NEPC held its 2014 Defined Benefit Plan Trends Webinar on November 18, 2014. The 2014 survey captures the experience of 117 defined benefit programs representing over $300 billion in total pension assets from a cross section of industries. This represents roughly 10% of the total defined benefit universe¹. Since 2012, estimated funded status has improved 14%. This improvement overshadows the underlying volatility as strong funded status gains in 2013 have been partially offset so far in 2014 due to lower discount rates. Consistent with past survey results, roughly 65% of plans employ Liability Driven Investing (LDI) strategies. In addition, over 70% of plans that utilize LDI implement through a glide path approach. Of the plans that use a glide path, 65% hit a de-risking trigger in the past 12 months, ending June 30, 2014. Given the interest rate environment and mortality table adjustments, plan sponsors are evaluating changes to their glide path. Of particular interest, more plan sponsors are considering other risk mitigation strategies such as annuitization and plan hibernation. However, plan sponsors reported a preference for plan hibernation strategies over plan annuitization given the costs associated with annuitization.
Both the presentation and the audio recording are available below:
¹Federal Reserve Private Defined Pension Plan Universe as of June 30, 2014