What is the primary focus of a surplus management policy?

The primary focus of a surplus management policy is to manage surplus in contribution levels and risk reduction opportunities. Surplus management is essential for ensuring the long-term sustainability of a pension or benefit plan. It involves analyzing and making strategic decisions about how to allocate excess funds that may arise from better-than-expected investment returns or lower-than-expected benefit payments.

This proactive approach allows organizations to balance their contributions and minimize risk associated with future obligations. By doing so, an effective surplus management policy can help plan sponsors make informed decisions about investments, benefit enhancements, or potential reductions in future contributions, all while ensuring that their obligations to plan participants are met.

The other options reflect important aspects of benefits management, but they do not capture the holistic intent of a surplus management policy. While increasing benefits for plan participants might be a consideration, the primary focus remains on managing the overall financial health of the plan. Minimizing administrative costs is a valid goal but is more about operational efficiency than managing financial surplus effectively. Additionally, eliminating unfunded liabilities is a significant objective for plans, but it does not encapsulate the broader strategy of how to deal with surplus funds specifically.