Our team of actuaries has decades of experience in helping Plan Sponsors and their trusted accounting and financial partners create Defined Benefit plans and other post-employment benefits that meet their unique goals and maximize the value of pension benefits to their participants.
We deliver actuarial services in all industries and sectors, including large and small corporations, not-for profits, and public and governmental entities.
Contact us today if you are looking for solid solutions for managing the risks associated with continued sponsorship and upkeep of Defined Benefit Plans.
Our Actuarial Services:
- Plan Design & Consulting
- Defined Benefit Plans
- Post-Employment Benefit Plans
- Prototype & Custom Plan Documents
- Calculation of Benefits
- Annual Actuarial Report & Annual Funding Notice
- Employee Benefit Statements
- ASC FASB 960-20 Accounting Disclosures
- AFTAP Certification
- ASC FASB 715 Reporting
- Non-Discrimination Testing & Compliance Services
- PBGC Forms
- Signature-Ready Government Forms, including IRS Form 5500 Schedule SB
Our Defined Benefit Plans and Other Post-Employment Benefits
This plan defines the promised retirement benefit as a stated benefit that does not hinge on the value of the plan’s investments. The employer solely assumes the investment risks and rewards on plan assets. Learn more.
Frozen Defined Benefit
Also known as a “preserved pension,” a frozen defined benefit plan is a workplace pension in which the employee no longer earns benefits — either because the employer has “frozen” the plan or because the plan was with a former employer. Companies may change their pension plans but cannot take away any benefit that the employee has earned up to the point of the freeze.
My Pension Plan is frozen. Now what? When can I terminate the Plan? How do I get my Plan to a funded status? What can TRA do for me?
- Getting Out of The Mess
- Plan Termination vs. Distressed Termination
- Asset Liability Matching
- Complimentary Funding Review
- Case Study
- To schedule appointment – Contact your dedicated CRM
- Latest Legislation/News/Blogs
- General Motors article
- Pension Funding Relief
- LinkedIn Groups
- Liability Driven Investing
- Pension and Employee Benefits Specialists
TRA has the depth of experience in helping to guide plans to termination. Our goal is to align the plan’s operation with the goals and objectives of the plan sponsor. We can assist with…
- Estimating contributions needed to terminate the plan
- Providing lump sum windows
- Review termination possibilities
- Assist in key business decisions on the future of the Pension Plan
Standard Termination vs. Distress Termination
An employer may terminate a single-employer plan under a standard termination if the plan’s assets equal or exceed its liabilities. If the assets are less than the liabilities, the employer must contribute the amount necessary to fully fund the plan. A standard termination is sometimes referred to as a voluntary termination because the employer has chosen to terminate the plan.
In a standard termination, all accrued benefits under the plan become 100% vested. The plan must purchase annuity contracts for all retirees. If the plan permits the payment of lump sums, active employees may be offered the choice of a lump sum payment or an annuity.
If any assets remain in the plan after a standard termination has been completed, the provisions of the plan control their treatment. In some plans, the excess assets revert to the employer; in other plans, the excess assets must be used to increase participants’ benefits.
An employer may terminate a single-employer plan under a distress termination if the employer demonstrates to the Pension Benefit Guaranty Corporation (PBGC) that:
- the employer is facing liquidation under bankruptcy proceedings,
- the costs of continuing the plan will cause the business to fail, or
- the costs of continuing the plan have become unreasonably burdensome solely because of a decline in the employer’s workforce.
If the PBGC finds that a distress termination is appropriate, the plan’s liabilities are calculated and compared with its assets. Depending on the difference between the two values, the termination may be treated as if it had been a standard termination or as if it had been initiated by the PBGC.
A Distress Termination may result in a reduction of benefits. For example, annual benefits over the PBGC maximum of $56,000 payable beginning at age 65 are not payable after a Distress Termination.
Offering Annuity Contracts to Terminate a Plan
When a pension plan terminates, it must pay out benefits earned by buying annuities or paying lump sums to all its participants. Some pension plans already offer lump-sum payments to their participants. Other plans introduce the lump-sum option once they decide to terminate the pension plan because lump sums are less expensive than buying an annuity. Both active participants and vested terminated participants can be offered the option of a lump-sum payment; however, they must always have the option to receive an annuity.
Despite low interest rates and spreads, this could be a good time to purchase annuities. Insurance carriers are very competitive on this type of business, serving as a natural hedge to the life insurance product line. Insurers have additional considerations when pricing annuities that may cause them to price a case aggressively. Despite low underlying interest rates, pricing for some cases may be very favorable for plan sponsors. How should a plan sponsor make the decision whether to purchase annuities at this time? The answer will vary by company, but the elements in the analysis should be similar.
- Could the cash necessary to terminate the plan be put to better use elsewhere in the business?
- How does the cost of maintaining the plan (PBGC premiums, plan administration, compliance) compare to the cost of terminating it?
- If the assets exist to terminate the plan now, is taking the risk that the plan may not be fully funded later appropriate?
- How will interest rates move in the next few years?
- For plans that pay lump sums, what will be the effect of the full Pension Protection Act phase-in in 2012?
Other Post-Employment Benefits (OPEBs)
Are benefits (other than pensions) that federal, state, and local governments and private companies provide to their retired employees.
Meet Our Lead Actuarial Team:
John has over 30 years of experience providing services to qualified retirement plans.
He has been active in the Government Affairs Committee (GAC) of the American Society of Pension Professionals & Actuaries (ASPPA), which includes an annual meeting with governmental agencies and elected federal officials or staff. He is also President of ASPPA’s College of Pension Actuaries (ACOPA).
As Director of Industry Relations at TRA, John serves as a consultant to Cash Balance and Defined Benefit plans, as well as for post-employment benefits other than pensions.
John obtained his BS degree in Mathematics from the University of North Carolina and an MBA degree from Penn State University.
Lisa has 18 years of experience in retirement plan actuarial administration. In her role as Director of Plan Administration, Defined Benefit Services, Lisa developed TRA’s defined benefit product line and its administrative support structure.
As an Enrolled Actuary, Lisa serves as a consultant for employers sponsoring qualified and non-qualified retirement plans, including cash balance plans. She also consults on post-employment benefits. She is an Associate of the Society of Actuaries and a member of the American Academy of Actuaries and the ASPPA.