Pension Plan De-Risking 101: It’s Time to De-Risk Your Pension Plan Benefits
A recent paper published by the Society of Actuaries states that “Since the 2007-2008 recession, de-risking has become the most discussed topic in corporate pension risk management.”
The economic environment over the last decade along with new mortality tables and rising PBGC premiums have put into focus just how out of control pension plan costs can get. On the one hand, the equity markets have been a boon for sponsors for the last seven years, but at the same time interest rates used to value pension liabilities have decreased causing liabilities to spike. In 2014, the Society of Actuaries released updated mortality tables that highlight that pensioners are living longer. Finally, with several rounds of legislation affecting pension plan sponsors over the last five years we have seen dramatic increases in the cost of PBGC premiums. With all of these developments many plan sponsors are left wondering what they can do to manage what is seemingly unmanageable.
Risk management is the process by plan sponsors quantify, minimize, or eliminate the potential risks that the company’s pension plan poses to its organization. These risks commonly include volatility on balance sheet liabilities and income statement expenses as well as large swings in cash contribution requirements.
De-risking has evolved into two main discussion points over the last several years: risk management and risk transfer. Risk management generally starts with plan design features and then moves onto asset solutions such as traditional liability driven investment strategies or up-and-coming structured equity arrangements. Risk transfer, on the other hand, completely eliminates a plan sponsor’s pension obligation. The most common forms of risk transfer available to sponsors have come in the form of lump sum cashout windows for vested terminated participants and annuity purchases for subsets of the participant population.
In this two-hour LIVE webcast, a panel of distinguished professionals and thought leaders will help you understand the important aspects of this significant topic. They will provide an in-depth discussion of Pension Plan De-Risking. Speakers will discuss the possible challenges, implications as well as critical issues surrounding this topic. They will also offer best practices in ensuring compliance with applicable laws.
Key issues that will be covered in this course are:
- Pension Plan De-risking – An Overview
- Pension Plan Liabilities and Benefit Obligations
- Risk Management Techniques:
- Plan Design
- Liability Driven Investing
- Structure Equity
- Risk Transfer Opportunities:
- Lump Sum Cashout Windows
- Annuity Purchases
- Legal Challenges and Risks
- Pension Plan Environment Background
- Interest rates
- Market volatility
- Increasing life expectancies
- Funded status volatility
- Administrative costs
- Investment Risk Management Strategies
- Liability driven investment (LDI)/interest rate hedging
- How LDI reduces pension plan risk
- Structured equity – shaping equity returns for optimal outcomes
Millennium Trust Company
- Proper Handling of Participants
- Operational Readiness
- Accurate and Complete Participant Data
- Effective Communication Campaign Strategies
- Annuities or Lump Sums
- Automatic Rollovers for Missing and Non-Responsive Participants
Mayer Brown LLP
- Defined Benefit (DB) Plan Background
- Basic Pension De-Risking Options
- ERISA Fiduciary Standards
- A De-Risking Transaction - Viewed as an M&A Deal
- Bidding and Selection Process
- Key Deal Documents
- The Group Annuity Contract
- The Definitive Purchase Agreement
- Separate Accounts for Pension Buy-Out Annuities
- Exposure of Participants to the Credit Risk of the Insurer
- State Guaranty Fund Protections
- State Regulatory Filings
- Major De-Risking Transactions to Date
- Highlights of 5th Circuit Decision in Lee v. Verizon Communications, Inc. (August 17, 2015)
- NCOIL Best Practices Resolution for Pension De-Risking (November 2014)
- Other Recent Developments
White Oak Advisors
- Mitigating the Risk in Your Defined Benefit Plan
- Understanding Your DB Concerns
- Key Issues in Pension Management
- Funded Status and Materiality Play Dominant Roles in a Dynamic Asset Allocation Framework
- Observations About Your Plan
- Portfolio Solutions
- Determining Appropriate Asset Allocation: Our Model
- Case Study: Integrated Risk Management
- Portfolio Optimization / Alternative Policy Portfolios
- Return Generating Investments
- Customized, Long-Term Allocation Strategy
- Ongoing Updates to Inform Tactical Decisions
- Monitoring Your Strategy
Who Should Attend:
- Benefits Managers
- Compensation and Benefits Consultants
- Employment Law Attorneys
- Retirement Plan Financial Professionals
- Employee Benefits Attorneys
- Retirement Plan Sponsors
Michael is a Director and Consulting Actuary in the Denver, CO office of P-Solve. Michael has worked with a number of clients across various industries on all aspects of their retirement programs. He is an experienced actuary and has consulted on the financial risk management of defined benefit plans as well as retiree medical plans. He has also consulted on defined contribution design issues along with nonqualified retirement and deferred compensation plans. Michael has presented at industry and professional association conferences on the topics of plan administration and pension risk management and has had several articles published in major trade magazines. Michael is a Fellow of the Society of Actuaries, an Enrolled Actuary and a Fellow of the Conference of Consulting Actuaries. Michael graduated magna cum laude from Brigham Young University with a degree in Statistics.
Michael is a Director and Consulting Actuary in the Denver, CO office of P-Solve. Michael has worked with a number …
Terry Dunne is the Managing Director of the Rollover Solutions Group at Millennium Trust Company with responsibility for the development of Millennium’s comprehensive automatic rollover product.
