A defined benefit (DB) or cash balance (CB) plan is more than just an employee benefit. Properly designed, a DB or CB plan can be an elegant tool to help manage cash flow, maximize profitability, and super charge the retirement accounts of business owners and their key employees.
For many advisors and indeed even for most plan sponsors, the actuarial services for a DB or CB plan remain a mystery, in a black box somewhere. Recent experiences suggest that actuarial service providers have taken their eye off the ball for all but the largest of clients. Often, the only time a client hears from their service provider is when the annual funding notice comes detailing the amount that must be contributed to the plan.
That’s not the way CDM Retirement Consultants (CDM) operates.
We open the black box to explain both how the calculations are constructed and how to use the plan to meet business objectives. With the client’s long term goals in mind, CDM will develop a multi-year funding strategy that best meets the goals for cash flow, balance sheet considerations, maximizing tax-deferrals and minimizing PBGC premiums. We carefully monitor the plan and the rate of accrual for benefits. We’ll then provide a quarterly scorecard which tracks progress towards those goals. No big mystery; no year-end surprises.
And we can often do this at a fraction of the cost of some of our larger actuarial brethren.
In one such instance CDM sat down with a regional hospital. They operate a defined benefit plan covering 500 participants with about $14M in plan assets. Their annual administrative fee was nearly $150,000 and they received little more than an annual funding letter from their actuary each year. CDM was able to come in and reduce their fee to $56,000 while at the same time providing a consultative, forward-looking approach to funding requirements, a greater interest in and responsiveness to their cash flow demands, and high touch participant service.
If for any reason you or your DB/CB clients are not satisfied with your current provider, or if you are interested in starting a DB/CB plan, we would be happy to schedule an introductory call to learn more and share more. Contact your NWPS business development professional by calling 443-797-1040.