Plan sponsors can benefit from de-risking options with which they may be unfamiliar. Most consider these options at some point. Why?
All these risks can generate financial statement volatility. New tax regulations and brackets, new mortality tables, normalizing interest rates, etc., require updated analyses to consider their impact on:
In the end, plan sponsors, participants and shareholders are served by dealing with their plan(s) in ways that will defang, shrink and remove risks once and for all.
It is time for most plans to take a new look.
- Market Risk has a direct impact on funding levels.
- Interest Rate Risk relates to unknown future crediting rates and changes to liability discount rates.
- Operational Risk includes changing administration costs, PBGC premiums, etc. For example, since 2012, the fixed premium has risen more than 130% while the variable premium has risen nearly 400%.
- Regulatory Risk includes changing regulations surrounding pension plans like the PPA (Pension Protection Act).
- Demographic Risks include increasing longevity, early retirements, etc.
- Black Swan Risks are unpredictable events that can wreak havoc on plan finances and funding levels
All these risks can generate financial statement volatility. New tax regulations and brackets, new mortality tables, normalizing interest rates, etc., require updated analyses to consider their impact on:
- Termination cash costs: Lump sums and SPGAs (annuities)
- Projected plan contributions
- Plan termination and insured de-risking possibilities
- Pension debt refinancing
In the end, plan sponsors, participants and shareholders are served by dealing with their plan(s) in ways that will defang, shrink and remove risks once and for all.
It is time for most plans to take a new look.
The process used by plan sponsors looking to de-risk and/or terminate their defined benefit plans begins with an analysis of their options, in the context of their situation and objectives.
If a decision is made to implement a course of action a well delineated process kicks in with well-defined deliverables and timeframes.
Much of the work we do is helping plan sponsors get a good handle on what a buyout of their plan will cost. This requires a projection of the lump sums that will likely be paid out, as well as the Single Premium Group Annuity (SPGA). If a decision is made to implement a de-risking solution the plan sponsor enters a well-defined process:
- Quote preparation and bid process
- Quoting process/execution – “Quote Day”
- Deposits and initial payments
- Participant communications
Our services, systems, and consultants can help participants and plan sponsors alike. Aimed at improving the Participant’s Experience, RJ’s Participant Services is a combination of services and systems for participants, with the plan sponsor’s support and involvement.
Working with the company’s team, we help examine the options and implement recommendations while reducing potential downsides. Our mission? To help companies make real progress toward the sunsetting/de-risking of their defined benefit pension plans.
If a decision is made to implement a course of action a well delineated process kicks in with well-defined deliverables and timeframes.
Much of the work we do is helping plan sponsors get a good handle on what a buyout of their plan will cost. This requires a projection of the lump sums that will likely be paid out, as well as the Single Premium Group Annuity (SPGA). If a decision is made to implement a de-risking solution the plan sponsor enters a well-defined process:
- Quote preparation and bid process
- Quoting process/execution – “Quote Day”
- Deposits and initial payments
- Participant communications
Our services, systems, and consultants can help participants and plan sponsors alike. Aimed at improving the Participant’s Experience, RJ’s Participant Services is a combination of services and systems for participants, with the plan sponsor’s support and involvement.
Working with the company’s team, we help examine the options and implement recommendations while reducing potential downsides. Our mission? To help companies make real progress toward the sunsetting/de-risking of their defined benefit pension plans.
Raymond James’s PRT Group and CESCrews
The Raymond James Pension Risk Transfer (PRT) Group brings a national presence with highly experienced advisers in your area. CES-CREWS systems and consultants bring what’s needed to complement these advisers and provide proactive results to plan sponsors. |
If you are a Raymond James financial advisor you can find the CESCrews page on RJNet by clicking here.