PLANSPONSOR - April - May 2022 - 16

UPFRONT
Participants Pose Challenges to PRTs
ACTIVE defined benefit plan participants-those
still working for the sponsoring
employer
and
enrolled
in
its
plan-and especially those under age
59.5, can pose challenges should the
sponsor be considering pension risk
transfer strategies.
Unless the sponsor has frozen the
plan, active participants' benefits continue
to accrue and will vary over time, based
on the plan's benefit formula, which typically
considers length of employment and
final salary. That variability makes it more
difficult to estimate a pension benefit's
present value and settle a plan's liabilities,
which are key steps in calculating lumpsum
and annuity payouts.
In addition, from a legal perspective,
16 PLANSPONSOR.COM April - May 2022
plans generally may not cash out active
employees, notes Matt McDaniel, U.S.
leader, financial strategy group with
Mercer. However, he adds, there are exceptions
to the rule-including plan terminations,
partial spin-offs then terminations,
and in-service distributions-which allow
sponsors to target active participants.
Terminate the Plan
McDaniel says plan terminations give
active participants the option of taking
a lump-sum payout or accepting an
annuity
from an insurance
company.
" That kind of activity's been happening
for 30 years, as long as plans have been
terminating, " he says.
Termination is not an option for all
Art by Dalbert Vilarino
plans, though. Bill Henry, head of plan
terminations and annuity purchases with
Willis Towers Watson, notes that participants'
benefits must be frozen first to halt
ongoing benefit accruals under a full, standard
termination. In this type of termination,
all benefits must be fully funded at
the end of the process with no changes in
either benefit amounts or payout options
for the participants. The results can differ
with distress
terminations, where
the
plan is turned over to the Pension Benefit
Guaranty Corporation, Henry observes.
Participants might experience changes in
payout amounts or options.
With a full, standard termination,
any deficit between the plan's assets and
liabilities must be funded immediately.

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PLANSPONSOR - April - May 2022

Table of Contents for the Digital Edition of PLANSPONSOR - April - May 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
The DE&I Lens
By Design
Things People Do
Leakproof Your Plan
The ESG Decision
When Retirees Stay in the Plan
PLANSPONSOR - April - May 2022 - Cover1
PLANSPONSOR - April - May 2022 - CT1
PLANSPONSOR - April - May 2022 - CT2
PLANSPONSOR - April - May 2022 - Cover2
PLANSPONSOR - April - May 2022 - 1
PLANSPONSOR - April - May 2022 - INSIGHTS
PLANSPONSOR - April - May 2022 - 3
PLANSPONSOR - April - May 2022 - INDUSTRY ANALYSIS
PLANSPONSOR - April - May 2022 - 5
PLANSPONSOR - April - May 2022 - RULES & REGULATIONS
PLANSPONSOR - April - May 2022 - 7
PLANSPONSOR - April - May 2022 - 8
PLANSPONSOR - April - May 2022 - 9
PLANSPONSOR - April - May 2022 - UPFRONT
PLANSPONSOR - April - May 2022 - 11
PLANSPONSOR - April - May 2022 - 12
PLANSPONSOR - April - May 2022 - 13
PLANSPONSOR - April - May 2022 - 14
PLANSPONSOR - April - May 2022 - 15
PLANSPONSOR - April - May 2022 - 16
PLANSPONSOR - April - May 2022 - 17
PLANSPONSOR - April - May 2022 - The DE&I Lens
PLANSPONSOR - April - May 2022 - 19
PLANSPONSOR - April - May 2022 - 20
PLANSPONSOR - April - May 2022 - 21
PLANSPONSOR - April - May 2022 - By Design
PLANSPONSOR - April - May 2022 - 23
PLANSPONSOR - April - May 2022 - 24
PLANSPONSOR - April - May 2022 - 25
PLANSPONSOR - April - May 2022 - 26
PLANSPONSOR - April - May 2022 - 27
PLANSPONSOR - April - May 2022 - Things People Do
PLANSPONSOR - April - May 2022 - 29
PLANSPONSOR - April - May 2022 - 30
PLANSPONSOR - April - May 2022 - 31
PLANSPONSOR - April - May 2022 - Leakproof Your Plan
PLANSPONSOR - April - May 2022 - 33
PLANSPONSOR - April - May 2022 - The ESG Decision
PLANSPONSOR - April - May 2022 - 35
PLANSPONSOR - April - May 2022 - When Retirees Stay in the Plan
PLANSPONSOR - April - May 2022 - 37
PLANSPONSOR - April - May 2022 - 38
PLANSPONSOR - April - May 2022 - 39
PLANSPONSOR - April - May 2022 - 40
PLANSPONSOR - April - May 2022 - Cover3
PLANSPONSOR - April - May 2022 - Cover4
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https://www.plansponsordigital.com/plansponsor/august_september_2021
https://www.plansponsordigital.com/plansponsor/june_july_2021
https://www.plansponsordigital.com/plansponsor/april-may_2021
https://www.plansponsordigital.com/plansponsor/february-march_2021
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https://www.plansponsordigital.com/plansponsor/february-march_2018
https://www.plansponsordigital.com/plansponsor/december_2017-january_2018
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