PEI Suggests Ways for Mid-Sized DBs to Get Back on Track

According to Portfolio Evaluations, Inc. (PEI), recent market research suggests that sponsors of mid-sized defined benefit (DB) plans (those with assets of between $50 and $500 million) remain most concerned with risk management, lower future return expectations and stock market volatility. However, what the company finds more concerning is these same surveys also indicate that many DB plan sponsors have yet to formally develop a goal for their retirement programs, nor have they designed a road map for getting there.

Richard Torbinski, partner/co-founder, Marcia Peters, CFA, chief investment officer, and Edward Landsman, senior consultant, have written an article, “Mid-Sized Pension Plans: How to Get Back on Track in 2017.” The article provides a checklist for plan sponsors to use.

In their article, the authors note that one commonly found, yet unintended, roadblock to achieving a plan’s goals is lack of proper plan oversight. In many cases an organization’s chief financial officer (CFO) has taken on sole responsibility for this, and may meet independently with plan service providers to review portfolio logistics and develop a schedule of next steps. However, the authors say, “without a properly designed road map, each of these providers ends up working autonomously, deprived of the benefits of having an interrelated and cohesive strategy.”

The authors say, in addition, often the roles of the actuary, investment adviser and asset managers are misunderstood by plan sponsors. There are also times when the fiduciary oversight process has been loosened or abandoned after a plan has been frozen.

The article offers sample governance and investment procedures designed to help mid-sized DB plan sponsors get back on track toward achieving plan objectives.