Longevity Risk: Overlooked, but Not Forgotten

In a traditional defined benefit plan, virtually all risks associated with a plan participant’s pension are borne by the plan sponsor, including investment risk, contribution risk, and longevity risk. Among these three risks, plan sponsors and their advisors (including actuaries and investment consultants) typically focus on investment returns and contributions because they tend to offset each other, and, unlike longevity, they are much more pronounced at the time of each actuarial valuation and fluctuate widely in the short-term.