Managing a successful defined benefit plan
Understanding and controlling costs are important, but maybe even more so through challenging years like 2020.
As you may be looking for ways to better manage your costs with the volatility in 2020, our DB specialists share these 5 tips that can help make costs more reasonable.
Active and frozen plans have different needs for targeted funded status. There are also special challenges for hard-frozen plans to keep in mind. We have three steps to help you.
Terminating a defined benefit plan is always a difficult decision to make. But we’re here to help. The 3 most common types of funding strategies we see are:
- Contributing the minimum required amount for an ongoing plan until the year you terminate
- Contributing a level amount until the year you terminate
- Fully funding the plan under ongoing Pension Protection Act (PPA) funding rules
To find out how each type works, the advantages, and disadvantages of each, check out our chart (PDF).
Managing your risk and investments
Market volatility is a given, but huge market swings coupled with lower interest rates in 2020 are a good reason to review your strategy to help take volatility out of your plan.
We all know that there’s no sure-fire way to completely avoid volatility, but there are a few strategies to help better manage it. Learn more about how a liability-driven investment strategy may help.
Two ways to transfer risk out of your plan are by offering lump sum payments or purchasing an annuity. Read about how they work.
It’s important that the risk transfer strategy helps meet your DB plan goals. Read more about the advantages and disadvantages for each.
Two of the most common types of asset allocation strategies are static and dynamic. The appropriate allocation for each pension plan is different because it’s based on your organization’s situation and risk tolerance. Read about how forecasting and modeling is important when picking your strategy.
The goal of a dynamic asset allocation strategy is to link the volatility risk of your plan’s portfolio to its funded status, gradually reducing risk as the plan approaches termination. Here are 6 steps to get started.
Comparing your plan
Help determine if you’re on the right track.
Each defined benefit plan is unique, but there are ways to compare using industry best practices. Take this quiz to see how your plan measures up.
You already know that good plan data can keep your DB plan on track, help you meet compliance requirements and help you make better decisions. Read these best practices for ideas on how to better manage the data.
How to terminate a plan
You have a lot of decisions to make before you can terminate your DB plan, and we can help.
First, do you have a formal termination strategy in place? If the answer is no, we have 3 steps to help you start your strategy (PDF).
The answer depends on your funded status, current interest rates and your asset allocation strategy. Discover what impacts cost the most.