A tool to help you understand the long-term economics of your plan

Understanding the long-term economics of your defined benefit plan is critical to successful plan management. Unless your plan is hard-frozen, understanding the benefits that have been earned to date does not give you the full picture. In order to be able to set effective funding and investment policies, it is also necessary to understand and examine how future benefits will accrue, and how large they will ultimately be. To help plan sponsors better understand the long-term economics of their plans, Russell Investments introduces a liability metric called Total Future Benefit Obligation (TFBO). TFBO is an all-in liability metric that looks at the present value of all benefits that will ever be earned by current plan participants as well as by future participants.

This Russell Investments Viewpoint defines TFBO and demonstrates how it can be used to help plan sponsors better understand and communicate their plan’s unique funding and investment challenges.

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Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.