US financial executives managing pension plans feel that proposed reform focuses too much on the PBGC’s need for solvency and not enough on the long-term health of the plans.
A total of 54 financial executives offered their opinions around the potential impact of the Bush Administration’s proposed pension reform. More than 85% felt that the proposed reform focuses too strongly on the PBGC’s need for solvency and not enough on creating a pension system that squares the long-term nature of pension liabilities with the PBGC’s interest in solvency. Additionally, more than a third of those polled (35%) also believe that the proposed reform and subsequent extra expenditures will increase the risk of future corporate bankruptcies.
“While PBGC solvency is the primary driver for reform, the trade-off cannot be to sacrifice the financial well-being of the companies who sponsor pension plans,” said Jim Morris, Senior Vice President, Retirement Solutions for SEI’s Institutional Solutions Group. “Reform will need to provide a solution for PBGC solvency while also providing incentives for plan sponsorship.”
In addition, 56% of the executives polled said they are taking a proactive approach to reform by identifying potential action plans even before the reform is finalized. “Many financial executives are using reform as an opportunity to reevaluate decisions regarding how their pension plans are managed, including changes around asset allocation and funding policies,” said Morris. “This proactive approach will minimize the impact that pension reform will have on their overall business.”
The poll, sponsored by SEI Investments, was a survey of the Pension Management Research Panel, an independent panel of financial executives who are dealing with the critical issues related to managing defined benefits plans.