In just a few years, the frozen pension plan sector has moved from being a footnote in the institutional investment story to a central plot point—a billion-dollar segment of the market in which some of the most rapid strategic development is occurring.

Every defined-benefit (DB) pension plan exists in one of three states. If it's an open plan, it continues to enroll new participants and benefits continue to accrue. If it's a closed plan, it is not enrolling new participants, but already-enrolled participants continue to accrue benefits. And if it's a frozen plan, not only does it not accept new participants, but no new benefits accrue. Figure 1, below, shows the proportion of U.S.-based defined-benefit pension plans that fall into each category; it's based on the latest reports available from the Pension Benefit Guaranty Corporation (PBGC), along with our estimate of pension plans' current position.

It's worth noting that there is some minor variation in how the concepts of open, closed, and frozen pension plans are applied in practice. The PBGC data shown in Figure 1, for example, defines a "closed plan" as either a plan that is closed to new entrants but continuing accruals, or else a plan in which benefit accruals are partially frozen.