Aon Hewitt Survey Reveals More Pension Plan Sponsors Likely to Adopt Settlement Strategies to Better Manage Risk

Employers taking Additional Actions to address Future Costs of Pension Plans

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Feb 12, 2015, 09:47 ET

LINCOLNSHIRE, Ill., Feb. 12, 2015 /PRNewswire/ -- A new survey from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), shows that almost two-thirds of employers plan to take actions in 2015 to curb Pension Benefit Guaranty Corporation (PBGC) premium costs down the road, with most of those likely to elect settlement strategies.

Aon Hewitt's survey of 183 defined benefit (DB) plan sponsors reveals nearly one-quarter (22 percent) are very likely to offer terminated vested participants a lump sum window in 2015. Additionally, 19 percent of employers plan to increase cash contributions to reduce PBGC premiums in the year ahead, and 21 percent are considering purchasing annuities for a portion of their plan participants.

"A growing number of plan sponsors anticipate increasing pension plan costs due to recent changes to the Society of Actuaries longevity models and rising PBGC premiums," explained Ari Jacobs, Global Retirement Solutions leader at Aon Hewitt. "Settlement strategies may be an appropriate approach for well-funded DB plans so that pension plan sponsors are able to honor the retirement benefits promised to participants, while also considering the long-term financial outlook of the plan."

Aon Hewitt's survey also revealed pension plan sponsors are increasingly adjusting plan assets to better match liabilities. More than one-third (36 percent) have recently made this shift and of the remaining group, another 31 percent are very likely to do so in the year ahead.

"Pension plan sponsors are planning ahead and are taking actions now to better position themselves to manage volatility in their pension plans no matter what the future economic environment brings," explained Rob Austin, director of Retirement Research at Aon Hewitt.

Other key findings

74 percent of companies have a DB plan:
- 35 percent have an open, on-going pension plan
- 34 percent have a plan that is closed to new hires
- 31 percent have a frozen plan
45 percent of companies recently conducted an asset liability study. Of those that have not done so, 25 percent are somewhat or very likely to in 2015
18 percent of companies performed a mortality study in 2014; 10 percent plan to do so in 2015
26 percent of companies currently monitor the funded status of their plan on a daily basis, up from just 12 percent in 2013

Click here to access the report.

About Aon Hewitt
Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon's global partnership with Manchester United.