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Retirement Strategies for a Changing Workforce

In recent years, an increasing number of employers
have implemented defined contribution plans to either
supplement or replace defined benefit pensions. 
Others have turned to hybrid solutions (e.g., cash balance,
pension equity) to mimic DC features in a DB environment.

Assessment – Regardless of what type of plan you have,
your organization spends a lot on retirement benefits.
But changes in regulations, financial markets,
and employee priorities can strongly affect the
appropriateness and "value" of your plan.  For this
reason, it's important to have an objective evaluation
of how effectively your retirement benefit dollars are
being spent.

Management – Although retirement payouts are far in the future, plans require a lot of attention in the here and now.  An independent review can ensure that you're using the most effective approach and design, DB assumptions and methods, and DC products.

Transition – In many cases, retirement plans no longer serve the purpose for which they
were originally designed.  We've found that employers, for the same dollars – or even less – can implement plans with greater impact, and more value in recruitment and retention.  Our experience includes designing new DB pensions for employers with multiple unions, as well as
DC plans to transition away from defined benefits.  (We led the third-largest DB-to-DC conversion in U.S. history, and a "Reverse Spin-off Termination" that generated a landmark IRS ruling.)

Cash Balance and Pension Equity Plans – Starting about 20 years ago, many employers turned to so-called hybrid plans in an attempt to get DC features in a DB environment.  In many instances, though, these plans were used to reduce benefits and led to class-action law suits claiming, among other things, age discrimination.  The most well-known of these is the series of rulings against IBM’s plan, a verdict recently reversed by the Illinois Seventh Circuit Court of Appeals.  Still, other cases, such as those brought against PNC (Third Circuit) and Southern California Edison (Ninth), have yet to be decided.  For several reasons, it’s possible that rulings in these cases may not concur with those of the Seventh Circuit Court.

Under the Pension Protection Act (PPA), hybrid plans that go into effect after June 28, 2005 are protected if designed consistent with PPA provisions.  But the same protections are not extended to conversions made before this date.  The status of these existing plans, and the benefits accrued by participants, are subject to interpretation in court – and therefore still vulnerable.

Given the “safe harbor” for post-June 28, 2005 conversions, many professionals tout hybrid plans as the best solution to PPA-created funding pressures.  Clearly, hybrids make sense in certain business situations, such as the original IBM case, where the employer, in financial difficulties, needed a palatable way to reduce pension accruals.  But, in most instances, hybrids offer employers the “worst of both worlds” – the complicated, and costly, administrative burdens of DB, without the upside potential of DC. Click here for more information on the implications for hybrid plans.

Whatever your circumstances, you’ll find that Strategic Planning Associates has the resources to address your needs.  We can transition your pension to a hybrid plan, if that’s best for your business situation, or can offer you alternatives that are even more effective.  And, if you converted to a hybrid plan before June 29, 2005, we’re particularly valuable – the only firm in the industry with a suite of "exit" strategies to secure, and even enhance, your benefits, while substantially reducing your vulnerability and risk.

Strategic Planning Associates can help you develop the right retirement strategy – for both
you and your people.  Best of all, through our proprietary approach, you'll involve and engage your leaders and employees throughout the process, ensuring you can implement changes with widespread support – and achieve the results you need.

 
To learn more about how we can help your organization with its retirement needs, contact us at info@strategicplanningassociates.com