Dynamic Asset Allocation for Plans with Short-Term Obligations

August 2026

Trustees of health and welfare plans face a challenge that traditional pension plans generally do not: their short-term liabilities can shift as quickly as their assets do.

A plan’s cash flow needs, recommended reserves, and asset values are constantly changing, so a fixed asset allocation set once and left in place may not keep pace with the growth in plan expenses, such as medical inflation, or with swings in claims and contributions. A dynamic asset allocation (DAA) structure addresses this by matching the investment profile of a plan’s assets to when its liabilities are expected to come due, moving the plan to a more conservative posture as near-term liabilities grow and to a more aggressive posture as they shrink.