Frozen Plans
The Problem
Frozen plans are, in essence, the proverbial comatose patient waiting for the plug to be pulled. Unfortunately, service providers providing advice to DB plan sponsors tend to often passively encourage continuation of the plan to protect their fees. The result is sponsors lacking the data and bearing unknown risks to form an action plan for the termination. In our experience, few executives can quantify the book and cash impact of the various options associated with termination, let alone effectively assess the alternatives on a real time basis.
As a result, the DB plan limps along with the plan sponsor covering ongoing administrative costs to service providers who have little economic incentive to provide the necessary analytics. The real time feedback provided by our software gives immediate calculations of various scenarios, allowing management to assess the magnitude of each factor (i.e. discount rates, funding decisions, actual insurance company pricing, etc).
The Answer
JHBenefits, aided by its proprietary software, can provide a complete picture across a variety of alternatives that quantifies the significant variables which impact funding, partial buy-outs and transaction pricing.
The JHBenefits software tool provides real-time feedback with multi variance inputs such as: asset returns, anticipated contributions, market pricing and maintenance cost data so a clear path to termination and resolution of the plan can be established. And all can be adjusted almost instantaneously. In one meeting the CFO and CEO can be armed with the comparative information of different funding, return, discount and settlement scenarios to determine the best path towards a sunsetting of the liabilities.
The analysis tools designed by JHB provided our Board and Management the information we sorely needed to develop a financial plan for the ultimate termination of our frozen plan. The software allows us to better understand and scenario test the implications of the many changing variables and different market pricing scenarios in real time. We recommend it to CFO’s and Boards as a tremendous financial tool.
Laura Hay, CPA, Executive Vice President
The Ohio Society of CPAs