At a time when a number of the nation's largest employers are freezing their defined benefit (DB) pension plans, Mercer Human Resource Consulting is today launching a new comprehensive program, Mercer Frozen Plan Solutions, to help employers better manage the financial and fiduciary risks of frozen plans.
Many companies that are freezing their DB plans cite a need to control costs and reduce financial volatility. But an employer's fiduciary obligation does not end when a plan is frozen, and freezing a DB plan doesn't immediately eliminate financial risk. Mercer Frozen Plan Solutions is a comprehensive program to help employers develop a thoughtful strategy for eventually winding down the plan, as well as a means to offload its ongoing management.
"Many employers continue to see defined benefit plans as a viable option to attract and retain employees and provide retirement security. But as we have seen from news reports, a number of prominent companies are deciding to freeze the plan in favor of a defined contribution approach," said Asghar Alam, Americas retirement leader for Mercer Human Resource Consulting. "For those employers, we have developed a unique solution. We understand what they are trying to accomplish. Unless employers carefully consider the unique aspects of frozen plans, the risk is that they may end up with more volatility than they expected."
Effective management of frozen plans involves a three-step process: setting the financial management strategy; implementing the investment strategy; and managing the plan to a "target endgame" that best meets the sponsor's business objectives.
To set the financial management strategy, Mercer has developed a unique diagnostic framework to help clients "get from point A to point B." This involves clearly understanding the current financial state (point A) and the inherent risks, defining the target endgame (point B), and articulating the appropriate strategy to close the gap and reduce financial risks according to the plan sponsor's objectives.
Mercer Retirement Solutions(tm), the integrated retirement plan outsourcing unit of Mercer, provides for the implementation and management of the frozen plan, including actuarial services, administration, participant communications and asset management. Mercer's investment services include portfolio strategy formulation and implementation, with the ability for employers to completely outsource the investment management of their frozen plans. Mercer Global Investments serves as a plan co-fiduciary in managing plan assets and providing investment operations, including unique fixed income approaches for frozen plans. Streamlined actuarial services, and administration designed specifically for frozen plans, simplify routine financial compliance as well as recordkeeping and participant transactions.
"Mercer Frozen Plan Solutions brings together the advantages of total retirement outsourcing with unique frozen plan financial management," said Chris Herman, Americas business leader for Mercer Retirement Solutions(tm). "By more directly linking a frozen plan's projected liabilities with its investment management strategy, employers can
better manage the overall financial risk of the plan and its potential impact on financial statements. This also has the potential to generate savings for plan sponsors with the added benefit of offloading key responsibilities for plan management."
For additional information about Mercer Frozen Plan Solutions, please contact Richard McEvoy at 1 415 743 8796 or Chris Herman at 1 617 760 2460. Visit Mercer on the web: www.mercerHR.com/uspress
