By Paula Aven Gladych
Companies considering a cash-out of their pension plans
should not only define the goals and objectives of the program, but also make sure to try to address any potential pitfalls that could arise and interfere with the program's success.
That's the advice from Mercer, which offers the following six tips for any company looking to cash out their pension plans:
1. Position the lump-sum cash-out option as a positive opportunity.
Make sure participants know it is an option and won’t be forced upon them. The lump-sum payment option allows each participant to make the decision that is best for his or her situation. Ensure participants know that their other options are still available.
2. Provide effective communication to participants.
Companies should compare the lump-sum payment option to an annuity. Help participants understand the impact of deferring or not deferring payment. Each participant should evaluate their own personal family situation and financial needs by reviewing their overall financial picture and assessing their ability to manage money.
3. Take steps to ensure you have correct and complete data.
Mercer recommends taking the time to analyze the quality of your data and perform cleanup where needed. Without the proper advance diagnostics, your project’s integrity may be compromised or limited.
4. Be prepared to explain your business rationale to a variety of stakeholders.
5. Understand your role as a fiduciary.
Plan sponsors have a fiduciary responsibility
to act in the best interest of the plan and its participants.
6. Work with a provider who is up to the challenge.
Mercer recommends finding the right partner to help you execute your cash-out program. Make sure any provider you choose will consult with you and guide you through the process; will collect and prepare accurate data for the targeted population; will create and deliver specialized participant communications; will provide knowledgeable staff to help communicate with participants; and is able to receive and process a large volume of distribution requests within the desired timeframe.
Originally published on BenefitsPro.com