CFO Studio Magazine with David Chambers, CFO, Jaguar Land Rover NA

EXECUTIVE DINNER SERIES EVENTS 32 WWW.CFOSTUDIO.COM 3rd QUARTER 2016 De-risking Pension Plans NOONE-SIZE-FITS-ALL APPROACHBUTGUIDANCE NEVERTHELESS D e-risking benefit and pension plans, a trend set in motion by the recession, new reporting requirements for pension liabilities, and waves of baby boomers reaching retirement age, was the discussion topic at a World-Class Companies CFO Dinner held recently at MetLife Stadium, and hosted by CFO Studio. The unfunded liabilities that pensions represent on a business entity’s balance sheet can hurt the company’s ratings from debt agencies and its attractiveness to investors. De-risking strategies are intended to mitigate three primary issues: the effects of market volatility on monies invested in the pension fund, interest rate risk, and consequences of events that do not meet actuarial assumptions, such as having a large number of employees reach retirement at the same time. “There are always differences between reality and those assumptions,” explains Claude Draillard, Vice President, Finance, Dassault Falcon Jet Corp., the evening’s discussion leader. Two frequently encountered discrepancies are “when the population changes dramatically and when the rate of return on the assets is much lower than planned. In both cases, you need to fund those differences at some point … and that could impact your cash.” There is no one solution related to de-risking a pension plan. “De-risking can take widely different forms once you have analyzed your population,” said Mr. Draillard. Some de-risking strategies include offering retiree buyouts or purchasing an annuity that effectively transfers pension obligations to a private insurance company. “Is it in your company’s best interest to offer retirees a lump-sum payout instead of monthly pension payments?These are questions that must be kept in mind,” says Mr. Draillard. “It’s important to analyze the situation all the way to its final outcome.” He adds, The comments made by these guests are their own and may not reflect the opinions and/or policies of their companies or of CFO Studio and/or its promotional partners. BUSINESS DEVELOPMENT PARTNERS Get published in CFO Studio Magazine, visit www.cfostudio.com