A familiar saying tells us to “plan our work and work our plan.” That’s good advice for getting stuff done and something we can also apply to financial wellbeing in retirement. However, while experts may recommend different tactics and strategies, you’d be hard-pressed to find one who advises you just to wing it. 

With that in mind, Ruth Schau, FSA, EA, FCA, Institutional Division’s Sr. Director of Pension Solutions, explains that achieving financial wellbeing in retirement is planned, and shows how you can make it happen. 

 **KEY TAKEAWAYS**

- Getting help from a trusted source is a good start. 
- Employer-sponsored plans can be key; choose wisely. 
- Life expectancy should be part of the math. 
- Debt (like student loans) can derail even the best plan. 
- Retirees get sick, too; make sure healthcare is part of the plan. 
- A budget will keep your retirement finances on track. 

 

Let us help you.

How to Achieve Financial Wellbeing in Retirement 

## How DB pension plan sponsors can reduce variable-rate PBGC premiums

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In 2014, variable-rate Pension Benefit Guaranty Corporation (PBGC) premiums were 1.4% of the plan's unfunded vested benefits, but rates will increase to 2.4% this year and to 2.9% in 2016. Many plan sponsors of defined benefit (DB) pension plans may not be aware of these increases and may be caught off-guard come October, when the 2015 PBGC premiums are due. However, they can take action now to reduce or eliminate the variable-rate premium. Pacific Life's Russ Proctor and Marty Menin spoke to PLANSPONSOR about a possible solution for sponsors of DB pension plans—a solution that can help stabilize their funded status should they decide to make a larger pension contribution in 2015 and reduce their variable-rate PBGC premium.

**PS:** The increase in the variable-rate PBGC premiums has been large. How can a plan sponsor address this issue?

**Menin:** That increase is certainly significant. In fact, if you look back at 2013, the variable-rate premium was just 0.9% of the
unfunded vested benefit amount. This means that the variable rate PBGC premiums will have actually tripled in just three years, going from 0.9% in 2013 to what will be 2.9% next year. There is a relatively easy answer: Plan sponsors can increase their contributions to their pension plan and reduce that unfunded amount, but that's not necessarily an easy thing for all plan sponsors to do.

**PS:** So, what do DB plan sponsors do? How do they start to address this?

**Menin:** If plan sponsors do not have the cash available to fund the shortfall, they could consider borrowing the money. After all, the unfunded pension liability is effectively already just debt owed to the pension plan, so they would be replacing variable pension debt with fixed debt.

Let's say you could borrow money at 6% interest and contribute that to the pension plan to eliminate the PBGC variable premium. Although you are paying 6% interest on the loan, you are saving almost 3% in PBGC premiums. Thus, the net cost of borrowing is reduced by about half. For some plan sponsors, the cost of borrowing might even be lower in this low interest-rate environment.

**PS:** Isn't there still a lot of risk for the plan sponsor? How do they prevent the plan from becoming underfunded again due to interest-rate or investment volatility?

**Proctor:** That's a great point. The volatility risk may actually be greater now that the plan is fully funded. The plan sponsor is going to see more variance in that funded status now that there are more assets in the plan. And, after plan sponsors have funded up their plan and avoided those PBGC premiums, the last thing they want is to be underfunded again. Yet, that can easily happen if the assets remain allocated 60% equity and 40% fixed, where they're subject to all the fluctuations in the market.

**PS:** If there is volatility in equity markets and in interest rates, what can plan sponsors do to maintain their funded status?

**Menin:** That funded status volatility is exactly why Pacific Life created our Pacific Insured LDI pension risk management solution. Insured liability-driven investing (LDI) is a solution that more accurately matches assets and liabilities than was generally available for plans in the past. It guarantees that the plan asset is going to move in sync with the projected plan liabilities, regardless of the interest-rate changes or the performance of the underlying investment portfolio. Thus, the funded status can remain stable.

