Preparing for a pension plan termination

The prevalence of defined benefit (DB) plans has been declining for decades in favor of defined contribution (DC) plans, where employers can define their cost with much less volatility. According to the Bureau of Labor Statistics, among private industry workers, 51% have only a DC plan while 32% have no retirement plan.

Within these numbers, private sector DB plans, a $3 trillion market, are at different stages in their lifecycles. As of March 1, 2017, 63% of employees in pension plans were in active plans, 25% were in “soft-freeze” plans, and 12% were in frozen plans. For plan sponsors that have resolved to terminate their plans, they typically turn their attention to two important factors: financial readiness and operational readiness. When interest rates rise, the best-prepared plan sponsors are those that are both financially and operationally ready.

In this article, Milliman’s William Strange explains more about what actions plans can take when they are getting ready to terminate.

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