Increasing benefits costs, market volatility, and ever changing compliance regulations all add risk to managing your company’s pension plan. You don’t want to be caught underfunded, non-compliant, or paying too much for administrative fees.
In a survey late last year by Towers Watson and Institutional Investor Forums, the most cited reason for creating a formal de-risking plan was the impact of the defined benefit plan on financial statements (69%), followed by the impact of the plan on company cash flow (58%) and the general cost of the plan (41%).
While last year’s strong stock market performance helped improve the funded status of many corporate pension plans, there has never been a better time to look at all aspects of your pension plan and implement strategies to mitigate or eliminate risks to the bottom line.
Here are 5 ideas to help de-risk the company’s pension plan and boost its financial health:
- Consider offering a permanent lump sum cashout feature for all ages. This could help to mitigate your fiduciary risk by eliminating your future financial obligations, while making for a stronger balance sheet over the long-term. It’s also very simple to administer and eliminates future administrative expenses.
- Offer immediate lump sum cashouts to terminated vested participants in lieu of their future monthly payments. Settling terminated vested participants with a lump sum payout eliminates future financial risks associated with those liabilities.
- Review the pros and cons of a partial annuity buyout for retirees in pay status. With a partial annuity buyout, an insurance company unconditionally takes on the obligation to provide benefits to a specified group of participants on behalf of the company. However, talk with your pension plan consultant to see if this option makes sense for your company.
- Review the pros and cons of an annuity buy-in for a block of retiree liability or entire frozen plan. In this case, a premium is paid to the insurer and a single annuity contract is issued to the pension fund. The pensions are paid to retirees by the plan fund and not by the insurer. The annuity contract is considered an investment made by the pension fund. Your consultant can help you weigh the cost benefits of this strategy.
- Adopt an integrated funding and investment policy that minimizes funded status volatility rather than managing assets and liabilities in isolation. For example, fluctuations in plan cash, accounting and PBGC costs are driven by the asset/liability mismatch, not the volatility of each in isolation, so it is critical to integrate these policies when funding toward a plan termination or stabilizing cost patterns.
These drugs doses do not increase sexual desire but, they make it physically possible to get the buy generic cialis click for info now erection. For example- kidney failure and HIV positive and taking cialis order online its treatment. This is one of the biggest reasons why the number canadian cialis online of unhealthy people these days is being overweight. These medications have been the first and foremost drug that discovered a significant treatment approach of men erection issue. tadalafil tablets prices https://drscoinc.com/properties/lavish-1-bed-apartment-in-baltimore-md-21229/
With Pension Benefit Guaranty Corporation (PBGC) premium rates scheduled to increase over the next several years, due to recent legislative changes, it will be more expensive for a plan sponsor to maintain its terminated vested liability. Putting a de-risking plan in place should be one of your company’s top priorities for 2014 and 2015.
If you aren’t sure which of these tactics makes the most sense for your company, call (312) 762-5945 or email Kathy Tompkins now to set up a free, no-obligation consultation.
You Might Also Like:
5 Ways to Reduce the Cost of Administering your Pension Plan
