Administrators and Actuaries Need to Practice Safe DB Plan Forecasting, Says Dan Cassidy, Benefits Expert at Argus Consulting Ltd.

Business Editors

CONCORD, Mass.--(BUSINESS WIRE)--May 18, 2004

"Sloppy defined benefit plan forecasting is like laying a minefield in your company's path," says Dan Cassidy, President of Argus Consulting Ltd, in an article to be published soon in a major business journal. "DB plans are expected to work quietly and reliably, but when they blow up, the issues can be divisive and devastating." The key to safe and effective DB plan forecasting is zeroing in on the most important issues with the most up-to-date information.

"Good forecasting isn't just an add-on to year-end financials, "explains Cassidy. "It requires its own planning."

First, he says, you need to decide what the forecast--and your actuary--should focus on: "With today's computer systems, there's plenty of information. Make sure you and your actuary don't waste valuable (and expensive) time crunching numbers that aren't important to your company's decision-makers." For example, public companies care most about pension expense (or what actually shows up in the financial statements) while private companies care more about cash contributions. For companies thinking about terminating or freezing their plans, funded status is critical.

The forecast's time horizon must also be carefully chosen. A ten-year time horizon generally works best to forecast a healthy company's ongoing defined benefit plan, according to Cassidy. However, one company with an underfunded frozen plan needed an asset allocation strategy to protect their downside risk until economic conditions enabled them to terminate the plan. In this case, a five-year forecast was most appropriate.

"Obvious as it sounds, make sure your actuary has the most up-to-date company information," warns Cassidy. "Has your DB plan investment portfolio changed significantly since last year? What are your future investment expectations? How much have you budgeted for next year's cash contributions?"

"When DB plan forecasting is done right, the crystal ball can be surprisingly revealing," asserts Cassidy. "Careful administrators can save their companies plenty of time, money, and trouble down the road."

To conduct a media interview with Mr. Cassidy, or to learn more about maintaining company retirement plans, email [e-mail], call 978-371-8029, or visit Argus's website at www.arguscl.com.

Dan Cassidy is President of Argus Consulting Ltd of Concord MA, providing employee benefits and retirement plan consulting services for qualified and non-qualified benefit plans of clients in the US, UK and Canada.