Changing a pension formula for success

Over the last five years, Milliman has worked closely with a pension administration client to transition its 30,000-participant defined benefit plan to a novel solution that continued to offer ongoing benefit accruals to participants, while maintaining cost-efficiency and contribution stability.

The plan, established in 1987, offers a cash balance formula as its primary benefit. When the client chose Milliman, it wanted to modify the cash balance formula to achieve both plan health and cost-efficiency. During a subsequent consulting session, it was determined that the plan’s goals could be better met by moving to a variable annuity benefit formula.

In this study, Tim Bernazza and Rebecca Connell discuss the administrative effects of changing to a variable annuity formula for this pension administration client.