Defined Benefit (DB) Pension Plans provide employers with a tool to reward traditionally desired employee behavior (long tenure, timely retirement), as well as a way for retirees to gain more security than that provided by a defined contribution plan. However, these plans can generate large swings in a company’s income statement and cash flow due to the long-term liabilities and assets which follow the market. Tax law requires employers to contribute assets when the plan becomes underfunded, however assets cannot be taken out easily if the plan is overfunded.

An employer now has the opportunity to transfer the risk to a captive insurance company. Spring has a patented method for risk transfer which reduces the volatility in a pension plan while increasing the benefit security for the participants. The pension retains a stable funded status while investments and longevity risk are in the captive where they can be better managed.

Benefits of pension funding in a captive:

  • Reduce volatility of funded status
  • Reduce uncertainty regarding future cash contributions
  • Reduce volatility of accounting costs
  • Reduce trapped assets while minimizing excise taxes
  • Improve benefit security for participants

Please contact us for more information about our defined benefit solutions and services.