Plan Termination

BCG’s 5-Step Process

Providing Guidance, Knowledge and Commitment

Terminating a pension plan often involves 7 or more players throughout a typical 5-step process, so managing this process can be overwhelming. BCG is here to help manage, organize and track the termination from start to finish.

Step 1: BCG works with plan actuary/attorney

  • Determine plan obligations and total accrued liability
  • Assist with termination filings with the IRS & PBGC
  • Notify the employees of the termination

Step 2: BCG plays the role of advisor for your plan participants

Hold employee meetings to:

  • Explain the plan termination package and why the plan is terminating
  • Walk each employee through the pros and cons of each choice and implications of taking a cash lump sum (taxes, spending habits, retirement)
  • Explain the options of the group annuity, as well as the option to roll dollars into their 401(k) plan, IRA or other rollover options
  • Ensure that participants understand and are comfortable with their decisions

Step 3: BCG begins preparing for the termination

  • Review your plan documents and consults with your actuary and attorneys to fully understand the plan
  • Create an RFP for the insurance carriers to bid on the plan
  • Narrow field to appropriate insurance carriers and request a preliminary bid

Step 4: BCG guides you through the due diligence process and financial review

  • Review the preliminary bids along with the due diligence package that has been created
  • Analyze insurance carriers with aid of the Department of Labor Interpretive Bulletin (DOL 95-1), which considers:
    • The quality and diversification of the annuity provider investment portfolio
    • The size of insurer relative to the proposed contract
    • The level of the insurer's capital and surplus
    • The lines of business of the annuity provider and other indications of the insurer's exposure to liability
    • The structure of the annuity contract and the guarantees supporting the annuities, such as the use of separate accounts
  • Discuss a final bid date, changes to be made, and the possible elimination of insurance carriers

Step 5: BCG acts as YOUR ally and confidant

  • Final numbers are requested from the insurance carriers
  • A decision is made as to what carrier is best for the plan sponsor
  • Assets and data are transferred to the insurance carrier
  • The insurance carriers begin payments to retired participants on agreed commencement date
 
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