Defined Benefit Plan Termination Consulting

Frozen Defined Benefit Pension Plans are Risky, Expensive and Burdensome

The number of frozen defined benefit (DB) pension plans have dramatically increased over the last two decades. Rising costs and longer life spans have added significant costs and administration difficulties for employers. While there are a vast number of frozen DB plans in which participants have ceased accruing benefits, plan sponsors still assume their associated liability and risk, caused by market volatility. If you have a frozen pension plan, it is essential to look at strategies to remove risk and optimize the management of your plan on the way to termination.

An increasing number of companies have been attempting to reduce costs and mitigate risk by freezing their defined benefit (DB) plans. Ironically, the costs and risks associated with these frozen defined benefit plans continue to grow, draining valuable financial and human resources that might otherwise be directed to productive uses. Treading water is rarely an intelligent means to an end. And, in the case of frozen DB plans, such lack of action has been shown to significantly increase the exposure and costs resulting from:

  1. Equity market volatility
  2. Persistent low interest rates
  3. Continually rising Pension Benefit Guaranty Corporation (PBGC) premiums
  4. Longer life expectancies requiring the use of revised (higher cost) mortality tables,
  5. Ongoing administrative and compliance burdens

While it is difficult to quantify the adverse impact of diverting time, energy and money to a frozen DB plan, most experts agree that by eliminating the distractions and unnecessary expenses associated with them through DB plan termination, it will have an outsized positive effect.

Most plan sponsors stuck with a defunct DB plan lack independent advisory due to actuarial firms, plan administrators, and investment consultants with inherent conflicts of interests. Some are part of larger global organizations of financial professionals or do significant business with specific insurance companies. Such consultants could lose recurring fees when a plan terminates and plan administrators affiliated with actuarial or investment firms could lose annual per-head fees when a liability settlement occurs.

These scenarios create a conflict of interest when non-independent consultants make recommendations to plan sponsors to continue to pay the frozen plan’s carrying cost, year-after-year. This practice of “kicking the can down the road” is in the non-independent consultant’s best interest rather than in the best interest of the plan sponsor. And that is how plan sponsors get stuck.

When considering an exit strategy for your frozen defined benefit plan, plan sponsors can avoid the problematic risks of engaging with a pension risk advisory firm that is not genuinely independent. We you work with us you work with a firm that is uncontrolled by other companies or connections, with no obligation or reliance on others that could compromise our objectivity.

Incorporating pension risk transfer and plan termination eliminates all risk and ongoing expense for plan sponsors. Our specialized team of financial professionals provides independent counsel and advice to help plan sponsors get unstuck. For years, plan sponsors have been waiting for interest rates to go up, hoping that the cost of plan termination will then go down. Certainly, higher interest rates favorably impact the value of benefits and therefore, the funded status of a plan. However, several other factors affect the cost of benefits and a plan’s funded status, many that function in reverse correlation to interest rates, potentially wiping out the advantages of interest rate increases.

There are numerous issues to consider when developing the optimum approach to pension plan termination. When you choose our firm, you align with a fiercely independent benefits consulting firm, comprised of an experienced team of client-centric pension and risk consultants. We work with you to identify and evaluate the facts, objectives, and considerations that need to be adequately addressed within the pension de-risking process using COMPASS – a complete DB plan termination strategy.

The COMPASS approach to defined benefit plan termination can help you chart the right course, while successfully navigating you through the pension risk transfer process. The result will be a financially-successful, sensible and time-sensitive solution that completely rids you of the hassles and headaches of your costly, frozen pension plan. It is designed to relieve plan sponsors of the risk, expense and fiduciary responsibility associated with maintaining a frozen DB plan, as quickly and efficiently as possible.

Introducing COMPASS – A Three Step Defined Benefit Plan Termination Solution

COMPASS consists of the following three parts:

  1. EDUCATION about the status of your plan;
  2. NAVIGATION of the timetable and requirements;
  3. And PLAN TERMINATION through the pension risk transfer process, once and for all!

We provide conflict-free advisory services with due diligence and expertise in the areas of insurance brokerage and underwriting, among others. Our seasoned team members have a broad knowledge of all major carriers that offer the safest available pension annuities. We serve our clients with impartiality and unwavering commitment to annuity price negotiations in the best interests of the plan sponsor.

As a legitimately independent pension risk consulting firm, we can quote liability settlements from multiple insurance companies anonymously, without exchanging confidential data, and have no business affiliations that compete with the best interests of the plan sponsor. Our conduct is free of any alliance that could cause a conflict of interest, or compromise our objectivity, or compromise confidential information, or add additional costs.


  1. Administrative costs and burdens on HR and Finance
  2. Headaches associated with managing a plan’s funded status
  3. Adverse effects of continued low-interest rate environment
  4. Requirements related to the ever-changing regulatory landscape
  5. The adverse financial impact of increasing PBGC premiums
  6. Volatility and unpredictability of future contribution requirements
  7. The escalation of plan liabilities due to continued mortality improvements

Will the total reduction in cost due to possible interest rate increases be more or less than the overall increase in cost due to:

  1. Possible adverse impact (of interest rate increases) on investment performance, plus
  2. Aging participant population, plus
  3. Increasing longevity, plus
  4. Ongoing administrative costs including increasing PBGC premiums/audit fees/actuarial fees/investment advisory services among others?

Many practitioners argue that the totality of the various factors and assumptions, including interest rate movement, is a net neutral or corresponding offset. While that may well be the case, we believe it is important for plan sponsors to ask and frame the questions based on their facts, circumstances (including tolerance for risk, business conditions, etc.) and suitable assumptions. Only then can a realistic and business-smart pension risk transfer and exit strategy be intelligently developed, implemented and completed.


  1. How do you know when or how to begin the pension de-risking process? Are you better off waiting? What’s the most efficient and least disruptive path to DBPT?
  2. Frozen DB plans remain because plan sponsors assume the economic and collateral cost of ending it is higher than the cost of maintaining the status quo. Is that a correct assumption?
  3. There are several (often competing) considerations that determine the answer to that question, as well as the path and timing of DBPT. That said, it is important to know because either way, one path must be more efficient, effective and less disruptive than the other.
  4. Have you examined the alternatives, costs, and benefits of a Defined Benefit Plan Termination (DBPT) including risk transfer and plan termination?

Let our independent actuarial and consulting teams help you find the answers. To learn more about the COMPASS approach to business-smart defined benefit plan termination, visit our DB Plan Termination FAQ page. You may also contact a Retirement Plan Actuary at 516-683-6100