Tags: Company | pension plans | fees | retirement

Company Pension Plans Hit With Higher Fees, Liabilities

By    |   Tuesday, 25 March 2014 08:35 PM

While the problem of corporate pension plans being underfunded has receded, two new concerns have arisen. The plans will soon face higher fees and will owe larger obligations to retirees.

The regulatory cost of administering pension plans will jump 52 percent in 2016, and pension plan liabilities will soar $150 billion thanks to retirees' extended lifespans, The Wall Street Journal reports.

As companies look for a way to cope with the increased burdens, they are likely to continue their move to defined-contribution pension plans from defined-benefit plans, according to the paper.

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In defined-contribution plans, only employees' contributions are assured. Benefits will depend upon returns in financial markets. Defined-benefit pensions, which cover more than 60 million American workers and retirees, guarantee an established payment for life.

The additional costs for companies are "a big deal," Caitlin Long, head of the corporate strategies group at Morgan Stanley, told The Journal. "It's definitely causing companies to rethink the benefits of holding a pension."

In addition to turning away from defined benefit plans, companies are offering lump-sum payments to retirees and outsourcing pension-fund management to hold down their costs, according to the paper.

As for funding, the total funding ratio of the 100 largest publicly-traded companies' pension plans rose to 89 percent as of Dec. 31 from 77 percent a year earlier, according to Towers Watson, Pensions & Investments reports.

"I think companies can breathe a little easier," Dave Suchsland, senior consulting actuary at Towers Watson, told the publication. "I think their memories are still relatively short, but they understand the prospects to the levels we previously had (before 2008) are not impossible."

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While the problem of corporate pension plans being underfunded has receded, two new concerns have arisen. The plans will soon face higher fees and will owe larger obligations to retirees.
Company,pension plans,fees,retirement
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2014-35-25
Tuesday, 25 March 2014 08:35 PM
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