As more companies look to cut their pension plan obligations by offering employees lump-sum payments or annuities, the U.S. Department of Labor is considering regulations that have groups representing employers and participants squabbling.
The department's ERISA Advisory Council earlier this month recommended that guidelines be created to ensure plans disclose to employees how derisking strategies are calculated and implemented, as well as making sure participants know their possible impact. The most contentious proposal might be one that would declare derisking a fiduciary decision.
Derisking has become increasingly popular. Derisking strategies can vary from reducing exposure to risky equities in pension portfolios to offering lump sum buyouts to retirees and former workers. In some cases, plan sponsors have transferred pension obligations to private insurance companies by purchasing huge group annuities to pay out benefits.
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