Corporate-sponsored DB plan terminations were extremely common in the 1980s and early 1990s, when half of all existing DB plans in the U.S. terminated.¹ Aversion to new funding and accounting rules, favorable annuity pricing and modestly taxed asset reversions all contributed to this trend. More recently, a majority of plan terminations have been small plans with fewer than 100 participants. However, for a variety of reasons, terminating a defined benefit (DB) pension plan will become a reality for some sponsors in the next several years..
This Russell Investments Practice Note discusses how sponsors’ decision to terminate their DB plans should affect their funding and investment strategies.
¹ PBGC, "2012 Pension Insurance Data Tables," Table S-31.