Defined Benefit: Plan Services
Overview
A Defined Benefit (DB) plan provides a solid foundation for retirement, rounding out a total retirement program. It can be used on its own or with 401(k), 403(b), profit sharing, money purchase and nonqualified plans.
Delivering a broad range of services
Your retirement program has to reflect the unique needs of your organization and employee base, a competitive environment and cost constraints. We take a consultative approach, carefully considering a wide range of factors to help design a retirement program for you. This approach integrates your retirement program with services that help reduce your administrative work. Services include:
Consulting Services – expertise drives solutions
By providing proactive support and a broad array of resources, we seek to develop strong working relationships that foster trust and confidence – resulting in a willingness to explore new approaches, adapt to evolving needs, and take action to implement time-tested processes and practices. Our consulting services give you access to the breadth and depth of knowledge that The Principal has accumulated in working with a broad range of retirement plans, representing expertise that stretches across the full scope of our capabilities
If your third-party administrator already provides these services, we can tailor your retirement plan services to meet the needs you do have.
Actuarial Consulting Services
At The Principal, we perform all the in-depth consulting and actuarial services that major actuarial consulting firms do. Our plan consulting team includes 25 independent enrolled actuaries with an average of more than 21 years experience, as well as trust specialists, plan document specialists and other specialists. Our actuaries are known for prompt services, open communication and business sense. They work independently for an objective perspective, adhere to well-established peer review program and have no sales or revenue targets.
Challenges/Solutions for Plan Sponsors
Plan sponsors face many issues, including the Pension Protection Act (PPA), accounting changes and volatile market conditions. We can offer various solutions, including forecasting, plan design, and an asset-liability modeling (ALM) study.
- Forecasting and projections help determine the likelihood of future costs and potential liabilities, helping you measure the affordability of your DB plan and budget for both the short- and long-term. Our consulting actuaries use sophisticated tools to measure the potential financial outcomes, including projected contribution amounts and their volatility from year to year, and your projected accounting expenses.
- We help you determine which plan design options to investigate by asking questions about your particular situation. Plan design studies can help analyze difference options, including a change in plan provisions, soft plan freeze and hard plan freeze.
- Through a customized asset-liability modeling study, we can work with you to help you measure the risk in your DB plan, manage and monitor the risk over time.
Develop a Termination Strategy
We've developed a four-step process to help plan sponsors and their financial professionals identify a strategy to terminate the DB plan in a way that fits their organization, timeline and budget.
- Evaluate costs to terminate: To help the plan sponsor budget for short- and long-term plan costs, and determine a timeframe.
- Evaluate funding strategies: To help the plan sponsor select the desired option.
- Evaluate asset allocation strategies: To identify risk, including the advantages of changing the asset allocation strategy over time.
- Monitor progress: To help ensure the termination is on track.
Plan Sponsor Services – An extension of your plan resources
Consolidating Plan Services
If you are working with multiple service providers – such as a separate actuary, investment provider, administrative services provide and plan recordkeeper – you're likely managing additional work and missing out on efficiencies. It takes extra time and effort to coordinate multiple service providers and can increase your fiduciary risk and the chance for errors, delays and unnecessary expenses.
With a single point of contact for administrative services, investment options, data management, employee education and more, you can streamline these components of your DB plan, saving time and resources. Benefits can include:
- Potential for more timely services due to less back and forth with providers.
- Greater likelihood of data accuracy because of fewer handoffs and a single data source, and potentially lower fiduciary risk due to the greater accuracy.
- Increased participant appreciation and awareness with access to a dedicated website, call center and planning tools.
- Potential hard-cost savings because you no longer pay for services separately, including profit margins and overhead from multiple providers.
- Soft-cost savings from the time and resources you no longer spend managing separate providers.
Participant Services
Defined Benefit plans can be one of the most valuable benefits you offer. However, many participants may not fully understand or appreciate the benefit.
Increase awareness and appreciation
Together with your financial professional, we offer a compelling array of education solutions, from statements to targeted campaigns, designed to increase participants' awareness and appreciation of your defined benefit plan.
Our easy-to-understand education tools and materials:
- Provide an introduction to the basics of a defined plan and how it differs from other plans.
- Reinforce the idea that defined benefit plans are a valuable benefit paid for solely by the employer. Most defined benefit plans require no participant contribution.
- Show how defined benefit plans can provide a solid foundation of financial security for eligible employees by providing an anticipated retirement benefit.
- Explain how a defined benefit plan fits into participants' overall strategy for retirement security by showing how the benefit works with other sources of income such as Social Security, personal savings and other employer-sponsored plans.
- Emphasize the ease of the benefit – little action is required on the part of the participant to manage or monitor the plan.
Comprehensive education resources
We make it easy for your participants to understand the value of your defined benefit program by offering comprehensive resources. These tools include:
- Our award-winning benefit statements,[1] which are also available online, feature earned monthly benefits, vesting percentage and estimated monthly benefits, as well as information about the plan and its assumptions.
- Our secure website at principal.com is a very important resource. Participants can access personalized information as well as historical data such as compensation history, hours history, service data and more. The Retirement Planning Center link contains educational tools and resources, including our Estimated Benefit Calculator. Unique in the industry, this tool uses participants' personal data, rather than industry averages, to model retirement plan benefits under a variety of scenarios.
- We provide World Class Service[2] through our client contact center. Participants can call and speak directly to multilingual retirement specialists who can answer detailed questions. These retirement specialists are registered with the Financial Industry Regulatory Authority (FINRA) with a Series 6.
Investment Services
Our investment services are backed by over 65 years of financial expertise, allowing us to help you find what you need to create a professionally-managed, diversified portfolio for your defined benefit retirement plan.
