Actuarial | Cowden Associates

Cowden knows that a retirement program is an integral part of your organization’s total compensation strategy. Cowden provides the full array of services for managing defined benefit plans, including the following:

• Comprehensive actuarial, advisory and financial management services for on-going plans
• Analysis of advantages and disadvantages of freezing and ultimately terminating a defined benefit pension plan, including developing replacement plans, funding and expense projections, investment consulting services, communication services, actuarial services and compliance assistance
• Termination services, including actuarial valuation, communications, compliance, assistance with purchasing annuities and/or providing rollover solutions for lump-sum distributions

Actuarial

Applying Mathematical and Statistical Methods to Bring About Measurable Results

Cowden’s actuarial professionals provide comprehensive consulting and valuation services for various defined benefits (qualified, non-qualified, municipal and Taft-Hartley) pension plans, as well as retiree medical and life obligations.

Our support extends beyond traditional services by continually working with plan sponsors on various projections and analyses, as well as “what-if” scenarios. We add value beyond the numbers by providing:

• Accounting Disclosure & Expense Calculations
• Retirement Plan Risk Management
• Defined Benefit Plan Freeze Analysis
• Financial Assistance Including Forecasts
• Retirement Calculations
• Communications Assistance

We blend actuarial experience and benefit design with a full knowledge of how these programs impact corporate cash flow and financial statements to arrive at value added services.

Accounting Disclosure & Expense Calculations

Once a plan is established, we prepare the required disclosures under ASC 715.

Our proactive approach has afforded us the ability to identify various design changes and assumption alterations to minimize financial risks and prepare the organization for any pending impacts. We also participate in analyst calls to explain issues in detail and address concerns about pension issues and related matters, including possible accounting, cash flow and balance sheet matters.

We also assist other governmental and public entities in preparing any necessary financial requirements, including preparation of the required ASC 965 and GASB 45 disclosures.

Defined Benefit Plan Freeze Analysis

A recent surge in high-profile pension plan freezes has prompted many companies to examine the potential benefits of following this action. However, a plan sponsor must fully understand all of the pros and cons of pursuing a cessation of future benefits for employees, including comprehending life in a post-freeze world. Cowden can help you by analyzing the advantages and disadvantages of freezing and ultimately terminating a defined benefit pension plan, including developing replacement plans, funding and expense projections, investment consulting services, communication services, actuarial services and compliance assistance.

We also provide termination services (including actuarial valuation, communications, compliance, assistance with purchasing annuities and/or providing roll-over solutions for lump-sum distributions):

Financial Assistance

Plan sponsors must operate their defined benefit plans like any other separate line of business. In order to facilitate this process, plan sponsors require up-to-date and user friendly information to complete their duties. Our services include:

• Cash/Expense Projections
• Asset/Liability Modeling
• Budgeting Forecasts

Retirement Calculations

We assist organizations in educating and communicating benefits to their employees, including preparation of comprehensive participant benefit statements, benefit change communications, Annual Funding Notices and Summary Plan Descriptions.

We are often asked to provide partnering services regarding the ongoing administration of pension programs, including:

• Calculations of all pension estimates, deferred vested calculations and retirement applications complete with cover letter and appropriate notice requirements and election form
• Recommendations of approval or denial for retirement benefits, including preparation of any required correspondence of denials
• Assistance with preparation of QDRO calculations
• Attendance and minute preparation at any or all committee meetings

Valuations Consulting

Valuation Consulting and Support Services for Qualified Defined Benefit Pension Plans
Cowden is often asked to perform consulting services regarding defined benefit pension plans. These plans can take on a variety of forms, ranging from a straightforward final average pay program to a cash balance plan. We prepare the annual required funding valuation reports, including financial data required; review a sampling of retirement benefit calculations; prepare PBGC premium calculations; perform normal and routine audit support for ASC 715 and 960; and the required Schedule SB (Form 5500). Our support in this area extends beyond routine services by constantly working with plan sponsors on various projections and analyses, as well as “what if” scenarios. Our proactive approach has enabled us to identify various design changes and assumption alterations to minimize issues and prepare the organizations for any pending impacts. We also participate in analyst calls to explain issues in detail and address concerns regarding pension issues and related matters, including possible accounting, cash flow and balance sheet matters.

