Funding Pressures Challenge US Retirement Plans, Finds BNY Mellon Study
A new study published by BNY Mellon Asset Servicing highlights the unprecedented cost pressures faced by US providers of retirement plans in providing their programmes. The study confirms that many are reducing the benefits they offer or looking to rebalance funding between employers and employees as they attempt to manage their finances.
Produced in conjunction with research and consulting firm Finadium, the study – ‘Redefining Retirement: What Changes to Defined Benefit and Defined Contribution Plans Mean for Plan Sponsors and Their Service Providers’ – concludes that there is little question in the minds of plan executives that they will either pay now for their retirees’ benefits or that they, or society, will pay later. “The main questions are how much and interrelated are those two costs and how far will the implications stretch,” the study notes.
Key findings of the study included:
Laurin Moore, head of the US tax exempt business at BNY Mellon Asset Servicing, said: “The most pressing question that sponsors of defined benefit and defined contribution plans have to answer today is how to provide retirement benefits that offer employees sufficient funding without causing further strain to employer balance sheets or government budgets. To meet this challenge, plan sponsors are looking to their custodians and asset managers for not only investment returns, but also tools for managing performance and ideas for successful programme structures.”
In particular, as the study notes, 55% of plan sponsors surveyed expect to need greater assistance in respect of performance measurement, while 35% expect the same in respect of risk management, particularly for illiquid investments in their defined benefit programmes.