![](/images/blog/easing-the-pain-image-2.jpg)

_(1) Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company._

**PS:** Can you talk a little bit about how that actually works?

**Proctor:** The plan sponsor's pension liability for generally accepted accounting principles, or GAAP accounting purposes, is equal to the present value of the projected benefit payments that the plan sponsor has promised to its participants. This present value is determined using a discount rate based on the current interest yield curve for high quality corporate bonds such as the Citigroup Pension Discount Curve. The Insured LDI solution provides a contract value that is calculated using the same projected benefit payments provided by the plan sponsor and the same yield curve. Thus, the Insured LDI contract value will change in sync with the plan liability as interest rates change. If interest rates go down, the pension liability goes up and the Insured LDI contract value would go up by the same percentage—and vice versa. Thus, the plan's funded status ratio would stay the same.

Insured LDI also pays the scheduled benefit payments in a bulk payment to the plan every month, which provides the monthly liquidity that the plan needs to make those benefit payments.

**PS:** What has the Insured LDI solution's track record been?

**Proctor:** Our first Insured LDI client funded $50 million in December 2011 and elected to use the Pension Protection Act (PPA) full yield curve to determine the Insured LDI contract value. We now have more than a three-year track record of performance, and the plan sponsor has received a statement every month documenting that the Insured LDI contract value moved exactly with its pension liability.

Interest rates and investments in the market have been very volatile over the past three years, but this plan's funded ratio has remained the same every month. This has allowed the company's executives to really focus on running their organization, rather than worrying what the daily changes in the market would do to the pension plan.

In fact, the total annualized gross return for Insured LDI for this client was 7.94% per year during the period from December 31, 2011, through March 31, 2015. Although that is a good annual return, the real value of Insured LDI is that the plan's funded status remains stable no matter what happens to interest rates or equity markets. Thus, a plan sponsor can now fund up its plan to avoid PBGC variable-rate premiums, then use Insured LDI to make sure it doesn't drop back below the desired funding level.

Easing the Pain of Increasing Variable PBGC Premiums

Given current events and the economic uncertainty facing retirees, it might be beneficial for those nearing retirement age to consider guaranteed lifetime income. The [Setting Every Community Up for Retirement Enhancement (SECURE) Act](https://www.congress.gov/bill/116th-congress/house-bill/1994) was recently signed into law. It modifies several areas of current retirement rules and includes changes affecting [defined contribution (DC)](/lifetime-income/) plans that will make it easier for plan sponsors to add a lifetime income option to their DC plans. Providing a lifetime income option through a 401(k) plan may be attractive to plan participants due to potentially lower expenses and lower commissions. In addition, institutional or group pricing combined with unisex rates may be a particularly good benefit for women who elect to annuitize all or part of their account balances through their employers' 401(k) plans.

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## More Lifetime Income

Typically, lifetime income strategies provided at work through a 401(k) plan must use unisex pricing. This requirement means that women gain a pricing edge when purchasing lifetime income at work versus the retail marketplace. For example, if a participant rolled his/her DC account balance to an IRA and purchased lifetime income in the retail market, a woman would receive a slightly lower monthly benefit than a man at the same age. This result is simply because women generally live longer than men, and insurance companies take that into account when determining the monthly payment. However, in an employer-sponsored retirement plan, the insurance company providing the lifetime income solution must use the same annuity rates for both men and women, resulting in a positive outcome for women. In other words, if annuitizing a portion of their 401(k) balance makes financial sense given their retirement needs, then women win at work. 

The illustration at the top shows the expected differences between a male and a female annuity result at age 65. Note that in this example, both the male and female receive higher monthly benefits from an annuity purchased from a 401(k) plan due to no commission assumed on the 401(k) annuity. In addition, the female receives significantly more in total expected payments by about $11,000 due in large part to unisex pricing and her longer life expectancy. This is a valuable benefit to consider making available to employees of your organization.

Prior to the SECURE Act, few plans offered a lifetime income option. The SECURE Act helps resolve several of the key elements that have prevented plan sponsors from adding a lifetime income option to their 401(k) plans. 

## Fiduciary Safe Harbor

Plan fiduciaries have been requesting additional safe harbor guidance on selecting a lifetime income provider for years. Defined contribution plan sponsors were concerned that they would be held liable if an insurance company looked solvent at the time of selection but later failed. The SECURE Act provides new guidance on key factors that must be considered by plan sponsors and plan fiduciaries at the time a provider is selected. If these guidelines are followed, the plan fiduciary will not be liable for failure of the insurance company in the future.

