6 Steps to Successful Retirement Risk Transfer

JThe success of a retirement risk transfer depends on working well with a variety of actors and developing a solid game plan. Paula Cole, head of Nationwide Financial’s retirement risk transfer business and “lifetime football player and chartered coach”, writes in a recent Nationwide blog post that she has applied the lessons she has learned on the football field at his PRT job.

“I find myself incorporating lessons from the field into my everyday life,” Cole wrote. “From my early days on the pitch to the days spent improving players in-game, I’ve learned that working well with others is essential to successful execution.”

Cole has created a six-step manual for defined benefit plans to help navigate the complex series of transactions that make up a TRP.

1. Build the right team

As in football, there are several different positions and roles to play on a team with PRTs. An experienced DB plan consultant acts as coach, while other team members include actuaries, legal advisors, plan sponsors, archivists and plan administrators. Each player offers their expertise to reduce risk for the plan sponsor.

2. Select a strategy

Just as no two games are the same, each PRT is unique and requires custom games. While game strategy can vary, it almost always includes a lump sum payout window, withdrawal, redemption, or termination of the plan. Several factors can affect playtime strategy, including participant demographics, plan funding level, and DB plan benefit formula.

3. Analyze and adjust

Once the strategy has been decided, the archivist, the actuary and the plan sponsor’s finance department must analyze the plan’s assets and liabilities. During the analysis, two questions should be considered: does the plan sponsor have sufficient funds and liquidity to fund the preferred PRT strategy, or does the DB plan itself sufficient funds to support the strategy? And what impact will the ERP have on the plan sponsor’s long-term financial liabilities and the funded status of the remaining DB plan?

4. Collect data

Collecting plan and attendee data for a PRT can be likened to tracking game day stats to prepare for the next game. Insurers responding to RFPs for a group annuity need the most accurate plan member data available to accurately price their product. The data needed to be collected includes participant information as well as relevant information on designated beneficiaries and survivor benefits.

5. Find an annuity provider

In addition to lump sum payment windows, PRT strategies include issuing a tender to insurers to find the best group annuity contract. At this point in the game, the Department of Labor is a referee. Choosing the right group annuity for members is a fiduciary act and plan sponsors should keep the six factors set out by the DOL in mind when reviewing RFP responses.

6. Communicate

Communication with all actors is crucial. While internal communication between the various team members should occur in a timely and concise manner, external communications with plan members are equally important. According to game strategy, certain participant communications are legally required to include specific content and must be shared within the time limits.

Nationwide offers a variety of actively managed ETFs for advisors that cater to a range of investment exposures and strategies for those seeking retirement income options for their clients as part of their broader retirement plans.

For more news, information and strategy, visit the Retirement Income Channel.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.