De-risking pensions: Can it be done?
By evaluating their pension plan options as well as future economic considerations, CFOs can develop a roadmap to help with de-risking over time.
The risks inherent in defined benefit (DB) plans are well known to CFOs, and the last decade has brought a parade of bad news from unprecedented market volatility to sustained declines in interest rates. In addition, the regulatory environment has brought changes—such as the recent MAP-21 legislation—to both the accounting and funding of pension plans. Indeed, the main constant for DB plans has been change, leading to increased volatility for corporate earnings, balance sheets, and free cash flow as well as increased scrutiny by analysts and investors.
Little wonder that in recent years, numerous companies have taken steps to reduce the risk associated with their DB plans.
In this issue of CFO Insights, we’ll discuss some of the options CFOs have to manage the risks inherent in their plans and outline the factors to consider before adopting de-risking strategies.