Administration October 9, 2024

More Plan Sponsors Seek to Completely Offload DB Pension Liabilities

Among companies with pension de-risking plans, 93% expect to completely divest their defined benefit liabilities, according to a MetLife survey.

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A growing number of plan sponsors are looking to completely offload their defined benefit plan liabilities, due in part to corporate pressure to reign in the costs and risks associated with the pensions, according to MetLife’s 2024 Pension Risk Transfer Poll.

The poll found that 93% of companies with de-risking goals plan to completely divest their defined benefit pension plan liabilities, up from 89% in last year’s poll. Meanwhile slightly more than half (52%) reported they plan to divest within two to five years, with the average of 3.8 years down from 4.1 years in the 2023 survey.

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Additionally, 90% of those polled reported that their pension plans are drawing “significant attention” from corporate management because of the financial effects that the plan’s volatility and associated risks have on a company’s balance sheet and income statements.

Approximately 68% of plan sponsors responded that they will secure a group annuity for a retiree lift-out, which involves buying annuities to transfer the liabilities related to some or all of a plan’s current retired participants. According to MetLife, this figure increased to 83% for plan sponsors seeking to offload at least $1 billion in plan liabilities. Meanwhile, only 26% of plan sponsors reported they will secure a buyout for a plan termination, which involves buying annuities to transfer liabilities for all of the plan’s current and retired participants.

Nearly two-thirds (66%) of plan sponsors said they will most likely use an annuity buyout when they de-risk their plans, up from 46% in 2015 when MetLife commissioned the first version of the poll. This includes an annuity buyout on its own or a combination of a lump sum payment offering and an annuity buyout.

The survey also found that an increasing number of plan sponsors are preparing to reduce their DB plans’ pension risks, with 56% saying they are improving their plan’s data quality and 52% increasing plan contributions, both typical, preparatory steps companies take before committing to a pension risk transfer.

Other indicators of impending pension risk transfers include 29% of companies seeing more involvement from their C-suite executives in DB plan management, while 23% said they are offering a lump sum distribution to terminated-vested participants, and 20% are adopting a liability-driven-investing strategy to minimize risks to their plans’ funded status. Meanwhile, only 2% of plan sponsors polled said they have taken no action related to de-risking their plans.

“As the poll and other market data indicates, the pension risk transfer market continues its bullish growth and will likely continue to remain strong in the near future,” Elizabeth Walsh, MetLife’s vice president of U.S. pensions, said in a statement. “The driving force [behind] the continued interest in derisking remains the current macroeconomic environment.”

Compliance October 8, 2024

Public Sector Increasingly Relies on CISOs Amid Continued Digital Threats

According to a Deloitte-NASCIO survey, these executives are leading state and local governments’ responses to the constant threat of cyberattack.

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Art by James Yang
Public Sector Increasingly Relies on CISOs Amid Continued Digital Threats

As state and local governments increasingly maintain digital records instead of physical ones, and more servers than ever hold citizens’ health, financial and personal data, the public sector has become an attractive target for cyberattacks.

The digital threats confronting state and local governments are wide and varied, and the emergence of artificial intelligence has introduced more sophisticated mechanisms for exploiting vulnerabilities. As a result, according to the 2024 Deloitte-NASCIO Cybersecurity Study, nearly every state now employs a chief information security officer to execute a range of key services.

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A CISO is a senior executive who manages an organization’s information and technology security. Some of the services for which they are responsible include security management and operations; strategy, governance and risk management; and incident response.

With governments looking to CISOs to lead the effort to protect citizens and systems, the role is rising in prominence, and survey results show the CISO is now firmly established as a central part of most states’ information technology organizations.

The role of the CISO has also become more important in light of recent digital attacks on state governments. For example, in February 2023, the city of Oakland, California, faced a serious ransomware attack that impacted many of its IT systems.

According to Deloitte’s report, 98% of state agencies now depend on a CISO for security management and operations, as well as strategy, governance and risk management. State CISOs also reported a jump in how many are responsible for maintaining data privacy, up to 86% of CISOs offering this service to state agencies in 2024 from 60% in 2022.

As of 2024, 20 states have comprehensive data privacy laws in effect, and survey results revealed that more CISOs are taking on responsibility for privacy than did so in 2022. In some instances, CISOs serve dual roles as both CISO and chief privacy officer, while in other cases, the chief privacy officer reports to the CISO. However, Deloitte found that only 21 states have chief privacy officers.

In addition, CISOs are becoming more involved with generative AI-related developments in many states, as 88% of CISOs reported being involved in generative AI strategy development in 2024 and 96% reported involvement with generative AI security policy development. Despite all of the effort, only 10% of state CISOs said they are very confident their state’s information assets are protected from AI-enabled attacks.

State cybersecurity budgets also pose a challenge, as most cover security management and operations, as well as strategy, compliance and privacy. Fewer cover generative AI governance and security controls. According to the survey, nearly 40% of state CISOs find themselves short of funds to comply with regulatory or legal requirements.

Because demand for cybersecurity experts continues to rise, understaffing and difficulty recruiting and retaining skilled workers continues to be an issue. Nearly half of state CISOs in the survey cited a lack of cybersecurity staffing as a top-five challenge, with another 31% citing inadequate availability of digital professionals.

According to the survey summary, state CISOs have an opportunity to educate employers on the latest technologies and potential threats, especially as new threats are constantly emerging. It is also important that CISOs confirm that there is adequate training and oversight of contractors who are allowed access to the state network, attempting to ensure that the digital practices of any contractors are robust.

Deloitte and NASCIO surveyed enterprise-level CISOs from 50 states and the District of Columbia in spring 2024.

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