PLANSPONSOR - February/March 2021 - 9

swaption holder must pay a premium to
the contract's issuer. Swaptions typically
provide for interest rate swaps, but other
types of swaps may also be arranged.
Because many plans are cash-flow
negative-paying more in outflows than
they get in inflows-they should avoid
a large shock to assets, especially large
declines or drawdowns, says McLaughlin.
For the growth part of an LDI portfolio,
being well-diversified remains key,
Clark says. " We saw quite a bit of disparity
in asset classes in 2020. Sponsors should
understand what asset classes are available
to them to create a well-diversified
portfolio, and rebalancing is a tried and
true principal. "
For the fixed-income part,
McLaughlin says, " We've seen more
interest in private markets and illiquid
securities such as structured credit and
private loans. The challenge is that more
illiquid assets could potentially mean
not enough liquidity to pay for outflows,
which would make DB plan sponsors
forced sellers of equities. "
Glide Path Triggers
" A big focus in 2021 will be reassessing
glide path triggers to make sure they're
realistic, " McLaughlin says. " [Sponsors]
are ... a long way from the next glide path
trigger on a funded-status basis or a
market-level basis-for example, a trigger
of a 3% market rate on Treasurys. "
Sponsors that adjusted their portfolios
when they hit a funded-status trigger
but fell below it due to a market downfall
last year should consult their investment
policy statement (IPS) for what to do,
Clark says. They might need to re-risk
their portfolio. " Many who did that in the
first quarter of 2020 came out ahead by
the end of the year, " he observes.
Also in light of 2020, River and
Mercantile would advise that sponsors
look at their governance structure. " If the
IPS and governance structure don't allow
sponsors to take advantage of market
movements quickly, they will miss out on
opportunities, " he says. -Rebecca Moore
TIDBITS
Employers on 'Well-Being'
While most of the 115 employer respondents to a survey said their organization
increasingly recognizes the importance of financial well-being and will likely
create, or expand a current, financial well-being program this year, priorities
for the programs vary and not every provision-e.g., those in 2019's Setting Every
Community Up for Retirement Enhancement (SECURE) Act-will be embraced.
Consider Letting Workers Withdraw up to $5,000
For the Birth or Adoption of a Child*
l Already have this provision
l Very interested
l Moderately interested
l Not at all interested
5%
15%
40%
40%
Consider Adding Annuities to Their Defined
Contribution Plan*
l Already have annuities
l Very interested
l Moderately interested
l Not at all interested
*Enabled by the SECURE Act.
Face Hurdles to Enacting Their Financial Well-Being Strategy-i.e., ...
Other benefit priorities
Budget constraints
88%
53%
No internal resources to manage it 43%
Insufficient leadership buy-in
Organizational issues
No hurdles
18%
3%
10%
Source: Alight Solutions, " Hot Topics in Retirement and Financial Wellbeing 2021 "
12%
3%
48%
37%
PLANSPONSOR.COM February - March 2021 9
http://www.PLANSPONSOR.COM
PLANSPONSOR - February/March 2021

Table of Contents for the Digital Edition of PLANSPONSOR - February/March 2021
