Preparing to De-Risk

In order to be prepared to implement a risk reduction strategy when market conditions permit, plan sponsors can take certain steps, such as:

• Quantify all current plan costs and the sensitivity of those costs to the investment and interest rate environment;
• Evaluate the costs and financial impacts of a risk reduction strategy – for example, on funded status volatility, earnings volatility, and ongoing expenses;
• Understand the plan’s economic liability (i.e., the cost to settle) and the accounting impacts of such a strategy.
• Identify an acceptable cost to implement such a strategy;
• Obtain the necessary approvals for action; and
• Monitor market returns and interest rates to identify the right time to implement.