Defined Benefit
Exit Strategies
LOCKTON RETIREMENT SERVICES
Your defined benefit (DB) pension
C U S TOMI ZE D A NA LYSI S & ST RAT E GY
plan is frozen. Now what? Effective
DB exit strategy requires more than
simply terminating the plan—it involves
A thorough evaluation of your plan is a critical first step. Leveraging extensive knowledge
thorough strategic planning, disciplined
of risk-transfer solutions and powerful monitoring tools, our consultants can provide
execution, and careful monitoring. To
Helping you manage all aspects
all the key information needed to understand your distribution options and map out the
-systematically
distribution phases, including:
achieve
theexit
most
favorable outcome,
of the plan
process
sponsors must:
™Retirement
™ Develop
a distribution
strategy
Plan Strategies
Defined Benefit
Exit Strategies
™™
Annuity purchases
™ ™ Understand terminal funding costs
™™
Lump-sum payouts
DB PLAN TERMINATION: A COMPREHENSIVE APPROACH
™™ Establish and monitor
™Your
™ Establish
a target termination date
defined benefit (DB) pension plan is frozen. Now what? For most sponsors,
your plan termination horizon based on your
distribution strategy
the ultimate objective is to eliminate the plan and its burdensome administrative
™duties
™ Design
a glide funding
path toand
de-risk
as the
and uncertain
accounting
results.
Yet antermination
effective DB exit strategy
requires
more than simply terminating the plan—it involves thorough
horizon
shortens
™the
™ most favorable outcomes
strategic planning, disciplined execution and careful monitoring. To achieve
possible, sponsors must:
Implement and manage a dynamic investment policy statement that enables your
plan to respond rapidly to market changes within a strategic policy framework
™ ™ Monitor terminal funding levels to
• Develop a distribution strategy;
• Design a glide path to de-risk as the termination horizon
• Understand
funding costs;
seizeterminal
opportunities
• Establish a target termination date;
shortens; and
when presented
That’s why our DB Exit Planning Roadmap includes activities and processes that
This chart is shown for illustrative purposes only
CUSTOMIZED ANALYSIS AND STRATEGY
eliminate the ineffectual wait-and-see policy that many plan sponsors adopt and put you
ABC Company Retirement Plan
March 31, 20XX Plan Termination Readiness Report
Joe Smith, Vice President & Consulting Actuary, 860.534.xxxx
Snapshot of the Past Quarter
$
46,750,000
2,500,000
(500,000)
4,250,000
$ 53,000,000
100%
Liabilities (BOQ)
Disbursements
Plan Aging
(Gains)/Losses
Liabilities (EOQ)
$ 55,000,000
(500,000)
550,000
750,000
$ 55,800,000
70%
BOQ = Beginning of Quarter
January / Plan Year
Plan Termination Funded Status
Assets
Contributions
Disbursements
Earnings
Assets (EOQ)
Quarterly Update
90%
80%
60%
3/31320xx
6/30/20xx
9/30/20xx
12/31/20xx
3/31/20xx
EOQ = End of Quarter
March 31, 20xx
30%
60%
10%
Bonds
Cash
Equities
Group annuity
rates remained
fairly level over
the last quarter.
Net investment
return for the
quarter was 1.4%
(not annualized).
March 31, 20xx
Defined
In-Payment
Active
20%
50%
Total Plan Assets:
$53,000,000
30%
Expected time to
reach plan termination
sufficiency
Total Plan Termination
Liabilities: $55,800,000
Change of Position for Termination Deficit/(Surplus) ($ Millions)
Liabilities
$2.80
$8.25
12/31/20xx
The path to plan termination is more certain when it follows a systematic approach.
• Monitor terminal funding levels to seize opportunities
when presented by the financial markets.
by the financial markets
3/31/20xx
These charts are shown for illustrative purposes only.
For Institutional Plan Sponsor Use Only. Not to be distributed to plan participants or the general public.
Contributions
Earnings/
Distributions
5 Years and
6 Months
A thorough evaluation of your plan is a
critical first step. Leveraging Prudential’s
extensive knowledge of risk-transfer
solutions and powerful monitoring tools,
our consultants can guide you through all
phases of the process.
in control of your DB Exit Strategy from beginning to end.
The DB Exit Planning Roadmap
Our thorough approach combined with our Plan
Termination Readiness Report provide all the
key information needed to:
Initiate
• Understand your distribution
options and map
out the distribution phases, including:
- Annuity purchases
- Lump-sum payouts
- Conditional rollovers Exit Planning
- Innovative, secure retirement options
including Prudential IncomeFlex ®
• Establish and monitor your plan termination
horizon based on your distribution strategy
Manage
Freeze
Implementation
Administrative
Outsourcing
Terminate
Plan
Termination
The Right Outcome
• Implement and manage a dynamic investment
policy statement that enables your plan to
respond rapidly to market changes within a
strategic policy framework
Your participants have a critical decision to make: what will they do with their benefit?
We can help you give them the tools to make wise decisions. Lockton can also help
• Recognize the timing requirements for
completing all participant communications
and regulatory filings
your organization enhance your defined contribution plan so that it is a highly attractive
alternative or supplement to the current DB program. Auto-enrollment, auto-increase
For Institutional Plan Sponsor use only. Not to be distributed to plan participants or the general public.
back...)
capabilities, (continued
and ondifferent
matching strategies can build participation and deferral
rates increasing the likelihood of a secure retirement for
your participants.
Securities offered through Lockton Financial Advisors, LLC, a registered broker-dealer and member FINRA, SIPC.
For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569
www.lockton.com