Managing Defined Benefit Plan Surplus Strategies

This guide outlines various strategies for managing surplus in defined benefit (DB) pension plans, particularly in the context of improved funding positions due to higher interest rates and strong asset performance. It discusses the implications of surplus funds, which remain plan assets and must be managed according to ERISA and the Internal Revenue Code. The document details three primary approaches: preserving surplus for flexibility, deploying surplus to enhance participant benefits, and de-risking strategies for frozen plans. It emphasizes the importance of evaluating organizational goals and legal circumstances when considering these strategies. The guide also presents a decision framework for plan sponsors, highlighting potential strategic priorities based on the funding status and organizational objectives. Additionally, it references IBM's approach to leveraging surplus assets to support retirement benefit design, illustrating practical applications of the discussed strategies. Overall, the guide serves as a resource for plan sponsors to align pension strategy with broader organizational objectives.