Is it in the best interest of participants to consider the plan sponsors business risks when developing a pension financial strategy?
An argument can be made that the business risks of the plan sponsor should be considered when fulfilling fiduciary responsibility. Unsound business management can undermine sound pension funding and put participant benefit security at risk. Participants lose in only one situation — when the plan sponsor goes bankrupt at the same time that the plan is underfunded. For example, allocating assets in a manner that reduces the chance that poor pension performance will coincide with poor business performance improves the security of participants’ benefits. In short, it is prudent for plan sponsors to view the risks in the pension plan in an enterprise risk management framework, and it may be acceptable for plan trustees to do so as well.