With over 35 years sales and marketing experience in the financial services industry, Terry has been published by several organizations including the American Society of Pension Professionals and Actuaries (ASPPA), Sage’s Compensation & Benefits Review, and International Foundation for Employee Benefits Plans on a number of retirement plan topics including plan terminations, locating missing plan participants, un-cashed checks, and de-risking of DB Plans.
Terry holds a bachelor's degree in economics from the University of Notre Dame, an M.B.A. in accounting and finance from the University of Chicago, and a master's degree in taxation from DePaul University. He has previously held the Certified Public Accountant®, Certified Financial Planner® and Personal Financial Specialist® designations.
Terry Dunne is the Managing Director of the Rollover Solutions Group at Millennium Trust Company with responsibility for the development …
Larry Hamilton is a partner in Mayer Brown’s Corporate and Securities practice and Insurance Industry Group. He focuses his practice on mergers, acquisitions, corporate governance and regulatory compliance of insurance companies. In addition, he regularly advises clients in connection with reserve financings, insurance-linked securities, pension de-risking transactions and public and private offerings of equity, fixed-income and hybrid securities. Mr. Hamilton has a 50-state insurance regulatory practice and also speaks and writes regularly in the field of insurance regulation. Mr. Hamilton graduated, with honors, from the University of Chicago Law School in 1996 and was admitted to the Illinois Bar in 1996. He received an A.B. summa cum laude in History from Harvard College in 1977.
Larry Hamilton is a partner in Mayer Brown’s Corporate and Securities practice and Insurance Industry Group. He focuses his practice …
Rocke Blair is Practice Leader and Lead Consultant for Healthcare clients in the Midwest for White Oak Advisors. Prior to joining White Oak Advisors, Rocke served as Regional Vice President for Transamerica Retirement Solutions/Diversified for 20 years and has been in the employee benefits industry over 25 years. He brings experience of the vendor marketplace and industry background working with healthcare organizations, manufacturing, financial institutions and non-profit organizations.
Rocke has worked with clients who have complex retirement plan structures including defined contribution plan (profit sharing, 401(k), 403(b), 457) and defined benefit plans. His specialty is the consolidation of multiple plans onto a single recordkeeping platform for optimizing plan sponsor resources, plan efficiencies and improved reporting while improving the retirement outcome for plan participants and effectiveness for plan sponsors.
He is a member of the American Society of Pension Professionals & Actuaries, founding member of the Cincinnati Retirement Professionals Association and frequent speaker on, “Mitigating the emerging liabilities from an aging workforce” at regional plan sponsor conferences and webinars.
Rocke has the Certified Employee Benefits designation from the International Foundation of Employee Benefits and the Wharton School; an MBA from Capital University in Columbus, OH; a B.A. in Chemistry and a degree in Business from Indiana University as well as the Certified Behavioral Finance Analyst designation from the Allianz Global Institute of Behavioral Finance. He lives in Cincinnati with his wife and two children where he enjoys the outdoors; cycling, running & golf; and continuing education.
Rocke Blair is Practice Leader and Lead Consultant for Healthcare clients in the Midwest for White Oak Advisors. Prior to …
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P-Solve is a dynamic, growing actuarial and investment consulting firm. Our core business is strategic retirement plan consulting for all types of qualified and non-qualified benefit plans. Our clients are located in the US and the UK and have included both for-profit and not-for-profit organizations. Our clients have come to trust and value our independent advice. P-Solve is owned by the UK based River and Mercantile Group. For more information, please visit our website at https://www.psolve.us.
About Millennium Trust Company
Millennium Trust Company is a leading Automatic Rollover IRA provider for retirement plans. Our solutions are tailored for open, terminated and abandoned plans and help plan sponsors comply with DOL Safe Harbor requirements for automatic rollovers. We work with a wide range of professionals and offer a full complement of solutions to address such plan related issues as: missing participants, uncashed checks, benefit distributions and notification services. For more information, please visit our web site at www.mtrustcompany.com.
About Mayer Brown LLP
Mayer Brown is a leading global law firm more than 1,500 lawyers in offices located across the Americas, Asia and Europe. Mayer Brown has more than 100 lawyers in our Global Insurance Industry Group representing nearly 400 insurers and insurance-related entities with specific insurance and reinsurance transactional, regulatory and dispute resolution issues.
In order to better serve clients in all global markets, Mayer Brown has focused its practice on the representation of insurers, reinsurers, intermediaries, banks and investors. The Insurance Industry Group focuses on the broader life, property and casualty, and offshore insurance fields, handling a range of matters that include strategic mergers and acquisitions, capital raising and insurance regulation, and sophisticated insurance structured finance work (such as sidecars and catastrophe bonds). The group’s mission is to deliver comprehensive interdisciplinary insurance and reinsurance experience through a seamless team-oriented approach that draws upon Mayer Brown’s enormous depth in all related areas of the law.
About White Oak Advisors
White Oak Advisors was founded by tenured professionals in the fall of 2004 with the purpose of providing “top shelf” consulting and advisory services to Employers and Plan Sponsors with various types of Defined Contribution and Defined Benefit retirement plans. White Oak is a boutique retirement plan consulting and advisory services firm based in the Midwest who specializes in plan design, fiduciary committee leadership services, plan investment consulting, compliance and regulatory support services as well as provider search services.