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The Forgotten 70%: Strategies for Pension Plans Accruing Benefits

Picture of Chief Executive Officer
David Druley, CFA Chief Executive Officer

Picture of Managing Director, Endowment & Foundation Practice
Greg Meila, CFA Managing Director, Endowment & Foundation Practice
  • While up to 70% of all single-employer pension plans have participants who are still accruing benefits, risk management solutions discussed in the pension community typically focus on the needs of the other 30% of plans—those that are hard frozen.
  • The mechanistic “glide path” approach tailored to hard-frozen plans is likely suboptimal for accruing plans, as it would lock in the need for permanently higher contributions.
  • We recommend a more flexible, holistic risk budgeting approach that seeks to maximize expected return subject to each sponsor’s unique risk tolerance.
  • Pursuing excess returns through active, alpha-driven strategies is particularly valuable for accruing plans, which face many years of future benefit accruals that must be met through either asset returns or contributions.

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David Druley, CFA - David Druley is the Chief Executive Officer at Cambridge Associates.

Greg Meila, CFA - Greg Meila is a Managing Director for the Endowment & Foundation Practice at Cambridge Associates.

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