Successful Plan Termination Starts with Structured Approach

Funded levels in corporate pension plans have continued to rise in recent years given the surge in interest rates and rebounding equity values. And as a result, PRT sales continue to break records.

Halfway through 2024, market volatility and a potential economic downturn are continuing to push employers toward de-risking their pension plans. According to recent statistics provided by LIMRA, the first quarter of 2024 has generated a record-breaking $14.2 billion in PRTs in the United States. This is 124% higher than the prior year’s results of single-premium buy-out sales. We continue to see positive funding trends in the U.S., providing employers with continued opportunities to de-risk.

With an eye on today’s economic situation, employers who had planned for a plan termination in recent years can take action now to de-risk their plans. Establishing a strategy and structured approach are critical to implementing a successful PRT – whether the plan termination is 1, 5 or 10 years away.

Plot Your Plan Termination Path with COMPASS

The plan termination process requires numerous steps, but there are also actions employers can take to better prepare for a plan termination. Exploring the plan’s investment strategy, understanding the benefits of de-risking and developing a formal contribution policy are key to determining your pension plan’s financial readiness for termination.

COMPASS, USI Consulting Group’s (USICG) proven pension plan termination solution, helps guide employers through a three-step process:

1. Educate – USICG’s actuaries examine your pension plan’s status and adeptly educate you on the available de-risking options.
2. Navigate – USICG’s pension plan termination team helps employers navigate the glidepath, compliance requirements and administrative complexities needed to terminate your plan. All filings and participant notices are executed by our team.
3. Terminate – USICG’s annuity placement consultants guarantee that the safest insurer with the best value, in accordance with DOL IB-95-1, will be procured to administer the benefits of plan participants who do not elect lump sum distributions. With this final step, organizations can successfully terminate their pension plans.

Case Study: Plan Termination Turns Up Earth-Moving Savings

A major hospital in the Midwest hired USICG to execute a pension plan termination for a group of over 10,000 employees and nearly half-billion in assets. After careful funding and liability management, the organization reached a point where their pension plan was sufficiently funded for termination.

USICG brought a total team approach to this project, combining associates from our administrative, actuarial and human capital teams to provide a personalized experience. Following the Compass approach, USICG conducted a search and placed an annuity contract with a qualified insurer in compliance with current regulations saving the client millions of dollars.*