"Improved solvency, combined with evolved risk management tools and a favorable regulatory backdrop, are challenging plan sponsors’ long-held assumptions about defined benefit plans’ endgames."

Corporate plan sponsors are embracing a new reality: Their defined benefit pension plans are back to full funding. Despite volatile and challenging markets in 2022, this year’s analysis of the largest 100 corporate pension plans reveals that more than half are now at or above 100%.

Plan sponsors, having reached the long sought goal of full funding, find themselves at an unexpected crossroads. Should they continue their march toward plan hibernation and termination, heedless of the inefficiency that this entails? Or should they reconsider the potential for a carefully managed defined benefit plan to play an ongoing role in delivering retirement benefits to their workforce? Additionally, industry headlines related to pension risk transfer (PRT) activity have created a lot of noise on the topic. Can sponsors separate the “signal" from the noise—and are all PRTs really worth doing?​

Given the current tailwinds driving defined benefit plans, including higher interest rates and more lenient funding regulations, we recommend that plan sponsors question their implicit assumptions about their pension plan endgames—and carefully assess the value and potential uses of a pension surplus to their organizations in 2023 and beyond.

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