More NewsFunding Pressures Challenge US Retirement Plans, Finds BNY Mellon Study

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:

  • Retirement benefits packages continue to be seen as an important part of employee hiring and retention. Half of private company executives surveyed said that their plans made them more competitive as an employer, whereas 73% of public plan executives felt that their plans were an asset.
  • The attractiveness of defined contribution plans for employers lies in the reduction of funding volatility; in the long run, funding costs for defined contribution may be higher or lower than current costs, but the ability to control volatility is seen as an unparalleled advantage.
  • Hybrid defined benefit/defined contribution plans offer the professional management of defined benefit with the portability of defined contribution; some type of hybrid plan may be the best solution for employers and employees if employer costs can be managed effectively.
  • Executives are looking to their service providers for help with some of their most pressing challenges, including assessing performance for private equity and other illiquid assets, and defining new strategies for assuring a stable retirement for their employees.

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.

Related Articles

Infosys Finacle to power Santander UK’s international cash management system

More News Infosys Finacle to power Santander UK’s international cash management system

3w The Global Treasurer
Preparing for GDPR? Here’s four things to consider

More News Preparing for GDPR? Here’s four things to consider

4m Elliott Wiseman
Cash flow in focus for investors

Cash Management Cash flow in focus for investors

5m Conor Deegan
Treasury TV: Karen Pugsley, Domino's Pizza Group

More News Treasury TV: Karen Pugsley, Domino's Pizza Group

5m Victoria Beckett
Treasury TV: Yeng Butler compares US and European MMF reforms

Compliance Treasury TV: Yeng Butler compares US and European MMF reforms

5m Victoria Beckett
Treasury TV: Tim de Knegt, The Port of Rotterdam

10 Minutes With The Treasury Treasury TV: Tim de Knegt, The Port of Rotterdam

5m Victoria Beckett
Banks are selling clients short with short dated cash deposit U-turns

Banking Banks are selling clients short with short dated cash deposit U-turns

5m Victoria Beckett
What does sterling’s Brexit boost mean for UK manufacturers?

More News What does sterling’s Brexit boost mean for UK manufacturers?

6m Tasja Botha