Bankers Who Care
Pension Termination
This Philadelphia-based credit union, once part of a corporate behemoth, looked to expand and streamline its operations and human capital offering. At issue was the existence of two retirement plans, a long-standing (and costly) Defined Benefit Pension and a Safe Harbor 403b. Among the first activities on the docket for the management team were:
- Study and report on the long-term viability and expense requirements of the organization’s pension
- Understand the pension termination/freeze processes and cost
- Develop a plan that showed the rank and file that management cared, not only about their today, but also about their tomorrow
- Take into consideration some of the pension’s best features (tenure rewards/higher-than-average income replacement metrics)
- Create a strategy to have just one retirement plan that every employee would participate in
- Deliver that plan and messaging to every single employee in both group and individual settings, with multiple touch points along the way
The result:
- Termination of the existing pension
- Creation of a non-elective match that would grandfather existing pension employees and reward them over a 10-year period with contributions that met or exceeded what they would have received in the pension, while controlling overall plan costs
- Development and delivery of customized employee analyses highlighting the positive effects of the enhanced 403b plan and the effect their pension rollover would have on their own retirement outcomes
- Employees increased 403b deferrals by an average of 4%
- 403b plan participation rose from 74% to 96%