By: Russ Kamp, Managing Director, Ryan ALM, Inc.

In 1971, Alka-Seltzer launched an Ad campaign with the now famous slogan “Try It, You’ll Like It”. I can’t believe that it was nearly 53 years ago when that phrase first hit the airwaves, since I remember it so well. As you likely know, those 5 words subsequently took on a life of its own. Not surprisingly, it has been used by many of us over the years.

Well, it is time for Ryan ALM, Inc. to dust off that saying. I believe that sponsors of DB pension systems would benefit tremendously from a greater focus on their plan’s liabilities, since they are the only reason why a plan exists in the first place. We believe that with more attention to the promises that have been given, a pension plan can achieve greater stability in its funded status and contribution expenses. The greater certainty should be embraced since there is so little certainty in most aspects of pension management.

As an FYI, we were recently approached by a prospect to undertake an analysis on what a defeasement strategy might do for their fund. Given the current rate environment, one in which we believe that we can reduce costs by roughly 2%/year, it wasn’t shocking that our cost optimization model estimated >54% reduction in the cost to defease the future value benefits! Yes, >-54%. You’re probably skeptical of that last statement. So let us prove it to you.

We’d be willing to create, at NO COST, a Liability Beta Portfolio™ (LBP), which is what we call our cost optimization model. All we need from you to create the output are the projected liability cash flows (benefits, expenses, and contributions) as far into the future as possible. We are confident that you will be pleasantly surprised by the results. Importantly, you dictate the allocation to our CFM strategy from as little as 5 years of benefit coverage to defeasing all of the Retired Lives Liability. We normally recommend converting your current total return fixed income assets to a CFM strategy thus keeping intact the fund’s asset allocation.

How often are you given an opportunity in our industry to have a comprehensive analysis done at no cost? There really is nothing to lose. If I can be so bold as to amend Alka-Seltzer’s original wording, I encourage you to “try us, you’ll like us!”