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9 Cards in this Set
- Front
- Back
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QBS 3: 1 of 12
Success of retirement program depends on |
1) Good plan design that meets employee needs
2) Plan sponsor goals and commitment 3) Efficiency of operation 4) Effective communication 5) Appropriate plan governance 6) Plan member goals and satisfaction |
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QBS 3: 2 to 4 of 12
Factors that can influence plan design and items the consultant should identify/ask before designing a retirement program (1 to 3 of 3) |
1) Environmental considerations
a) Employer's legal status b) Basic characteristics of the employer and industry c) Characteristics of employees d) Employer with diversified operations e) Community in which the employer does business f) Presence or absence of collectively bargaining units g) Demands of labor 2) Employer philosophy and attitudes a) What is the employer's basic compensation philosophy b) Does the employer favor an income-maintenance or compensation-oriented approach? c) Does the employer believe employees should share the cost of program? d) Should the benefits be coordinated with a government program? e) Should executive program differ from non-executive program? f) Is the employer willing to assume plan termination obligations? g) Who does the sponsor believe should bear inflation and investment risk? h) What type of retirement pattern does the sponsor want to influence? i) Does the employer want to provide a wide choice of plans? j) What cost level does the employer want to target? 3) What are the employer's objectives regarding? a) Attraction and retention of employees b) Meeting competitive standards c) Cost considerations d) Compliance with legal requirements e) Achieving optimum tax benefits f) Efficiency in design g) Income-replacement ratios |
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QBS 3: 6 of 12
Additional questions that should be asked when designing a retirement program |
1) Is the firm young and growing or mature?
2) Are profits stable or volatile? 3) What are its needs for employees? 4) Is the industry highly competitive? 5) Are profit margins narrow? 6) Is the business cyclical? 7) What are the firm's short and long-term capital needs? |
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QBS 3: 7 of 12
Other objectives that should be considered when designing a retirement program |
1) Social obligations
2) Employee incentives 3) Corporate identification 4) Administrative convenience |
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QBS 3: 8 of 12
A pension's design must balance the following |
1) Members needs and goals
2) Maximum tax deductible limits 3) Economic realities 4) Minimum required benefits per legislation 5) Plan sponsor goals and constraints 6) Other legislation |
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QBS 3: 9 of 12
Employers with diversified operations should consider the following when developing a retirement program for each operation |
- Should consider the following within each operation:
1) Cost 2) Profit margins 3) Competitive needs 4) Geographic differences - Is the same benefit plan appropriate for each operation - How should transfers be treated? |
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QBS 3: 10 of 12
Regarding cost considerations prior to plan design, consultant should ask client |
1) Does the employer prefer level contributions or a patter that starts off lower and increases?
2) Does the employer prefer contribution flexibility? 3) Does the employer want to assume the cost of inflation? 4) Does the employer want to coordinate benefits with other benefits? 5) Does the employer view the retirement plan as a tax shelter for key employees? 6) Should postretirement medical and death be prefunded? 7) Should inflation sensitive benefits be controlled? 8) What funding mechanism should be used to control cash flow? |
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QBS 3: 11 of 12
Steps when comparing benefit programs |
1) Need to determine a standard for comparison (industry, geographic or both)
2) Determine where the company wants to be 3) Determine the technique for establishing relative standing |
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QBS 3: 12 of 12
Techniques for establishing a relative standing |
1) Compare benefits payable to representative employee under different circumstances (e.g. NRA)
- Disadvantages i) Does not indicate true relative cost ii) May not capture value of all benefits iii) Aggregate value may not be ascertainable iv) Sensitive to assumptions 2) Compare actual employer costs for different benefits - Disadvantages i) Reporting among clients may be inconsistent ii) Contribution patterns may not reflect true cost 3) Determine relative value of benefits using uniform actuarial assumptions and methods |
