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Fed Policy Adds to Pension Funding Woes, Mercer Warns

Tammy Whitehouse | November 12, 2010

The Federal Reserve’s policy of “quantitative easing” may or may not achieve the Fed’s objective of jumpstarting a sluggish economy, but the supressed interest rates that come with the policy are sure to give pension plan sponsors more funding headaches.

That’s the prediction from investment advisory firm Mercer, which is warning sponsors of defined benefit pension plans to think carefully about how the funded status of their specific plans might be affected by the policy. Action to keep interest rates low is likely to create even further funding problems for companies that are already struggling to prop up underfunded plans, said Jonathan Barry, a partner in Mercer’s retirement, risk, and finance group.

Many companies that sponsor defined benefit pension plans are already looking for ways to minimize the effect of...

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