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1、After the StormPlan Redesign 101Washington, D.C.Tonya B. Manning, FSAVice PresidentAon Consulting Donald J. Segal, FSASenior Vice PresidentThe Segal CompanyAfter the Storm1What Will Be Discussed:Reasons for Sponsoring a Defined Benefit Plan Employer/Employee Factors to Consider in RedesignDesign Alt
2、ernativesTransition IssuesCommunicationMeasurement2First.3A Flash Backto the 70s4Fashion5TV6Music7Movies8Comedy9RetirementDefined Benefit Plans10Why Were DB Plans Popular in the 70s?Few rules regarding DB plansProfit sharing plans not yet caught fireNo 401(k)Stock market relatively quietFixed income
3、 investments popularRiskERISA11Why Employers Today Choose to Sponsor a Retirement ProgramCompetition for personnelIncreasing “popularity” of DC plansEmployee demandPaternalismFavorable tax treatmentDB plan can serve as a tool for HR (ERWs)12Why Plan Sponsors Are Looking to Redesign Their ProgramsDB
4、plan woes:Cash funding requirementsEffect on income statement and balance sheetVolatility13Why Plan Sponsors Are Looking to Redesign Their ProgramsHistorical Expense for Pension Plan14Why Plan Sponsors Are Looking to Redesign Their ProgramsPerceived lack of appreciation by employeesPressure to grow
5、share holder valueCompanys short term vs. long term outlookTrendy15Why Plan Sponsors Are Looking to Redesign Their ProgramsDecline in DC equity balancesEmployees are not saving (or are saving less)Employees/recruits are agingNeed to phase out older employees vs.Need to phase in older employeesEmploy
6、ees more mobile / less loyal16Factors to Consider in the Redesign ProcessFinance perspectiveCash requirementEffect on financial statementsAdministrative expensesVolatilityRiskCost objectivesMoreCost neutralSavingsAffordability17Factors to Consider in the Redesign ProcessHR perspectiveGoals of progra
7、mHow to use your 401(k) plan as a true employee motivation deviceBy Suzanne Thompson, ChFC Employee moraleCompetitorsAttraction / RetentionFuture (desired) structure of workforce18Factors to Consider in the Redesign ProcessPaternalismEmployees savings rate (current and potential)Adequacy of programW
8、ho deserves full retirement benefits19Factors to Consider in the Redesign ProcessOrphanismAdministration pressing toward personal accountability with proposed savings accountsIndividual Social Security accounts again being discussed20Factors to Consider in the Redesign ProcessDemographicsAge of work
9、force populationAverage years of service (actual and desired)Number of employees near retirementIncreased longevityInvestment savvy of employeesCompensation level of employeesLow-paid less likely to save?High-paid need supplemental benefit?21Factors to Consider in the Redesign ProcessTimingHealth of
10、 the companyHealth of economy/job marketSimultaneous benefit improvements / cutbacksAny Co. Stock Price22Factors to Consider in the Redesign ProcessQuestions Regarding Social SecurityConsider it in adequacy assessment? (Will it survive?)What will it be?Should benefits be integrated?23Design Alternat
11、ivesNo ProgramDB onlyFinal Average PayCurrent Pay Unit Accrual (career average)Hybrid plan (cash balance, PEP, etc.)Advantages of each designRegulatory uncertainty24Design AlternativesDC OnlyTargetProfit sharing contributionSet percentageDiscretionaryMoney purchase plan (why?)25Design AlternativesDC
12、 Only (continued)Savings without matchSavings and matchFlat match formulaMatch varies with age and/or serviceMatch varies with plan sponsors performanceSafe harbor designAdvantages and disadvantages26Design AlternativesBoth DB and DC Vary type of plan offered based on type of jobOffer both types to
13、all employeesDB plan is secondary (used as a safety-net)DC plan is secondary (to supplement DB plan)27Transition Issues - Phasing Out DB PlanHow to do itClose participationFreeze accrualAll participants / partial participantsService onlyTerminateChoice 28Transition Issues - Phasing Out DB PlanPossib
14、le double up on costGrandfatheringClosing participationAdministrationMultiple plansComplex transitionsNondiscrimination testingRemove highly compensatedAdd back nonhighly compensatedDBDC29Transition Issues - Phasing Out DB PlanGrandfatherCostHow to do it (continue in DB or get the better of the two)
15、Legal issuesLawsuit potentialHaves and Have Nots dichotomy of workforceEncouraging savings (especially if not previously required)30Transition Issues - Phasing Out DB PlanCOMMUNICATIONCrucialAdditional items now requiredMore changes means greater need for EFFECTIVE communicationChoice is DEPENDENT o
16、n effectiveness of communicationPersonalized communication is very important31Transition Issues - Phasing Out DB PlanCOMMUNICATIONMultiple approaches are bestPaperIntranet / InternetMeetingsModelersOne-on-one32MeasurementLong term vs. short termAccountingDB vs. DC accountingCash balance accounting issuesFundingChange funding method?Should that be part of cost effect?Workforce MoraleTurnover33Retirement Programs After the Storm34Retirement Programs After the Redesign35
