As a plan sponsor’s de-risking strategy ultimately bears fruit and the plan approaches full funding, a new phase of the pension management lifecycle brings with it new challenges. Navigating the later stages of the asset-liability journey requires that plan sponsors establish a clear and well-defined view of the end-state. Doing so requires careful consideration of costs (some knowable, some not), risks, and less tangible company-specific considerations. Once this end-state is defined, investment and contribution strategy can be cohesively aligned to maximize the probability of success. With greater flexibility, the probability of a successful outcome increases.
In previous Topics of Interest papers, we introduced the concept and mechanics of liability-driven investing and outlined the methodology used to help clients build successful de-risking glidepaths customized for unique circumstances. This discussion will build off those earlier papers and now focus on the different potential end-game options for plan sponsors and address some of the key considerations to align investment strategy with their ultimate end-game objective.