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Aon Hewitt Survey Reveals More Employers Plan To Offer Lump-Sum Pension Payouts In 2013

Stocks in this article: AON





LINCOLNSHIRE, Ill., Feb. 13, 2013 /PRNewswire/ -- Last year marked a watershed moment in retirement benefits as numerous companies decreased their pension risk exposure by offering participants a one-time lump-sum pension payout. A new survey by Aon Hewitt, the global human resources solutions business of Aon plc (NYSE: AON), reveals more employers plan to follow suit in 2013.

(Logo:  http://photos.prnewswire.com/prnh/20100719/AQ37264LOGO)

Aon Hewitt surveyed 230 U.S. employers with defined benefit plans, representing nearly five million employees, to determine their current and future retirement benefits strategies. According to the findings, more than one-third (39 percent) of defined benefit (DB) plan sponsors are somewhat or very likely to offer terminated vested participants and/or retirees a lump-sum payout during a specified period, also known as a window approach, in 2013. By contrast, just 7 percent of DB plan sponsors added a lump-sum window for terminated vested participants and/or retirees in 2012.

"There is no question, employers are looking for new ways to aggressively manage their pension volatility," explained Rob Austin, senior retirement consultant at Aon Hewitt. "In 2012, many DB plan sponsors were exploring options and planning their strategies—we think 2013 will be the year when many more actually implement large-scale actions such as offering lump-sum windows. Pension Benefit Guarantee Corporation (PBGC) premiums will begin to increase in 2013 and 2014, which will increase the carrying cost of pension liabilities and give plan sponsors an economic incentive to transfer those liabilities off their balance sheet."

Aon Hewitt's survey also found that most employers (84 percent) will not make any change to the benefit accruals they offer workers. Of those that are planning changes, fewer than one-in-five (16 percent) employers are somewhat or very likely to reduce DB pension benefits, while 17 percent are somewhat or very likely to close plans to new entrants in 2013. Just 10 percent are somewhat or very likely to freeze benefit accruals for all or some participants.

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