As defined benefit pension plans and their guaranteed lifetime income features continue to disappear in the private sector, the annuity safe harbor rules are the best effort yet to provide guaranteed lifetime income options for 401(k) participants. The SECURE Act now provides plan sponsors the fiduciary guidance they've been seeking.
  
## Portability

Another obstacle to adding a lifetime income benefit in a defined contribution plan was the fear that the lifetime income option might incur penalties if distributed or rolled out of the plan after the participant changed employment. The new rule will permit participants to preserve any elected lifetime income options and avoid surrender charges and fees upon distribution to the participant or another qualified plan. 

  
## Communication and Education

The SECURE Act also adds a new feature to defined contribution plan statements, which must now include a lifetime income disclosure at least annually. This disclosure will illustrate the monthly lifetime income stream equivalent to the participant's total plan balance, providing vital information for retirement planning. The Act also includes a level of assurance for plan fiduciaries and plan sponsors that there will be no liability under the Employee Retirement Income Security Act of 1974 (ERISA) for providing an estimate of monthly lifetime income.
  
## Plan Sponsors Should Feel More Secure

Overall, passage of the SECURE Act will be seen by many as one of the most significant changes to the retirement landscape in years. Plan sponsors now have the opportunity to enhance 401(k) plans to provide one or more lifetime income options, so participants can choose to create guaranteed lifetime income for themselves and their spouses.

Women Win At Work as a Result of the New SECURE Act

## Comparing Pension Buy-Outs and Pension Buy-Ins

### Both options for defined benefit plan sponsors require careful consideration 

Defined benefit (DB) plan sponsors interested in reducing plan risk and eventually removing the liability from their company's balance sheet now have more options than just a few years ago. The new possibilities are helpful but also complicate the process of selection. To explore today's solutions, and how to use them, Alison Cooke Mintzer, editor-in-chief of PLANSPONSOR, spoke with Russ Proctor and Marty Menin, both directors of institutional sales at Pacific Life. They explained the difference between the traditional buy-out solution and the newer buy-in solution.

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**PS:** A buy-out of pension liability has been around a long time, whereas, in the U.S., the buy-in concept is relatively new. How are these two similar?

**Proctor:** A buy-out is a purchase of annuities for all or some of the participants in a defined benefit [DB] plan that transfers all the risk and liability off the plan sponsor's balance sheet to an insurance company. Buy-ins have been used for many years in the U.K. A buy-in, such as our Pacific Secured Buy-In solution, resembles a buy-out in that it transfers the investment risk, interest rate risk, liquidity and longevity risk to the insurance company. And, by the way, we just completed the third buy-in contract ever placed here in the U.S.

**PS:** Congratulations! So, what makes a buy-in different from a buy-out?

**Menin:** Under a buy-out contract, the liabilities are transferred to an insurance company and completely removed from the pension plan and the company's balance sheet. The insurance company issues certificates to individual plan participants and directly assumes all future payment obligations.

The key difference with a buy-in contract is that the plan sponsor retains the payment obligation to plan participants and the liability remains on the company's balance sheet. The insurance contract becomes an asset of the plan under which the issuing insurance company is obligated to cover the financial risks and makes covered benefit payments in bulk to the plan sponsor. Individual certificates are not issued to the plan participants and the participants remain in the plan for purposes of actuarial valuations, calculation of PBGC [Pension Benefit Guaranty Corp.] premiums, etcetera.

**PS:** Why would a plan sponsor choose a buy-in or buy-out?

**Proctor:** A buy-out is used when the plan sponsor is either terminating the plan, and has to buy annuities to complete the plan termination, or wants to completely settle a portion of the liability. A buy-in is more of a steppingstone to get to a buy-out; the plan sponsor may want to transfer most of the risk now but can't fully settle the liability yet.

One scenario where a buy-in may be helpful is for a plan sponsor that has borrowed money to fully fund the plan. A buy-in lets the plan sponsor lock in the annuity cost now and worry about terminating the plan later when the IRS [Internal Revenue Service] and PBGC approvals are received. This eliminates the risk of having to contribute or borrow more money 12 to 18 months later when unfavorable investment performance may have eroded the funded status of the plan.