Providing you choice
- Select from an attractive mix of more than 70 Sub-Advised Investment Options, which are:
- Managed by more than 30 investment managers (selected through our due diligence process) from the industry's leading investment firms
- Designed to be appropriate for retirement savings under employer-sponsored plans and cover a wide range of asset classes
- Access to more than 2,300 mutual funds from more than 145 fund families is available through our extensive Mutual Fund Network investment options. In addition, access to more than 20,000 mutual funds from third-party fund companies through the National Securities Clearing Corporation.
Helping you meet your fiduciary needs
Our analysts use sophisticated analytics to monitor the available investment options along with independent third party metrics and market indices. Thus providing a consistent process to evaluate and monitor the investment options on our investment platform.
- Disciplined framework
Our rigorous and disciplined due diligence process is one of the most important ways we can help you meet your fiduciary responsibilities. The process applies to: - Sub-Advised Investment Options - quantitative and qualitative monitoring allows the member companies of The Principal to have fiduciary oversight and the ability to manage the investment manager selection process to identify, hire and retain top investment managers on these investment options
- Mutual Fund Network investment options - quantitative data is made available to help you monitor and manage the investment manager selection process
- Financial coverage[3],[4]
Let the investment fiduciary support of The Principal Warranty help you feel more confident and in control when managing retirement plans. You have a choice to receive a level of indemnification protection against three key areas of fiduciary concern: - The Broad Range Requirement under ERISA 404(c)
- Qualified Default Investment Alternatives (QDIAs)
- Prudent monitoring
- Investment advisory services
You will also have access to investment advisory services through Principal Financial Advisors, Inc.,[5],[6],[7] a registered investment adviser and member company of the Principal Financial Group. Principal Financial Advisors: - Provide experienced investment personnel, robust analytical tools, comprehensive reporting and ongoing support
- Can assist you in designing and implementing customized asset allocation strategies
- Can share fiduciary responsibility for asset allocation decisions[8]
- [1]
- 2010 DALBAR Seal of Excellence
- [2]
- c wenger group, Second quarter 2010
- [3]
- This is for informational purposes only and does not affect those terms and provisions defined in The Principal Warranty Investment Fiduciary Support and Service Warranty documents. For comprehensive warranty details on the levels of coverage we offer, see The Principal Warranty document(s) available at principal.com.
- [4]
- The Principal Warranty is provided by Principal Life Insurance Company.
- [5]
- Principal Financial Advisors, Inc. is a registered investment adviser and member company of the Principal Financial Group®.
- [6]
- Asset Allocation strategies are developed using Separate Accounts available through a group annuity contract of Principal Life Insurance Company.
- [7]
- Insurance products, plan administrative services, and separate accounts which are available through a group annuity contract, are provided by Principal Life Insurance Company, a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392. Certain Separate Accounts may not be available in all states or U.S. Commonwealths.
- [8]
- The plan sponsor remains the "named fiduciary" of the plan, but you select Principal Financial Advisors, Inc. as your plan's investment advisor.
Sub-Advised Investment Options include Separate Accounts available through a group annuity contract with Principal Life Insurance Company and mutual funds available through the Principal Funds, Inc. Separate Accounts are made available through a group annuity contract with the Principal Life Insurance Company, Des Moines, IA 50392. Securities are offered through Princor Financial Services Corporation, 800.547.7754, member SIPC and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor®. Principal Funds Distributor, Princor, and Principal Life are members of the Principal Financial Group, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.
Before investing in mutual funds, investors should carefully consider the investment objectives, risks, charges and expenses of the funds. This and other information is contained in the free prospectus, which can be obtained by calling 800.547.7754 or from your local representative. Please read the prospectus carefully before investing.
Before directing retirement funds to a separate account, participants should carefully consider the investment objectives, risks, charges and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information contact your plan sponsor, financial professional or call us at 1.800.547.7754.
The investment fiduciary support portion of The Principal Warranty applies to covered plan investment options that are part of an active retirement plan recordkept by Principal Life. 404(c) and QDIA coverage applies only to plans subject to ERISA. In general, nonqualified plans are not regulated under ERISA. Different investment products and financing options apply to nonqualified plans. No member company of The Principal assumes any additional fiduciary responsibility for any nonqualified deferred compensation plan. For purpose of nonqualified plans and plans not subject to ERISA, Principal Life indemnifies the Plan Representative who signs the Service Agreement.
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).
Equity investment options involve greater risk, including heightened volatility, than fixed-income investment options.
Principal Life is not a fiduciary in the broader context of operating any plan. The selection of any investment option on behalf of a plan is the fiduciary responsibility of the appropriate plan fiduciary, which is not Principal Life, nor any affiliate. Principal Life does not guarantee performance of any investment option (other than the portion of a group annuity contract that constitutes a guaranteed benefit policy as described in ERISA §401(b)(2)). Principal Life does not guarantee that any investment option will meet the criteria of any particular plan's investment policy statement or be suitable for use by any specific plan. The limited fiduciary tasks undertaken by Principal Life do not eliminate the responsibilities of the relevant plan fiduciaries for the prudent selection and monitoring of any investment option for a retirement plan. Please consult with your counsel or other advisor.
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal Funds, Inc., is distributed by Principal Funds Distributor, Inc. Securities are offered through Princor Financial Services Corporation, 800.547.7754, member SIPC and/or independent broker/dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Principal Funds Distributor, Princor and Principal Life are members of the Principal Financial Group®, Des Moines, IA 50392. Separate Accounts are made available through a group annuity contract with Principal Life, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.
