Tag Archives: Kelly Coffing

Tackling the challenges of traditional plan designs

Pension plan trustees are looking for more robust retirement solutions for the future to avoid the struggles many traditional pension plans have faced. They want to make their defined benefit pension plans less vulnerable to the risks inherent in retirement, but don’t want to change to defined contribution plans that offload these risks onto participants. Modified variable annuity plans, such as the Milliman Sustainable Income Plan™, could be a good option because they maintain plan funding and preserve contribution stability better than traditional designs. Milliman’s Kelly Coffing and Ladd Preppernau provide some perspective in this article.

Explaining the Milliman Sustainable Income Plan design

Recently, Financial Adviser magazine published an article highlighting the benefits of the Milliman Sustainable Income Plan™ (SIP), which can provide sponsors and participants the best of both defined benefit (DB) and defined contribution (DC) plan worlds. Milliman consultant Kelly Coffing is quoted explaining the SIP plan design.

Here is an excerpt:

“The design is truly sustainable in a way that defined benefit and defined contribution plans are not,” explains Kelly Coffing, Milliman principal and consulting actuary, based in Seattle. The SIP, she continues, offers “lifelong income and funding stability while maintaining a balanced portfolio to get the best risk adjusted returns.”

How? The SIP is technically a defined benefit plan, but one in which benefits adjust up or down with the plan’s performance, “thereby keeping assets and liabilities in balance,” says Coffing. The plan establishes a base investment return or “hurdle rate.” If annual returns equal that rate, the plan functions like any other defined benefit plan. But if they lag or surpass that rate, the benefits increase or decrease accordingly.

“Like a traditional defined benefit plan, participants receive a lifelong monthly benefit,” says Coffing. “Unlike a traditional plan, the level of the monthly benefit is not fixed, but can adjust, up or down, based on actual investment returns of the plan.”

Contributions, on the other hand, don’t have to adjust. The SIP is designed for a specific contribution level that doesn’t change from year to year and, as such, is kept fully funded in all economic environments. “The contributions are directly tied to the benefit levels desired in the plan and are mostly related to the level of contributions employers want to make for retirement and/or the desired level of benefits to be provided,” says Coffing.

To learn more about the SIP, watch the following video.

The Stabilized Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income Plan™ (SIP).

A sustainable retirement plan for sponsors and participants

The Milliman Sustainable Income PlanTM (SIP) is a good retirement plan option for employers seeking predictable contributions while offering employees lifelong income. According to Milliman consultant Kelly Coffing, the SIP offers sponsors and participants the following:

• Professional asset management throughout participants’ working and retired years
• Maximized retirement benefits per dollar of employer contribution
• Lifelong inflation-protected income
• Stable, predictable contributions for sponsors

For more perspective, read Kelly’s article in Money Management Intelligence entitled “Retirement plan innovation that opens up investment possibilities.”

The Stabilized Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income PlanTM(SIP).

Retirement risks side by side: DB vs. DC vs. VAPP

The Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income PlanTM (SIP).

In this video blog, I discuss the retirement risk allocation between a plan sponsor and the plan’s participants in a variable annuity pension plan (VAPP) structure compared with risks associated with traditional defined benefit (DB) plans and defined contribution (DC) plans. I also explain how a VAPP can reduce risks of inflation, portability, and interest rate.

View our VAPP video blog series here.

For more information on VAPPs, click here, or visit our VAPP reading list.

Benefits side by side: DC vs. DB vs. VAPP

Coffing-KellyThe Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income PlanTM (SIP).

Variable annuity pension plans (VAPPs) provide secure, lifelong, inflation-protected retirement benefits. VAPPs combine the best of what traditional defined benefit plans do regarding longevity protection and lifelong income and what defined contribution plans can do to combat inflation. In this presentation, I explain the advantages for retirees of VAPPs compared with these more traditional plan structures.

For more information on VAPPs, click here, or visit our reading list.

Plan funding side by side: Traditional DB and VAPP

Coffing-KellyThe Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income PlanTM (SIP).

In recent months, we have featured quite a few articles on the resurgence in popularity of variable annuity pension plans (VAPPs). They provide lifelong inflation-protected benefits to participants while employers make predictable plan contributions, similar to 401(k) plans.

In this presentation, I discuss how funding a VAPP compares with funding a traditional defined benefit pension plan. The presentation also touches on how Milliman helps plan sponsors stabilize benefits for retirees through reserves.

For more information on VAPPs, click here, or visit our reading list.