It's also fairly common that companies have a large pension loss on their balance sheet, and it may be that completely settling the liability now would require that they recognize the loss on their income statement. A buy-in lets them secure the liability and the risks, transferring those to the insurance company, but leaving the pension liability unsettled until a better time in the future.

**Menin:** A buy-in is also an opportunity to capitalize on interest rate spikes. The plan sponsor may like where current interest rates are and want to lock that in, then complete the buy-out process later. The buy-in contract gives the plan sponsor more flexibility and time—something we try to emphasize with all our pension risk transfer products.

In the old days, you terminated the plan or you kept the plan. Today, a plan sponsor may desire to dollar-cost average into the interest rates applicable to a buy-out annuity contract. In other words, a plan sponsor may say, &quot;I want to de-risk my pension plan, but I don't want to do it all at once—I'd like to do it over a longer time frame, perhaps in segments.&quot;

Another benefit of a buy-in can be removal of longevity risk from the plan. Longevity risk has been in the news a lot lately. A plan sponsor can use a buy-in to transfer the longevity risk to Pacific Life without having to worry about full plan termination. Thus, a buy-in can be used for a longer transfer of risk without necessarily serving as a short-term bridge to a buy-out.

**PS:** If the endgame for the plan sponsor is a buy-out—as you said, plan termination—how does a buy-in fit into that strategy?

**Menin:** A buy-in contract lets the plan sponsor decide when to settle the liability and notify participants. Because a buy-in remains a plan asset, the sponsor can put a buy-in contract in place, then complete the regulatory paperwork required in a plan termination. The more plan sponsors seek flexibility in the pension risk transfer market, the more they'll see a buy-in as a creative solution.

**PS:** Continuing with flexibility, if you decide to pursue a buy-out strategy, how do you exit a buy-in contract, and are there additional fees?

**Proctor:** For Pacific Secured Buy-In, all the plan sponsor needs to do is provide a letter requesting the conversion to a buy-out. There are no additional charges, administrative costs or any fees. At that point, the liability and assets are completely transferred to Pacific Life and removed from the plan and the company's balance sheet. This may trigger the settlement accounting, but the plan sponsor controls when a conversion and settlement occur.

It is this control and flexibility that makes a buy-in a valuable tool for U.S.-based plan sponsors as they develop their strategy to manage their pension plan risks.

In or Out?

## How longevity impacts DB plans and financial wellness

People are living longer than at any other time in history. But what does that mean for defined benefit (DB) plan sponsors? Are there ways to help bolster the financial wellness of employees who might spend decades in retirement? And are sponsors prepared for the impact of longevity: its effect on their plan's financial wellness? PLANSPONSOR discussed these questions with Russ Proctor and Marty Menin, both Directors of Institutional Sales at Pacific Life Insurance Company, to determine what plan sponsors should know about the impact of longevity.

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**PS:** How long are people living today?

**Proctor:** When the subject is retirement planning, the real question is how long do people think they're going to live? I hear
people approaching retirement who say they expect to live to age 76 because they remember hearing that's the age of life
expectancy. However, that number is a little out of date and—more importantly—that's from birth. Once you reach age 65, the
Society of Actuaries' mortality tables show that males are typically living to age 86 and females to age 89.

**Menin:** Especially for married couples; there's a 50/50 chance that one spouse will live to age 94, and a 20% chance one of
them will live to 100. Thirty to 35 years of retirement planning is a long time to plan for and to be certain that your money will last.

**PS:** Does longevity differ by demographics?

**Menin:** There are different ways to look at demographics, aside from the most obvious male versus female. The Society of
Actuaries' (SOA) mortality tables have begun to break out things like blue collar versus white collar. Where individuals live, their education, and their income are also factors that affect longevity. From a DB plan sponsor perspective, they may have different populations covered by the pension plan—such as manufacturing and research divisions in which workers have different educational or income backgrounds—and they need to consider those to determine what the true longevity risk is for their pension plan.

