Vested Terminated Buyout & DB Administration Optional Plan Benefits

“The Findley team provided us information with the sophistication of a “big firm” and the personalized “boutique” style service. We were very pleased with all of their services— actuarial, consultant, and call center.”
-HR Director, Nonprofit Health Care System

Background:

A nonprofit health care system provides a traditional defined benefit pension plan.

Challenge:

The system’s goal was to cut costs and dampen volatility in their pension plan due to changes in the healthcare market, reductions in Medicare reimbursements, an erratic stock market, complex government laws on funding and reporting of future pension benefits, increasing PBGC premiums, and competitive trends in compensation and benefits.

Solution:

Findley consultants performed a detailed analysis to outline the financial impact on cash funding requirements, PBGC premiums, and accounting reporting, including special settlement accounting requirements. The analysis outlined the administrative costs, steps in the process, timing, and resources required to administer the buyout—from amending the plan and developing the participant communications, to preparing for a surge in participant phone call volume and processing election forms. To further reduce plan volatility, the size of the plan, and to prepare for eventual plan termination, Findley provided information about the potential total cash to be paid out of the plan as lump sums and typical rates of electing lump sums in this type of offering. All-in-all, the Findley team:

  • Managed the buyout process
  • Performed eligible participant analysis, including missing participant and death
    searches
  • Certified the prior actuary’s accrued benefit calculations
  • Developed system and data preparation for vested accrued benefit calculations, lump sum options, and immediate annuities
  • Personalized participant communication packets
  • Opened an online election portal to enhance the participant experience and increase the take rate
  • Provided call center support to answer buyout packet and eligibility questions
  • Managed distribution processing including review and follow-up of returned
    paperwork for completeness and authorization to the trustee for distributions.

Results:

Over a six-month period, lump sums were offered to 950 vested terminated participants, with more than 500 participants electing the lump sum and just under $13 million paid. During that time, nearly 900 phone calls were handled with an average call time of 4.5 minutes.

Decreasing the number of participants and total liabilities in the plan also lowered the risk exposure for the future lifetime of the plan. With a large portion of the terminated vested group removed from the plan, the remaining participants’ current location identified, and all benefit calculation details collected and ready, when the plan sponsor is ready to terminate the plan, the process will be much easier.

Category: Findley Proof

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