Six Tips for DB Cash-Out Programs

DB plan sponsors face many challenges in providing a successful cash-out program and must consider the numerous implications for participants in explaining and addressing the right decision for the individual, said Andrew Yerre, a partner at Mercer.

The top six considerations for DB plan sponsors include: 

1. Positioning the lump sum cash-out option as another choice for participants to consider;
2. Providing effective and personalized communication to participants to help guide them through their decision-making process;
3. Analyzing data to ensure that it is complete and accurate;
4. Being prepared to answer questions from a variety of stakeholders about the business rationale behind the cash-out offering;
5. Understanding the fiduciary responsibilities as the plan sponsor; and
6. Choosing a provider who can effectively execute the entire cash-out program.

In addition to these six tips, Mercer posted related materials on its website, including a white paper, videos and articles. These additional resources about cash-out programs are available here.

“Pension cash-out programs are one of the options that plan sponsors can consider when looking to reduce risk associated with these plans,” said Jonathan Barry, a partner in Mercer’s retirement area. The role of a plan sponsor as a skilled communicator in this process, he added, cannot be overstated.