernation (long-term sustainability) or termination — in some cases mixing elements of both. Right now, termination appears to be the most popular option: 71% of senior finance executives polled in a new survey by CFO Research in collaboration with Mercer say their organization is considering terminating their DB plan within the next 10 years. On the other hand, 51% say they are likely to move to a hibernationstrategy in the next two years — which in many cases could be a long-term plan for sustainable retention or perhaps a prelude to an eventual termination. In either case some level of de-risking will be core to direction.
Regardless of the ultimate goal, plan sponsors need a multi-year roadmap to help them reach their destination as efficiently as possible.
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