Fewer plan sponsors are considering terminating their defined benefit plans as they consider other risk management strategies such as plan design changes or limited risk transfers.

Half of plan sponsors do not intend to terminate their DB plans, up from 36.7% in 2023 and 28.3% in 2021, according to Mercer’s 2025 CFO Survey, shared in a webinar on Wednesday.

The survey is based on responses from 173 chief financial officers and senior finance executives.

“A lot of the plans who had planned to terminate did so,” said Matt McDaniel, who leads Mercer’s U.S. pension strategy and solutions team. “We’re now up to … half of plans anticipating staying in the pension ecosystem for a long time, and the other half looking to terminate in the next five to 10 years. With more overfunded plans than ever, managing pension surpluses that have emerged has become the key theme in terms of how plan sponsors are thinking about dealing with those types of plans.”

The 100 largest corporate DB plans were 104.1% funded on an accounting basis, with a surplus of $51 billion as of March 31, according to Milliman.

As surpluses have increased, plan sponsors have tapped into alternative measures other than termination to unlock the savings, McDaniel said.

“We’ve seen sponsors move DC contributions into a DB plan to provide similar contributions; we’ve seen plan sponsors do retiree medical transfers of surplus assets to cover health benefits for employees; we’ve seen plan sponsors do somewhat creative partial transactions—where that may be to spin off a portion of the plan, terminate that with some surplus, leave a portion of the plan behind, perhaps for employees that are still accruing benefits,” he said. “The rules do require a little bit of creativity in terms of different ways to access some of that surplus, and sometimes it’s a little bit of a work-around to try to get there. But there are lots of good activities.”

More than 50% of respondents said they are eyeing plan design changes for 2025, with an increasing interest in hybrid models and cash balance plans to offset investment risk and interest rate volatility, according to the survey.

According to survey results shared during the webinar, 37.6% of respondents said they had implemented a hybrid pension plan design that eliminates investment risk and interest rate risk for the company, up from 32.2% in 2023.

Investment risk and interest rate risk were the two main factors that plan sponsors listed for why they terminated their plans, at 66% and 48.9%, respectively, according to the survey.

Meanwhile, risk transfer continues to dominate strategic discussions. More than 70% of organizations plan to offer lump-sum payments to some portion of their plan beneficiaries in the next two years, while more than 60% are exploring or have already executed retiree obligation transfers to insurers via annuity purchases, sometimes called pension risk transfers.

Organizations are also moving to de-risk their investment portfolios, with 70.1% reporting they have implemented dynamic de-risking strategies, an increase of nearly 10 percentage points from 2023. Additionally, 44% have boosted allocations to fixed-income assets to stabilize their funded status.

Yet internal confidence remains a hurdle: Fewer than 40% of CFO respondents reported high confidence in their in-house capabilities to manage DB plan complexities. Many cited time and resource constraints, prompting a growing reliance on analytics, dashboards and data-driven tools to inform decisions and streamline operations.

“Plan sponsors are thinking about all the options that are on the table,” said Valarie Dion, a senior pension strategist at Mercer, during the webinar. “With higher funded status, you have a lot more options on the table.”