Risk Transfer Strategies - The Challenge

Pension plan sponsors experienced severe funding shortfalls in 2001 due to what has been termed the "perfect storm" market effect of a combination lower equity market values and lower interest rates. It has taken 5 years for most plan sponsors to regain their plan funding positions through increased contributions and more favorable market conditions.

The hard lessons learned through this have changed the perception for most plan sponsors of the reality that both pension asset and plan liabilities need to viewed in tandem. Liability Driven Investing has become the generic term and paradigm used to reflect this new thinking and there are numerous approaches being offered as "solutions" in the market today.

We believe this emphasis is appropriate and long overdue, but we do not feel that this is the only nor the best solution to prudent risk management required of plan fiduciaries today. While these schemes do more accurately match plan assets and liabilities which will reduce mismatch risk they do not eliminate other financial or longevity risk.

Have a specific question regarding a challenge you are encountering with a risk transfer strategy? Ask, and we can help provide you with an answer.

The Solution

Dietrich & Associates has the Solution.

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