Retirement Benefits Strategy Review

Committees often need a structured, facilitated process to meet their goals. A thorough review and analysis can give a team the right perspective.

Background

A religious organization, consisting of a variety of health and human services ministries in several states, provides a competitive benefits package to its lay employees, which includes a traditional defined benefit pension plan and the opportunity to participate in a defined contribution 403(b) plan. Committing to revisiting its retirement plan strategy within a 5-year period following a previous study in which no changes were made, the ministries engaged Findley Davies to assist with a comprehensive review.

Strategy
The objectives of the review included: reevaluate the retirement strategy; evaluate current retirement plans and projected costs and benefits; benchmark benefits with competitive norms; evaluate alternative strategies; and recommend a strategy that aligns with the organization's philosophy and desired objectives. The Plan Sponsor was aware that any potential changes to the retirement strategy would impact each entity and industry differently.
Findley Davies' consultants led an initial meeting focusing on the retirement program philosophy and objectives using Compression Planning, a facilitation technique designed to guide participants to work collaboratively and compress the planning time so better decisions are made faster. The work product was an updated statement of philosophy with defined objectives for the retirement program to guide decisions.
Additional committee discussions facilitated by Findley Davies included understanding the current and projected state of the pension plan, determining the affordability of the current plans over the long-term, discussing acceptable benefit levels and cost strategy, and measuring the competitive position of benefits and expenses compared to peers and the marketplace. Based on these discussions, several alternative strategies were developed to be analyzed for projected cost and benefit implications, including impact and transition issues.
Findley Davies' actuaries worked with the Plan's actuaries to prepare a cost analysis for the pension plan to project costs of the plan under various plan design alternatives. In addition, our retirement consultants prepared several scenarios of enhanced plan design formulas for the defined contribution plan.

Results
Based on the presentation of the analysis prepared by Findley Davies, the committee made several recommendations regarding the segregation of assets to fully fund certain liabilities and implementing an asset allocation that matches the duration of the liabilities, increasing lump sum cash-out minimums to reduce the overall size of the pension plan, and allowing locations to implement different plans with different employer contribution requirements.
The ministries have finalized the retirement plan structure and developed a strategy to mitigate the impact of change. Communication challenges were identified within a decentralized organization. Findley Davies change management consultants prepared a strategy to help employees understand and accept the changes, as well as appreciate the competitive benefit package. The strategy included support for each ministry at a local level, and personalized communications for each employee.

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