Ensuring effective governance of a defined benefit (DB) plan and its investment strategy has always been challenging. Over the past decade, it also has become increasingly complex, spurring many plan sponsors to reevaluate their governance structures, including the degree to which they delegate some of their governance responsibilities.
In a new survey of senior executives conducted by CFO Research in collaboration with Mercer, 77% of the respondents say they expect to change their DB plan’s investment governance structure over the next two years, up from 60% the last time the survey was conducted in 2017. Meanwhile, 63% concede their organizations are struggling to find the time and expertise to fully meet their obligations relating to oversight of their DB plan investment strategy.
Options for managing risk have exploded. In addition to freezing plans and adopting liability-driven investment strategies, responsible plan sponsors also must now consider a raft of additional options that have become commonplace.
Many investment committees are concluding that pension governance is no longer business as usual, and that “set it and forget it” will not work as a governance strategy.
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