Valuation Consulting and Support Services for Nonqualified Defined Benefit Pension Plans
As noted above, we perform all of the steps required for a plan sponsor to evaluate nonqualified defined benefit plans. These services include plan design, potential plan participants, expense, cash flow and estimated participant benefits. Unlike qualified plans, nonqualified defined benefits plans, primarily Supplemental Executive Retirement Plans (SERPs), do not require annual funding valuations, but do require the same data for financial statement purposes that is used for qualified plan purposes. As such, we prepare the required financial statement data. Companies often do not realize the importance of managing their SERP liabilities. Cowden is frequently contacted to provide plan redesign consulting services. This area includes the full range of altering plan formulas, choosing appropriate actuarial assumptions and benefit offsets, as well as attempting to maximize qualified plan benefits.

Valuation Consulting and Support Services for Retiree Medical and Life Obligations
Companies are required to account for their retiree medical and life obligations (commonly referred to as OPEB), in a manner consistent with defined benefit pension plans. As a result, our typical engagement in this area includes the preparation of the required accounting information, as well as cash flow forecasts. Again, our assistance in this area goes beyond the traditional valuation services. As companies are faced with a growing number of retirees, escalating healthcare costs, and financial statement pressures, we often are engaged to provide various consulting services to assist in attempting to minimize or contain this issue. Our assistance in this area crosses over from the traditional valuation services and becomes a benefits consulting arrangement. We can perform the following actuarial services and more:

• Develop Annual Contribution Requirements
• Calculate Funding Status
• Prepare Information for Auditor Requirements
• Prepare Information for Government Forms
• Certify Actuarial Methods and Assumptions
• Develop Annual Expense and Financial Disclosures
• Prepare ASC 715 disclosures
• Actuarial information needed under GASB 25, 27, 43, 45, 47 and 75
• Prepare ASC 965
• Produce Annual Retirement Benefit Statements
• Compose Comprehensive Participant Benefit Statements
• Devise Benefit Change Communications
• Develop Funding Notices
• Generate Summary Plan Descriptions
• Create Legislative and Compliance Assessment
• Monitor Federal Regulations
• Prepare and File Government Forms
• Generate Cash/Expense Projections
• Prepare Asset/Liability Modeling
• Generate Budget Forecasts
• Create Retirement Strategy
• Create Plan Design
• Implement Strategic Planning
• Produce Benchmarking
• Create Certification of Retirement Benefits
• Prepare Signature Ready Forms
• Prepare Relative Value Disclosures
• Perform Lump Sum Calculations
• Prepare Cash Management
• Compose Employee Communications
• Devise Replacement Plans
• Perform Annuity Placements

Merger & Acquisition Due Diligence

Due Diligence Services in Corporate Transactions
Deferred compensation, retirement plans, employee benefits and related items are complex and important considerations in corporate transactions. It is imperative to review and evaluate all Human Resources programs to find hidden problems and to devise a strategy for solving the cost and balance sheet impact – usually all within a short period of time. Cowden’s qualified Human Resources, compensation, and employee benefits advisors ensure a smooth transition.

Primary Compensation and Benefit Considerations

• Understated or underaccrued liabilities (of specific concern are special pension provisions that may be invoked as a result of layoffs or plant shutdown provisions)
• Allowance for benefits or liabilities resulting from sale
• Employment/union agreements
• Executive compensation agreements
• Understated or underaccrued liabilities associated with sick pay or accrued vacations
• Understated or underaccrued retirement plans (significant restrictions apply)
• Unfunded retiree medical or death benefits (a substantial liability in many industries)
• Special executive needs and agreements
• Potential non-compliance with federal laws and regulations
• Failure to communicate with participants on a timely basis resulting in significant penalties

How Cowden Associates, Inc. Helps
Senior members of Cowden’s staff possess broad generalist experience and specialties in compensation, executive compensation, actuarial, retirement and all areas of employee benefits. Along with strong affiliations throughout the U.S. and around the globe, they are available to:

• Consult with management regarding general issues and delve into specifics of the corporate transaction as appropriate. It is of particular use to be included in strategic discussions related to the background of the merger/acquisition and the identification of key talent targeted for retention.
• Assist in gathering and analyzing data.
• Provide modeling as appropriate related to costs, liabilities and potential savings or pitfalls.

Defined Contribution Consulting

Defined contribution plans are poised to take a prominent role in the average life of the American retiree. By design or by accident, 401(k) plans are about to become America’s primary source of retirement income. Whether you are managing an existing 401(k) or want to implement a new defined contribution savings plan, Cowden can help you meet your employees’ investment objectives, while improving the overall value (real and perceived) of your defined contribution plan. We will bring you up-to-date with the latest technology and plan design options while containing internal and direct plan expenses.

