The set payments in retirement provided through defined benefit (DB) plans play a central role in attracting, retaining and rewarding public sector employees. Behind the scenes, public sector employers are responsible for managing the plan, including maintaining a careful balance between performance and risk. To achieve this balance and deliver on commitments to employees, most public sector plans rely on the specialized knowledge of outside actuarial, investment and administrative professionals.

Traditionally, plan sponsors have chosen to address these DB plan needs separately — often selecting different providers for each function. However, in today’s ever-evolving financial environment, bundling actuarial, investment and administrative services with a single provider can enable DB plan sponsors to take a more holistic, strategic approach and gain valuable synergies. When considering whether integrated services make sense, add up the potential advantages by using the following equation. 

Actuarial + Investment Advisory Prowess

DB plans are a significant part of a public sector entity’s financial profile. Meeting minimum funding status requirements means assessing long-term risks, obligations and setbacks, and then managing the plan with these liabilities in mind. Actuarial services are needed to estimate the plan’s obligations and calculate the required contributions each year by reviewing the plan’s actuarial assumptions and suggesting changes based on employee demographics and reasonable future expectations.

The actuarial calculations and liability analyses are critical components in determining how to manage the plan and its assets. Investment advisors rely on actuaries to provide an accurate depiction of plan obligations to help them build and recommend an investment portfolio that’s appropriately allocated to meet specific goals and cash flow needs. Investment advisors also monitor and adjust the portfolio as interest rates, market conditions, contributions and distributions change.

Bundling actuarial and investment services with a single provider enables DB plan sponsors to link earning and funding elements more closely and create a balanced strategy that matches the plan sponsor’s objectives and unique needs. When investment advisors work together with actuaries they can more effectively align asset management decisions with the implications for liabilities and costs. Close connection between actuaries and investment advisors is especially important in volatile markets to ensure timely adjustments in investment strategies since the liability projections change as interest rates change.

Actuarial + Investment + Administrative Efficiency

Integrated plan administration services add even more synergy to the equation. Accurate, timely recordkeeping is more than a vital and visible part of the plan sponsor and participant experiences. When bundled with actuarial and investment services, essential administrative data sets become more accessible for actuarial analysis and investment calculations.

Data is the driving force behind the actuarial and administrative functions of managing a DB plan, so ensuring consistency is critical. The same data points used in the day-to-day calculations to determine the pension amounts participants receive when they retire are also required for the plan’s annual actuarial valuation. Similarly, investment advisors rely on plan administration when determining cash-on-hand to fulfill pension payments. When the data sources are consistent — and current — across the services, there are greater efficiencies and fewer issues for both plan sponsors and participants. In addition, bundling actuarial, investment and administrative services facilitates data access for specialized actuarial studies and investment analysis. 

5 Key Bundling Advantages for DB Plan Sponsors

The need to connect investment strategies, actuarial insights and administrative plan management is increasingly important in optimizing DB plans. Replacing multiple single-focus providers with one provider can create five key advantages for plan sponsors:

1. Increased Responsiveness: Shared data and behind-the-scenes teamwork make responding to shifts in short- and long-term needs and market variables easier.
2. Integrated Consulting: Removing silos created by separate providers better facilitates a combined strategy for plan assets, liabilities and day-to-day experiences, which helps to optimize results.
3. Improved Efficiencies: Integrated end-to-end management of the pension lifecycle and oversight of assets and liabilities streamlines processes, shortens timelines and produces greater operational efficiencies.
4. Simplified Coordination: Plan sponsors save time and resources previously spent on managing multiple providers, which can be refocused on plan strategy and other tasks.
5. Cost Savings: Increased efficiencies and integrated strategies can reduce fees and operational costs.

The public sector industry specialists at CBIZ can help you bundle the actuarial, investment and administrative services needed to optimize your DB plan and achieve your financial objectives.