Mission: Rescuing Traditional Pension Promises
…and at the same time satisfying both employee and employer
We are dedicated to sustaining the preeminence of the defined benefit (DB) pension structure.
With the emergence of 401(K) and other defined contribution systems as a threat to the survival of defined benefit systems, it becomes essential to facilitate “fixed cost” DB structuring and, in addition, make use of the “operational under-belly” of defined contribution systems, to further embellish the preeminence of the defined benefit structure over DC.
It is recognized that the threat to the traditional defined benefit pension design lies in the financing volatility to which it is exposed during periods of market turmoil. Defined contribution systems overcome this financing volatility by resting on its “fixed cost” characteristic. Overlooked in this “solution” is the obligation to pay the “fixed cost” every year. The financing of traditional defined benefit systems enables funding reductions and even funding holidays when experience is favorable.
We have harnessed the defined contribution weakness and created a defined benefit structure labeled Double DB. See the Double DB page which follows. Plan sponsors are confronted with three choices (i) continue the traditional defined benefit (DB) structure and its volatile funding profile, (ii) adopt a defined contribution (DC) system with its fixed annual funding requirement but with the need to “soft freeze” the DB [likely causing the DB to have cash flow and asset allocation problems] or (iii) the patent-pending (Double DB) with its equivalent-to-DC fixed annual funding requirement. Since both employees and employers will prefer the last of these if fixed annual funding is desired, the defined contribution (DC) structure is no longer the favored alternative.