Recently, borrowing has appealed to sponsors due to historically low interest rates and, as a result, much lower borrowing costs.
Many plan sponsors have spent the last 10 or so years reacting to the wild movements of plan financial positions and suffering through the impact that volatility has had on corporate financial performance. Choosing to accelerate contributions, financed through borrowing, will not be right for all plan sponsors. However, most plan sponsors could benefit from assessing the option.
Borrowing to fund can lessen the risk of near-term interest rate movements and provide more security for sponsors during the continued turbulence of global financial markets. In addition, taking action now to reduce risk exposure can alleviate some of the worry about future volatility and allow sponsors to focus more attention on their core business operations.