The client
The plan is open with a funded status of approximately 70%.
The challenge
The challenge
They also wanted to develop a clear plan to reduce funded status volatility over time.
The fiduciaries wanted to limit funded status volatility and managing any cash contributions they might need to make to the plan.
The strategy
After a full asset/liability study of the plan and in-depth understanding of the plan’s specific goals, objectives, contribution requirements and risk tolerance, we created a 10-year projection of liabilities, expected benefit payments, and other info to calculate metrics relevant to sponsor’s regulatory environment.
This info and Russell Investments’ capital market assumptions was input into a proprietary asset and liability modelling tool to produce simulations which allowed the plan sponsor to compare the potential impact that various asset allocation alternatives may have on its funded status and cash contributions.
We implemented an asset allocation specifically designed to aid in closing the funded status shortfall by maintaining the allocation to return-seeking assets while reducing the funded status impact of falling interest rates.
The pension plan maintained its allocation to 65% return seeking assets and reallocated its 35% core fixed income exposure to a new LDI strategy.
The results
Three years after implementing this strategy, an updated asset/liability study showed
that the plan’s realized funded status is approximately 500
basis point higher than it was at the onset of the program and has been less volatile than an estimate of these measures under the legacy strategy.
The client
The challenge
The strategy
The results
A pension plan with approximately $780M in pension assets supporting over 4,000 employees and retirees.
A pension plan with approximately $780M in pension assets supporting over 4,000 employees and retirees.