Challenge
A publishing company produces a daily newspaper that services a tri-state area. The
Company offers a highly competitive benefits package to their salaried employees, which
included a defined benefit pension plan and a defined contribution 401(k) plan.

Faced with considerable pressure on their retirement plans from the economic environment, legislation changes, and competitive forces, the Company opted to analyze a
redesign of their retirement program.

Strategy
Findley Davies’ actuaries prepared a cost analysis for the defined benefit plan to project costs under various design alternatives and interest rate assumptions. After considerable analysis on the impact to the Company and employees, a decision was made to freeze the pension plan.

Our retirement consultants prepared several scenarios of plan design formulas for the
defined contribution plan. The information included a summary of the total cost under
each scenario, a comparison of the number of employees affected positively or negatively
by the change in benefits, and any applicable projected compliance results.

Results
The Company determined they were committed to delivering a retirement benefit equal to
what would have been delivered under the defined benefit plan. Although the current expenses in the near term for both plans exceeded their current costs, the Company focused on their ability to reduce the volatility of future costs.

To encourage employees to take charge of their retirement savings, the 401(k) plan was
enhanced with a better employer match and a new discretionary contribution. Current
employees received an enhanced benefit based on their age and years of service as of the
date of the freeze. In lieu of providing a specific benefit allocation to each participant age
and years of service were developed. An allocation rate was derived for each category based on categories making the majority of the participants “whole” (as it relates to their original defined benefit plan benefit). Since the benefits delivered to the affected participants vary for highly and non-highly compensated employees, non-discrimination testing must be demonstrated annually.

Final Steps
Employees needed to understand the specific changes, plus the rationale for making those changes. We also wanted employees to contribute to the enhanced defined contribution plan. Our communication strategy created the feeling of a personalized solution for each employee through three distinct channels.
• Group meetings. Our retirement consultants walked employees through the reasons for
the change and the specific details around each retirement plan.
• Personalized information packets. Each employee received information that included a
personalized statement showing the impact based on each employee’s situation.
• One-on-one meetings. At individual meetings, a Findley Davies actuary or retirement
consultant gave employees personal attention so they understood the changes.

The Company wanted to ensure that every employee received a clear picture of how
this change impacted him or her. As a result, we lowered the Company’s risk of retention
problems among key talent. The Company’s Chief Financial Officer commented on the initiative, “Every salaried employee understood the reason for the change. They may not have liked what we needed to do, but they accepted the business reasons behind it. But most importantly, every employee knew where they stood on their path to retirement – in a way they never did before.”