ERISP

Employee & Retiree Income Security Program

Managing a public defined benefit plan today requires greater diligence and more innovative solutions than ever before. Recent economic turmoil, investment market volatility and regulatory changes have combined to dramatically affect the funding status of public plans. Taxpayer resentment towards the funding of public plans may make the viability of maintaining existing benefits impossible. Although terminal funding has been used extensively to reduce risk and liabilities in the private sector, ERISP™ has been designed to address the unique challenges of public plans.

ERISP™ has been designed to reduce the risk of underfunding, to lower costs and to deliver promised benefits to all employees and retirees participating in the plan. Implementation of the program can be done independently or in conjunction with other techniques such as a pension obligation bond.

The Risk Disconnect

Defined benefit pension plans traditionally have attempted to manage investment risk and returns by allocation between stocks and bonds, usually using a 60% equity/40% fixed income model. More recently, exposure to other asset classes have grown in use. However, this focus on the asset allocation method does not account for the varying demands placed on the plan by the primary plan constituents: Retirees, Pre-Retirees, and Remaining Participants.

Potential Solutions to Underfunding Risk

Practical solutions to the underfunding crisis are complex and externally driven, therefore, considered analysis must be given to several plausible actions:

Shifting the issue to the future by maintaining current status
Increasing taxes on constituents today to fund shortfalls
Close participation in the existing plan and establish a new defined contribution plan
Reduce benefits to current and future participants
Reduce Unfunded Status by Annuitizing and Immunizing Liability

Pension Risk Management Continuum

risk_management

Implementation

implementation

Benefits Using ERISP™ Model

• Reduces risk of tax increases to pay for underfunding

• Less uncertainty in plan assets funding promised benefits

• Provides fluid long term plan to protect non retired participants’ promised benefits

• No additional cost to plan and may reduce overall costs

• Segments participants’ actuarial costs achieving more efficient asset allocation

• Allows trustees the option to partially or fully eliminate retirees’ liability from the plan

The ERISP™ Partnership

Investment Advisory, LLC was founded in 2008 and provides high level institutional investment advice, manager selection and distribution consultation to defined benefit plans and other institutional investment industry clients.

StoneRidge Investment Partners, LLC manages numerous equity and fixed income investment accounts for Pennsylvania municipalities and counties. Founded in 1999, StoneRidge is one of the largest minority owned registered investment advisory firms in PA.

Multiple Highly Rated Insurers, including MassMutual, MetLife, Prudential Life Insurance, and John Hancock.