BEST PRACTICES: Design Elements of Defined Benefit Retirement Plans Flashcards
Pension administrators and finance professionals should consider essential elements in their plan design if a public sector employer choose to provide a defined benefit plan.
What is the fundamental goal of retirement plan design according to GFOA?
To adequately meet the needs of employees, consistent with the plan sponsor’s available resources.
What are some key plan design considerations for defined benefit plans?
Desired benefit amounts, eligibility, vesting requirements, formula components, early and disability retirement options, and service purchase provisions.
What is recommended for the funding of DB plans?
Establish a funding policy that considers the plan’s funding goals, understand key cost components through actuarial analysis, ensure manageable funding mechanisms, and develop a comprehensive investment program.
How should a DB plan’s board governance be structured?
With a focus on varied interests representation, competence in policy development, and fiduciary duty to administer the plan for the exclusive benefit of plan members.
What ethical standards are expected for trustees and staff of DB plans?
Annual certification of compliance with legal and ethical standards.
What type of education should new trustees receive?
Orientation training on their responsibilities, fiduciary duties, and the responsibilities and fiduciary duties of plan staff and agents.
Why is risk management important for DB plan administrators and trustees?
To identify, manage, control, or mitigate investment and operational risks.
What consultants should be engaged for a DB plan?
Actuaries for sustainable funding measures, investment managers for asset management, investment consultants for establishing investment policies, and a custodian for asset custody.
How should participant education be approached in DB plans?
Emphasize retirement planning goals, develop programs for understanding benefits, discuss health care options and costs, provide retirement benefit estimation tools, and make important information available through communications and materials.