Cowden has experience with 401(k), 403(b), and 457 plans, as well as non-qualified defined contribution plans and Supplemental Executive Retirement Plans (SERPS).

Compliance Review & Assistance

The administration of a defined contribution plan doesn’t end with good design. It is the plan sponsor’s responsibility to comply with all rules governing defined benefit plans. These rules are in place to ensure equitable treatment of all plan participants and to avoid illegal abuse of the plan’s provisions.

Cowden has extensive experience in compliance testing and can help a plan sponsor to comply with all regulations for 401(k), 403(b), 457 and similar plans. We can also correct failed compliance tests, avoiding substantial penalties and possible disqualification of the plan’s tax-exempt status. Alternatively, Cowden can help plan sponsors design their defined contribution plans with safe-harbor provisions in mind, allowing them to skip compliance testing altogether.

How Cowden Associates, Inc. Helps
Senior members of Cowden’s staff possess broad generalist experience and specialties in compensation, executive compensation, actuarial, retirement and all areas of employee benefits. Along with strong affiliations throughout the U.S. and across the globe, they are available to:

Operational Review

The best designed plan can fail to meet the needs of your employees if it is not managed effectively. Cowden can perform a complete operational review of all aspects of a defined contribution plan to determine if plan designs are efficient and meet the objectives of the plan sponsor. Executing a rigorous assessment of the 401(k), 403(b), or 457 plan’s administration, we answer questions like:

• Do operations follow the plan provisions?
• Are plan documents, enrollment forms, SPDs, and other communication materials current and clear?
• Are the plans in compliance with all required testing and reporting?
• Has the plan sponsor optimized all available pathways to accomplish their objectives?

Operational Review: Sample Tasks

• Review the current vendor’s administrative, recordkeeping and trust services.
• Analyze the current service and support structure of 401(k) vendor, including compliance testing.
• Review the plan document to determine if design changes are warranted in:
  • Safe Harbor Requirements
  • Automatic Enrollment
  • Alternative Matching
  • Hardship Provisions
  • Loan Features, etc.
• Review the quality and effectiveness of employee communications and investment education.
• Analyze the capability and usability of the vendor website and voice response unit from participants and plan sponsor perspective.
• Review the vendor technology platform and backup/disaster systems.

Participant Education & Communication

The best designed plans will fail if not properly communicated. Education is a key in investment decisions, but in many cases, defined contribution plan participants are not equipped with the knowledge necessary to make sound choices. Very few people understand how to invest their money and many do not have sufficient data on their available investments to make informed selections.

Cowden Associates, Inc. (Cowden) can guide you and your employees through the investment process from an overview of investment strategy to in-depth discussions of specific issues for 401(k), 403(b) or 457 plans. We educate employees in the basics of investing: how to participate in the plan, how much to contribute and how to invest appropriately. Training is tailored to the specifics of your plan, with careful consideration given to how your investment options can best benefit participants.

Cowden can also assist companies in preparing communications to employees and provide education for managers regarding the new program and other related assistance. We can support companies in implementing any newly developed defined contribution programs.

Plan Design Strategy

Designing a defined contribution benefits plan can be a complex and time-consuming process. Cowden Associates, Inc. can walk a plan sponsor through the process, helping them define their 401(k), 403(b), or 457 plan design strategy.

First, we identify the plan sponsor’s objectives, keeping in mind the plan participant’s goals. We then benchmark the current design features against selected comparisons, like:

• Eligibility
• Timing of Plan Entry
• Contribution Levels
• Safe Harbor Options
• Investment Options
• Loan Features

Taking what we learned from these processes, we recommend design changes as appropriate to meet the plan sponsor’s objectives. We continue to monitor these changes and analyze the impact on the plan sponsor and the plan participants, making adjustments as necessary.

Vendor Analysis & Benchmarking

It can be helpful to know how your defined contribution plan compares with other companies like yours, particularly your competitors. Cowden works to identify appropriate peers for defined contribution plan performance and benchmarking. Using published documents, public surveys, and our own database of best-practice companies, we can give you a snapshot of current 401(k), 403(b), or 457 plan features and trends. We can also identify how your participants measure up against industry participation and contribution rates.

Actuarial

• Actuarial
• Merger & Acquisition Due Diligence
• Defined Contribution Consulting
• Case Studies