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MetLife: Long Lives Could Surprise Pension Plan Sponsors

By Staff Writer

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Relatively few U.S. pension managers are paying much attention to risk factors such as mortality risk, longevity risk and early retirement risk.

Researchers at a unit of MetLife Inc., New York, present that warning in an analysis of defined benefit pension risk management based on a telephone survey of 168 corporate pension plan sponsors.

More than 40% of the participants rated asset allocation, meeting return goals, underfunding of liabilities and and asset and liability mismatch as important, the MetLife researchers report.

Fewer than 10% of the participants rated as quality of participant data, longevity risk, mortality risk or early retirement risk as important.

The low ratings of some of the factors may reflect lack of understanding of some, such as quality of participant data, and the fact that other factors, such as mortality and longevity, tend to change slowly.

“New mortality tables required by the [Pension Protection Act] used for valuing liabilities for funding (not accounting) purposes take one step in the direction of adding visibility to this risk, as they begin to factor in some improving mortality in the future,” MetLife researchers write in comments on the survey results.