With interest rate levels at all-time lows and corporate pension plans potentially facing large cash contribution requirements at an inopportune time, Congress enacted legislation in July 2012 in order to ease the pain. The Moving Ahead for Progress in the 21st Century Act (MAP-21) reduces near-term funding requirements for pension plans by allowing them to discount future cash flows based on the average interest rate experienced over the past 25 years, rather than at the current historically low rates.

While the goal of the legislation was to free up cash for employers to spend elsewhere and increase tax revenue by reducing the amount of tax-deductible contributions, a secondary impact may be a sizable shift in asset allocation away from liability-hedging assets. In addition, this law, the most significant among multiple recent installments of funding relief, may set a precedent that leads to a potential reevaluation of the importance of risk when setting pension investment policies.