Pension and Healthcare Consulting

Consultation services regarding benefit changes

Our work within the public sector leads to frequent health and pension plan design analysis. The design is often modular to obtain a certain goal and work within the structure of existing benefits. Alternatively, we can undertake a global benefits review and help you create plans that, together, satisfy a total compensation philosophy.

Review of DROP, PLOP and Retirement Incentive Plans

The development of retirement policies and plan designs have a significant impact on retention policies. We work with our clients to develop strategies for the workforce and design plan features that assist in supporting these strategies. Some of the plan designs that can accomplish specific workforce planning strategies are Deferred Retirement Option Plans (DROPs), Partial Lump Sum Option Plans (PLOPs), and Early Retirement Incentive Plans.

Impact of Re-Employment of Retirees

The re-employment of retirees has a significant impact on the cost of pension plans and has become a hot topic in today’s environment. We often assist in the development of a reasonable re-employment policy that is both affordable and meets the needs of the workforce.

Provide plan factors used to prepare retirement calculations at retirement

The purpose of a defined-benefit retirement plan is to provide lifetime income to the members upon attainment of benefit eligibility.  The contributions made by both the member and the employer over the member’s expected career are actuarially determined to be sufficient to provide the earned benefit for the expected post-retirement lifetime of the member as a single life annuity.  The plan offers optional forms of benefits which are actuarially adjusted to maintain equivalence with the expected value of the single life annuity to the member. In this manner, the funding accumulated over the member’s career is expected to be sufficient to provide either the single life annuity to the participant or an actuarial equivalent optional form of payment.

Actuarial equivalence is the process of balancing the present value of the expected amounts paid by the plan under two different forms of payments.  This typically involves the reduction in the monthly payment to the member during their lifetime because the optional form of payment would be expected to continue payments to a beneficiary.   It is important to note that actuarial equivalence relies heavily on the expected mortality experience of the annuitants.  The reality, of course, is that it will be only by coincidence that annuitants will live to the exact age expected.  Most will either die before or after their life expectancy and, for a sufficiently large group, the savings generated by those dying earlier than expected will offset the losses due to those annuitants dying later than their life expectancy.  The objective of actuarial equivalence is that the actual experience of a large group of annuitants is approximately as expected overall due to the offsetting gains and losses of the individuals in the group.

Most plans in the country allow a member to elect an actuarial equivalent optional form of payment at their retirement date.  Many are in the form of a joint and survivor form that allow the member to provide a lifetime benefit to their spouse if the member predeceases their spouse in retirement.  The reduction in the monthly payment to the member should be thought of like a life insurance premium to cover the expected increase in life expectancy of both member and spouse.

Individual Benefit Calculations

For many of our clients, CavMac assists the Human Resources department in handling the administrative duties of certifying or providing benefit calculations to its members.  Many of these calculations require actuarial calculations.  If needed, CavMac has designed an excel model to handle any types of calculations for our clients.  It is a tool that is customized differently for each client and it streamlines the work each month to allow for consistency and understanding by our clients.

Annual Employee Benefit Statements

CavMac will provide annually personalized benefit statements for active participants of the Plans. These will be completed in a four-step process.

  1. Data Collection – in this step, we will collect the data from the Plan administrator to be used to generate the statements. After the data has been collected, we will perform tests of the data to check for consistency and reasonableness.
  2. Benefit Calculation – utilizing the data provided we will calculate the member’s accrued benefit and projected retirement benefit. The accrued benefit is based on current service and current salary and represents the value of the member’s benefit as of the calculation date. The projected benefit is based on service and salary projected to normal retirement age.
  3. Statement Generation - the end result is a one-page personalized benefit statement that will display the member’s name, gender, date of birth, current service, service projected to the normal retirement date, accrued benefit and the projected retirement benefit.
  4. Statement Review - the statements generated in the previous step will be thoroughly reviewed by both CavMac staff and the administrator. Once we have final approval, a final copy of the statement will be prepared and sent to the administrator for distribution.

Funding, Budgeting & Reserving for Self-Funded Health Plans

Our actuaries and consultants have extensive experience in establishing funding rates and premium equivalencies that result in effective funding and budgeting of self-insured employee and retiree benefits. We work with employers that self-fund medical, prescription drug, dental, vision, life, disability and long-term care. We use your medical and drug experience files and plan design information for setting premium rates for both retiree and active self-funded plans as well as for performing budget projections and reserving.

Health care plan design modeling

We use our health care plan design models to estimate the impact of health plan design changes, such as changes to copays and deductibles, and to drill down and analyze claims costs in great detail.  If necessary, we work to recommend benefit changes or candidates for wellness and disease management, among other things.

RDS attestation and Medicare Part D creditable coverage

Retiree Drug Subsidies (RDS), Prescription Drug Plans (PDPs) and managing the OPEB and GASB implications: simply put, the options are as complex as the acronyms. However, we can provide a careful comparison and evaluation of all alternatives is needed to make the best decision for your plan and retirees. Our actuaries have conducted many such analyses for state and local governmental plans and employers and can provide attestations for RDS reimbursement and for providing notices of creditable coverage.

IBNR calculation

Our actuaries can recommend ways for plan sponsors to develop adequate reserves to fund outstanding claim liabilities for Incurred but not Reported (IBNR) claims for self-funded plans. We can estimate claims reserves for your medical, prescription drug, dental, vision, disability and long-term care, vacation and paid-time off benefits.