Executing a Lump Sum Window · Inclusion/exclusion of those over NRD/MRD or QDROS Under $5k –...

Benefits in Focus WEBINAR series

Executing a Lump Sum Window

Presented By:

Jaime Packer, ASA, EA, MAAA Associate Vice President & Actuary

Diane Padernacht Assistant Vice President & Actuarial Manager


©2016 USI Insurance Services. All rights reserved. 2116.S0422.9935

For Plan Sponsor Use Only. Institutional communication, not to be shared with participants or the general public

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WHY?

De-risking Tool

Looming new mortality tables

Easier to take care of TV population now rather than later

Plan size reduction – under 100 lives = no audit

Potential PBGC Savings




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WHY? Scheduled and Historical PBGC Premium Increases

Source: PBGC

Variable-rate is subject to further indexing beginning in 2017.

Both flat-rate and variable rate premium are subject to further indexing beyond 2019.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

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$10

$20

$30

$40

$50

$60

$70

$80

$90

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Plan Year

Flat-Rate Premium Variable-Rate Premium




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HOW?

Consult (and then consult some more)

ERISA plan - Is AFTAP over 80%?

Concern about settlement recognition?

Any obstacles?

Collectively bargained group of participants

Consider projection studies to illustrate impact

Goal = NO SURPRISES




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HOW? - Example

Distribution Date: September 1, 2016 Age at Distribution Date: 40 Monthly Vested Accrued Benefit payable at Normal Retirement Date: $400 Estimated Lump Sum at Distribution Date: $15,565

Based on November 2015 segment rates (1.76%, 4.15%, 5.13%)




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HOW? – Example (Continued)

Impact on PBGC Premium

Estimated PBGC Liability at Distribution Date: $15,698

Based on March 2016 PBGC rates (1.71%, 3.98%, 5.03%)

Save at least $64/year in flat rate premium

Variable rate premium stays flat

Impact on Funding Liability

Estimated Funding Valuation Liability at Distribution Date: $9,410

Based on 2016 HATFA rates (4.43%, 5.91%, 6.65%)

Unfunded liability increases approximately $6,200

MRC increases approximately $1,000/year for 7 years

Impact on Accounting Liability

Possibly a settlement gain, depending on rates

Estimated Lump Sum: $15,565




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HOW? – Other Things To Consider

Entire population versus subset

Immediate annuity requirement

Inclusion/exclusion of those over NRD/MRD or QDROS

Under $5k – auto-rollover? (only if valid address)

Lump sum rates to be used

Are accrued benefits “final quality”?

Interest letter

Outsourcing services

Financial planning services




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When?

Plan Sponsor goals?

6 months on average

Timeline – make one and stick to it




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Implementing a Window

Consider scheduling check-in calls throughout the process

Board Resolution & Amendment

Ensure all appropriate components are addressed – no ambiguity

Who is involved?

How long is the window?

Have appropriate parties been notified? (e.g. trustee)

Address research

Pre-window mailing

Obtain and review data for completeness




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Implementing a Window (Continued)

Election Forms Review contents

Do you want to include your own cover letter?

Addresses Check for out of country addresses




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Window Election Period

If USICG Outsourcing services are obtained for window, weekly status update (i.e. IGO/NIGO report) are sent

If not, periodic actuary/client check-in is encouraged

Consider reminder letter mid-way through period

Participant meetings

Send acknowledgement letters to participants who return forms




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Closing the Window

Deadline date – agree in advance about stragglers

Cash load file




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Post Window

Send letters to participants who did not respond

Prepare actual impact analysis

Check for settlement accounting

Report on PBGC filing




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Questions

For more information:

Reach out to your USICG representative or

E-mail [email protected]

mailto:[email protected]




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Thank You

Please join us for our next Benefits in Focus Webcast!

Executing a Lump Sum Window · Inclusion/exclusion of those over NRD/MRD or QDROS Under $5k –...

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