**Proctor:** From the plan sponsor's point of view, the difference between white collar and blue collar employees affects their
pension plan and how long benefit payments will be made. If you have a highly-educated, highly-paid white collar workforce, your risk may be much higher in terms of having to pay those benefits for a longer period of time and that will affect the plan's financial wellness going forward.

**PS:** How does this impact qualified pension plans?

**Proctor:** With the qualified defined benefit plan, employees have guaranteed payments for life. There is really no longevity risk for the employee. It's all on the employer. When you think of people living to age 86, 89 or even 100, the plan cost can increase significantly. It's all the more reason to transfer that risk to an insurance company, that's one of the reasons the buy-out strategy is so popular right now.

**Menin:** Most plan sponsors recently updated the mortality table they use to calculate the GAAP accounting pension liability. This increased the projected benefit obligations (pension liability) from 5% to 7%. Also, if these mortality rates continue to improve faster than projected, plan sponsors would need to update their liabilities again (Note: the SOA just updated their tables which reduced life expectancy by about 5 months).

**PS:** What's the impact on nonqualified defined benefit plans?

**Menin:** These plans are typically offered to the highly compensated senior executives in a company. The interesting thing is that many plan sponsors use the same mortality assumptions for their non-qualified plan liabilities that they use and apply to their qualified plans. Thus, the non-qualified plan liability could end up being higher than expected.

**PS:** How does this impact individual retirement planning?

**Proctor:** When a plan sponsor terminates their pension plan, leaving only a defined contribution plan, the longevity and investment risk that was once in the defined benefit plan is now shifted to the employees. The employees are then responsible for managing those assets for their lifetime and if the market performs below their expectations, the employees are the ones that suffer. Maybe they invest too conservatively, or the market crashes right before retirement, it can cause a pretty severe hardship for the employees. In contrast, the plan sponsor benefits from the law of large numbers. They're spreading these risks over a longer period of time, over several generations of employees in fact, whereas individual employees are subject to the investment performance of the assets they've accumulated.

**Menin:** Guaranteed lifetime income solutions have now become the next step in retirement plan offerings, and everybody is trying to figure out how to do it. It is difficult to protect oneself from longevity risk because you can build up a large account balance in a 401(k) plan, manage that money for 30 to 35 years and still have to think about watching the market and making sure you're properly allocated for that extended period of time. Slowly but surely, plan sponsors will start getting serious about adding some kind of lifetime income solution to their 401(k) plans.

**PS:** What solutions are available to address these issues?

**Proctor:** Once plan sponsors complete a DB buy-out, they ask: &quot;What do I do next?&quot; One strategy is adding a group annuity option to the 401(k) plan, such as a Pacific Lifetime Income® annuity. When employees retire, an annuity option gives them the opportunity to purchase a guaranteed lifetime annuity with a portion of their 401(k) assets. This provides additional guaranteed monthly income to supplement Social Security benefits.

By offering an annuity option, the plan sponsor also provides a great educational opportunity because some employees just don't understand what an annuity can provide in terms of guaranteed lifetime income. Employees often think, &quot;If I die too soon, I'll lose my money.&quot; But by offering a Pacific Lifetime Income® annuity, employees can learn about multiple forms of annuities. They can discover that with a joint life option, money isn't &quot;lost,&quot; it's paid to their spouse. Or if both spouses pass away earlier than expected, a 20-Year certain payout ensures their beneficiaries receive the money.

**Menin:** At Pacific Life, we provide an interactive website that lets employers or advisers run different scenarios for their participants. Providing these different scenarios to participants helps them understand and evaluate the lifetime income options available to them.

**Proctor:** We hear many plan sponsors say they're looking for more holistic ways to help employees with financial wellness. This means plan sponsors are thinking about whether employees understand their healthcare options, Social Security benefits, or investing basics. Educating employees about annuities can be an important part of that. After all, annuities are still one of the best ways to deal with longevity risk, which is an absolutely crucial factor in financial wellness for both companies and their employees.

Longer Lives, Larger Financial Needs

## Corporate Tax Cut? Profit Repatriation? Rising Interest Rates?

### Will President Trump's anticipated economic changes create opportunities for DB plans?
  
There is much debate in corporate boardrooms over the effect the current administration's economic policies will have on corporate tax rates, possible repatriation of foreign profits and interest rates. Considering all the talk about the changing economic environment, PLANSPONSOR sat down with Russ Proctor and Marty Menin of the Retirement Solutions Division at Pacific Life to ask them whether these developments will help defined benefit (DB) pension plans.

