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Defined Benefit (DB) Plan Termination Best Practices - Part Two

Executive Summary

Once you develop a termination strategy for your hard-frozen defined benefit (DB) plan, it is critical to execute that strategy efficiently to terminate the plan as quickly and cost effectively as possible.

Best practices for efficient management of hard-frozen DB plans leading up to and throughout the termination process should focus on:

  • Protection of benefit security for participants and retirees
  • Reduction of plan sponsor financial risk

Our analysis centers on how employers can work effectively with their financial professional and efficiently integrate a plan's actuary and other retirement plan service provider(s) in the termination process. Working with a limited number of service providers can improve coordination and accuracy during termination.

Special emphasis within the process is placed on:

  • Effective execution of a Dynamic Asset Allocation (DAA) strategy
  • Plan sponsor administration of the termination process
  • Final risk transfer

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Investment options are subject to investment risk. Shares or unit values will fluctuate and investments, when redeemed, may be worth more or less than their original cost. This does not apply, however, to the guaranteed portions of group annuity contracts issued by Principal Life that constitute guaranteed benefit policies as defined in ERISA §401(b)(2)(B).

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