The Perfect Storm Facing Pension Plan Sponsors
Frozen pension plans face recurring costs and perpetual exposures in the form of rapidly increasing Pension Benefit Guarantee Corp (PBGC) premiums, on-going administrative and money management fees, and updated mortality tables incorporating longer participant life expectancies. With inherently precarious pension liabilities exposed to pervasive risks from increasing longevity, investment performance, and interest rate fluctuations, plan funding status can deteriorate abruptly. Plan sponsors face an increasingly asymmetric risk and reward profile; companies retaining risk assets receive diminishing economic benefits as excess funds can’t be used for other, more productive, business purposes . . . . while downside risks grow.
Responsibly Exiting the Pension Business
Companies concerned with the risks entailed in their pension plans can transfer some-most-all of their obligations either by purchasing an annuity from a highly-rated insurer to cover future payments to a group of retirees, or by offering lump-sum buyouts to participants. Many are considering using existing resources and/or borrowing capacity to transfer pension risk while borrowing costs remain reasonable. These fiduciaries increasingly reject ‘Hope’ as a strategy, believe the cost of lump sum buyouts will increase with time, and realize that lower income tax rates increase the after-tax cost of pension contributions.
How We Help
My team helps transfer pension liabilities and their potential to escalate away from plan sponsors and we do so in the most efficient manner possible. We have the experience, knowledge and partnerships in place to deliver solutions capable of reducing both cost and risk, thereby benefitting pension plans and their Trustees, sponsoring companies, and people.
We also illuminate a competent path to restore lost pension benefits for select key contributors. We design and administer non-qualified defined contribution plans, among other effective arrangements.