Cost and volatility concerns related to defined benefit plans have led more than 20% of plan sponsors to either freeze or consider a freeze on pension plan benefits, according to research by Aon Consulting. Studying more than 1,000 private sector DB plans, Aon found that 13% of plan sponsors have implemented a freeze since the beginning of 2001, with another 2% arranging for freezes by the end of this year. An additional 6% indicate they are actively contemplating a freeze. The survey respondents cited the cost of plan contribution (45%) and contribution volatility (39%) as some of the major factors in their decision to freeze. The freezes come as the Senate debates continued use of the 30-year Treasury bond as the benchmark interest rate for determining funding requirements. The House has approved a new, temporary rate based on conservative, long-term corporate bonds. "A change to funding requirements is absolutely necessary to avoid unnecessary plan freezes," observes Christopher Bone, executive vice president and chief actuary at Aon. "Without a solution that plan sponsors can live with, we are putting this vital retirement tool's existence at risk."
Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.
Insight and analysis into the management, marketing, operations and technology of the asset management industry.
Have an account? Sign In