Liability Glide Paths

L3V3R18-175 If GPLE were underfunded, it might consider establishing a liability glide path. A liability glide path is a technique in which the plan sponsor specifies in advance the desired proportion of liability-hedging assets and return-seeking assets and the duration of the liability hedge as funded status changes and contributions are made. The technique is particularly relevant to underfunded pensions. The idea reflects the fact that the optimal asset allocation in general is sensitive to changes in the funded status of the plan. The objective is to increase the funded status by reducing surplus risk over time. Although a higher contribution rate may be necessary to align assets with liabilities, the volatility of contributions should decrease, providing more certainty for cash flow planning purposes and decreasing risk to plan participants. Eventually, GPLE would hope to achieve and maintain a sufficiently high funded ratio so that there would be minimal risk of requiring additional contributions or transferring pension risk to an annuity provider