Study: Pension Plan Sponsors Are Becoming More ‘Liability Aware’

(February 24, 2010) – According to a new MetLife survey, market volatility has urged officials of large US corporate pension plans to adopt a broader view of risk management.

“While clearly this shift in focus was spurred by the market environment, it also may signal an acknowledgement that traditional methods of mitigating risk by diversifying the investment portfolio may no longer be viable as a sole or primary means of pension risk management,” said Cynthia Mallett, who oversaw the study.

The study showed that officials of US corporate pension plans rank the measurement of liability-related risk and pension plan underfunding as their first and second priorities in 2010. Most plan sponsors believe they’re doing a better job implementing risk management measures this year compared to a year ago. And while “asset allocation” and “meeting return goals” occupied the top two spots in 2009, those two categories dropped this year.

Additionally, MetLife’s study highlighted a need for new tools and strategies to help plan sponsors manage risk. Within two years, MetLife expects the industry to develop and implement new practices and tools to manage these risks, particularly risk relating to liability.

MetLife’s second annual U.S. Pension Risk Behavior Index Study surveyed 166 corporate plan sponsors. MetLife is a provider of insurance, employee benefits and financial services, reaching more than 70 million customers around the world.