Maintaining consistent focus on retirement plan financial metrics

It's not unusual for a client to request ad hoc studies during the year, particularly as the fiscal year winds down and all thoughts turn to what the impact of changes in assets and interest rates means for the plan's accounting disclosure results. While providing these studies is an important part of the job, in most cases clients would be better served by maintaining a consistent focus on the plan's financial metrics throughout the year. By doing so, smart CFOs are able to prepare for changes in funded status and potential swings in funding requirements prior to their becoming last-minute fires needing significant funding to extinguish.

This is why the Pension Performance Dashboard (PPD) has proven to be a critically important tool to plan sponsors. It provides (on either a monthly or quarterly basis) all of the significant measures of plan assets and liabilities updated to the prior month end. In addition, the most current information is used to continuously update three-year projections of required contributions, effective interest rates, funded status, and Financial Accounting Standards (FAS) pension expense. The consistent monitoring of the current year's assets and liabilities as well as using this new data in the projections significantly reduces the element of surprise when the final reports are issued. Additionally, having this information provided on a regular basis alleviates the burden on our clients of having to make a special request for studies and eliminates the danger that a request might be forgotten.

The unique layout of the results of the PPD make it easy to see the primary drivers of changes occurring in the plan without having to sift through extensive actuarial jargon to get to the desired results. Another benefit of the dashboard's layout is that clients are able to see at a glance if the plan is approaching one of the many operational constraints affecting pension plans such as quarterly contributions, Pension Benefit Guaranty Corporation (PBGC) 4010 filings, and even down to participant-level constraints such as benefit restrictions.

While plan sponsors might not always like the results we have to deliver, they can have the peace of mind knowing that if they opt to use the PPD, they can create more accurate budgets and are no longer subject to last-minute surprises.

To see an example of data generated by the Pension Performance Dashboard monthly reporting tool, play the video above or click here.