Capabilities
Leverage Pension CFO’s skillset to manage the cost, cashflow and risk of your defined benefit pension plan
Restore proper balance between risk and return
Get strategic recommendations specific to your financial situation.
When CFOs can simplify complex DB plan management, their pension plans become more predictable and less stressful to manage. With more predictability, it becomes less of a burdensome liability to the overall financial health of the organization.
Simplify the complex to regain control
Simplify the management of your defined benefit plan by identifying and focusing on the most impactful ‘levers.’
It certainly takes significant time, energy, and resources to prepare your company for year-end financials. However, by working with Pension CFO, you will have a partner that strives to make sure that your defined benefit plan has a stable, secure investment strategy that will help you avoid creating additional stress, conflicts, and uncertainty.
Financial knowledge is power
Get to the truth of the matter.
Expand your defined benefit management skills and knowledge. Pension CFO shares the perspective of an experienced CFO with substantial investment and asset/liability management experience. The result is a Gap/Fit analysis that is thorough, yet simple to understand and explain.
How to manage your DB pension plan volatility
Probably the most acute pain your company sees from your pension plan is the volatility and “surprise factor” for the required annual contribution.
- Our most significant contribution to your operation will be to provide you with a way to quantify and manage your funding plan.
- You will know what your funding requirements will be, with our help, long in advance of the need.
- Not only can this help with year-end financial planning and reporting, but it will result in better company performance over time.
ADDRESSING PENSION PLAN COSTS
Direct costs of the plan
- Actual Pension Payments
- Funding costs and investment underperformance
- Administrative – TPA, Legal, audit, Actuary, and investment
- PBGC Premiums
- OCI accounting treatment
Indirect costs of the plan
- Impact on financial statements – it is a volatile liability
- Impact on cash flow – surprise funding needs after fiscal year-end.
Pension CFO has the experience and expertise to evaluate and effectively manage these.
Pension CFO addresses all plan risks
Your investment advisor should be an expert on investment risk management
Investment risk and return tradeoff should be a basic conceptual understanding of most investors and plan sponsors. Unfortunately, most have a difficult time quantifying these and, therefore, a difficult time determining what the right strategy is. Should we take on a little more risk and hope for a better return or vice-versa?
Your Actuary is an expert on the valuation of your plan liability
Understanding this risk is more critical and even harder to understand than investment risk.
Your actual plan risk is the difference between the volatile ‘value’ of the plan liability and the ‘value’ of your investments.
NONE of your current advisors can adequately address the management of this overall risk. These matters are up to you, the company CFO, to understand and recommend appropriate action. We have been in your shoes, and we know how to help.
Recommended steps to resolve your Defined Benefit Pension Plan challenges
- Quantify probable volativility of the plan liability.
- Quantify probable volatility of the plan assets.
- Quantify likely volatility of plan net worth (reported on financial statements) and the volatility of probable funding requirements.
- Quantify probable volatility of the company and how this relates to the volatility of plan.
- Develop strategy to manage plan volatility and funding requirements.
- Evaluate and recommend investment alternatives to optimize risk/return of the plan as it relates to the goals of the company.
- Quantify the ongoing costs related to underfunded status of the plan.
- Evaluate the company’s financials for alternatives available to fund the plan and the costs associated with these options (could include reallocating assets or replacing an underfunded plan with bank borrowing).
- Evaluate the impacts to Other Comprehensive Income (OCI) caused by these funding plans.
- Recommend funding strategy for the plan (long and short term).
- Quantify the ongoing costs of the plan.
- Evaluate and recommend whether to terminate the plan or not and related strategy options.
- Manage the investment assets to the overall determined strategies.
- Assist with plan termination if that is the selected strategy.