Pension Indicator Updated for April 30, 2018

I've got no Roots

By: Matthew Klein, Principal, Findley

With apologies to Alice Merton’s current hit single, I think it might be time to re-focus our efforts on remembering pensions’ roots.  The history of pensions is really a form of deferred compensation: the employee accepts money later to forego pay now.  It benefitted employers when pensions were established at many companies through the 1950s, 60s, and 70s because of the available of young, cheap labor.  Pension costs were very cheap because so many employees were 30 years away from retirement.  The naturally back-loaded nature of traditional DB plans also provided incentive for employees to stay and keep turnover costs low.

Through the 1980s, pension costs remained cheap due to the high inflation environment.  In fact, overfunded plans were often cashed out by companies to get at the excess assets, only to restart a new pension plan a day later. (This concept was killed in the late 1980s when onerous new excise taxes gobbled up most of any excess assets).  Through the 1990s we saw the rise of the 401(k) concept, and it was fairly easy to convince employees that this was a superior idea with a stock market that roared for many years.

The turn of the millennium saw two significant market corrections and increased globalization.  Pension freezes became more about survival to many companies.  While many companies have waited years for assets to recover and interest rates to rise, de-risking activities have significantly picked up as the funded status for plans continue to improve.

For generations, pension plans have provided a stable, secure, lifetime income option for millions of Americans.  It is not a coincidence that defined contribution plans and their lack of annuity options, professional investment knowledge, and leakage have led a rash of articles debating a retirement crisis ahead.

This is not a call for the “good ole days.” Modern pension plan design can share risks between the employer and employee that make sense for all stakeholders.  If you are interested in learning more, I’d suggest you take a look at my white paper that provides the details, which can be found at

As always, thanks for reading, and drop us a comment on how we're doing.

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Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. Performance data represents past performance.  Past performance is not indicative of future results.

Year to Date Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 3.8% 3.1% 1.6% -0.5%
 Recently Frozen 5.4% 4.7% 3.2% 1.0%
 Ongoing Traditional 7.2% 6.4% 4.9% 2.7%
 Cash Balance 4.3% 3.6% 2.1% -0.1%
Month-over-Month Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 1.4% 1.0% 0.3% -0.5%
 Recently Frozen 1.8% 1.4% 0.8% -0.1%
 Ongoing Traditional 2.3% 1.9% 1.2% 0.4%
 Cash Balance 1.5%% 1.1% 0.5% -0.3%
12-Month Change Investment Mix 
Plan TypeAggressiveBalancedLDI LiteLDI
 Frozen (for several years) 10.9% 9.6% 8.7% 6.5%
 Recently Frozen 10.0% 8.7% 7.7% 5.6%
 Ongoing Traditional


7.6% 6.7% 4.6%
 Cash Balance 11.1%


8.8% 6.7%