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.

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