From 80% to Secure: Three Pension De-Risking Strategies Sponsors Often Miss

3 De-Risking Opportunities Sponsors Face at 80 to 90 Percent Funded and How Targeted Settlement Strategies Can Lock In Progress

Reaching 80 to 90 percent funded is a meaningful milestone for a defined benefit plan. It often reflects years of contributions or favorable market performance. But this stage is also one of the most misunderstood points in a plan’s lifecycle.

Many sponsors feel comfortable once they reach this level. In reality, plans in the 80 to 90 percent range often carry concentrated risk. Volatility still matters, PBGC premiums remain significant, and a single bad year can erase years of progress if there is no strategy to convert gains into something permanent.

Below are three common opportunities we see sponsors have at this stage, along with practical ways targeted settlement strategies can help reduce volatility and long-term PBGC premium drag.

Opportunity One: Avoiding the Assumption That the Remaining Gap Will Close on Its Own

Sponsors often assume that once a plan reaches 80 to 90 percent funded, markets and contributions will naturally close the remaining gap. The problem is that volatility still dominates outcomes. A modest decline in interest rates or a market pullback can quickly reduce funded status.

What is often missing is a plan to lock in gains as they occur. Settlement strategies that reduce non-strategic liabilities, such as small benefit retirees or terminated vested participants, can permanently shrink the portion of the plan exposed to rate and market swings. Instead of hoping gains stick, sponsors actively convert progress into something durable.

Opportunity Two: Treating De-Risking as a Process, Not a One-Time Event

Many sponsors think of de-risking as a one-time event once the plan is fully funded. Waiting often concentrates risk and increases execution challenges.

The most effective strategies are planned early and executed incrementally. Partial settlements reduce volatility now while preserving flexibility for future actions. This staged approach improves outcomes, lowers execution risk, and allows sponsors to act opportunistically rather than reactively.

Opportunity Three: Reducing Ongoing PBGC Expense Drag

PBGC premiums are often seen as an unavoidable cost. In practice, they are a recurring cash outflow with no upside. Even at 80 to 90 percent funded, variable premiums can remain elevated for years. Contributions alone may not reduce PBGC exposure as quickly as expected while premiums quietly compound over time.

Targeting unfunded vested benefits directly rather than relying solely on funding is often more effective at controlling long-term costs.

Turning Progress Into Permanence

Targeted settlement strategies are not about rushing to terminate a plan. They are about making selective, well-timed moves that reduce volatility, stabilize cash flows, and control long-term costs.

A more helpful question than 'are we doing okay?' is which risks are we still carrying and which ones can we permanently remove.

For many sponsors, the next step is a short scenario analysis to understand potential participant reduction, PBGC savings, and funded status impact. There is no commitment involved, just clarity. Even relatively small actions at this stage can have a meaningful effect on a plan’s efficiency and long-term cost structure.

If you would like to see how your plan might benefit from targeted settlements, a brief advisory review can help outline options and tradeoffs with no obligation.