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In this Environment, are Plan Sponsors Waiting to De-Risk?

A couple of years ago, most plan sponsors were anxiously waiting for interest rates to rise, which would result in major improvements in funded status and provide an opportunity to hedge plan liabilities. 2018 provided some relief, but it was short‐lived. Will plan sponsors continue to wait again? It does not seem likely.

As Goldman Sachs noted in their recent paper, “US Corporate Pension Review and Preview: Running in Place,”* plan sponsors continued to de‐risk asset portfolios through the end of 2019. Group annuity sales continued to rise through the third quarter of 2019, at a pace that exceeded that of a similar time‐frame in the previous ten years. Goldman also theorized pension plan demand drove outstanding interest in US Treasury Strips up another notch in 2019. Despite lower interest rates, much of this activity is driven by rising PBGS premiums, which are set to rise again to $83 per participant in 2020 from $80 per participant in 2019.