Companies with frozen pension plans are more likely to consider investment strategies that will eventually allow them to terminate the plans, rather than continue them, Aon Consulting reports in the brief titled “Ready 2012: Pension Pulse Survey.”

The Chicago-based HR consulting firm surveyed about 70 U.S. employers with more than 100 frozen defined benefit plans, totaling plan assets of over $50 billion.

About 81% of respondents with DB plans in which benefits accruals are frozen for all participants or eligibility is limited are considering termination strategies that include hedging significant risks (35%), changing investments to reflect the shorter investment horizon to termination (27%), or moving to a more liability-driven investment approach (19%).

“The majority of plan sponsors wants to terminate their frozen plans quickly, but doesn’t have sufficient assets to do so,” says Cecil Hemingway, U.S. retirement practice leader at Aon. “Survey participants told us they made the design changes associated with closing their pension plans (soft freeze) or ending future benefit accruals (hard freeze). However, without addressing the investment paradigm, they are leaving themselves open to significant future risk,” he adds.

The data also shows that 68% of employers with frozen DB plans thought that funding challenges will lead to cutbacks in hiring and training to make up for the shortfall in plan funding.

Moreover, 75% of respondents who are considering a plan termination within the next five years plan to hire multiple vendors. Despite the cost savings and efficiencies associated with using one vendor, many employers believe terminating a plan requires expertise, specialization and prudent fiduciary behavior — objectives that are more easily achieved by using multiple vendors, according to the report.

“Ultimately, plan sponsors of frozen pension plans have to decide whether they want to terminate their plan, start it up again, eliminate or mitigate accompanying risk, or change the benefits provided under the program,” Hemingway says. “Without [an investment] plan, it's highly unlikely that companies will be happy with their pension plans five years from today, and will instead be thinking about what they need to do in order to address the funding shortfalls and economic drain of the plan, since it still exists and still has not been addressed.”