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**PLANSPONSOR:** If corporate tax rates are reduced significantly this year or next, how could this impact pension plan sponsors?

**Russ Proctor:** Under the assumption that corporate tax rates will get reduced, plan sponsors might consider accelerating the funding of their pension plans to take advantage of the larger tax deduction before the lower tax rates are fully effective. In some cases, the contribution could be made after the end of the plan year and still deducted for that year. For example, a company with a calendar year plan year may be able to make a contribution as late as September 15 of the following year and deduct it for the prior year's tax return. If a plan sponsor intends to make a contribution to the pension plan in one of the next few years, it may make sense to do that in a year when it can take a larger tax deduction.

**PS:** What if the new administration gives companies a tax break on their offshore profits? Could they use those repatriated profits to make pension contributions?

**Marty Menin:** There are many reasons a plan sponsor may want to contribute available cash to its underfunded defined benefit plan. These include the potentially larger tax deduction we just mentioned, as well as reducing PBGC [Pension Benefit Guarantee Corporation] variable rate premiums. This year, the PBGC premium is 3.4% of the unfunded pension liability. Assuming average wages increase 3% per year, it is projected to increase to 3.9% in 2018 and 4.4% in 2019 (1). If the plan sponsor can make a contribution to fully fund the plan, it can reduce the impact of those large and increasing variable rate premiums. Some companies are considering &quot;borrowing to fund.&quot; If you can borrow at an interest rate that is close to the PBGC variable premium rate, why not borrow the money and increase the funded status of the plan? So, whether a company has cash available, borrows the funds, or captures the funds thanks to a foreign profit repatriation program, it should review their options to deploy that cash, and that analysis may include the possibility of fully funding the pension plan.

**PS:** What would a plan sponsor do then? Terminate the pension plan? If suddenly you've made a huge contribution to your pension plan, what's next?

**Menin:** That's the key question: Once you've got a fully funded pension plan, what do you do then? Unfortunately, unless you've already filed for a plan termination, and filed all the necessary paperwork with the PBGC and the IRS [Internal Revenue Service], you can't immediately terminate the plan and get that liability off your balance sheet. A plan termination can take six to 18 months or longer. So, that's why we've built insurance options that offer flexibility for plan sponsors. There are tools that can help them lock in their funded status while they proceed with their plan termination.

**PS:** How would that work? How quickly can a plan sponsor act to ensure its funded status doesn't deteriorate after it has fully funded the plan?

**Proctor:** The quickest and probably easiest way to secure the plan's funded status would be to use our Insured LDI [Liability-Driven Investing] solution. Insured LDI is a guaranteed match to the plan's projected liability based on the Citi Pension Discount Curve. This provides an ideal asset/liability match for the plan sponsor. Thus, the funded status will remain stable as interest rates and equity markets remain volatile prior to full plan termination. In addition, Insured LDI is fully liquid, which allows the plan sponsor to withdraw the money without penalty at plan termination in order to pay lump sums or purchase annuities.

**PS:** What other options are available to plan sponsors to preserve their funded status?

**Menin:** There's another tool that's actually been a little bit more prominent in the United Kingdom. A buy-in annuity contract is an option for locking in costs and preserving funded status. Like Insured LDI, the buy-in will help stabilize the plan's funded status and doesn't require that the participants be notified of the annuity purchase, so the contract can be executed fairly quickly. The buy-in goes a step further than insured LDI by locking in all costs related to the annuity purchase including mortality, early retirement and other demographic changes. So, if a plan sponsor had just fully funded its plan and then wanted to quickly and completely lock in the annuity costs—say, interest rates had spiked at the same time—then a buy-in might provide a great solution.

**PS:** What other advantages does a buy-in provide for a defined benefit plan sponsor?

**Proctor:** The buy-in allows the plan sponsor to control when it completes the liability transfer regardless of what's going on in the market at that time. When a plan is terminating, there is usually a 120-day window for the plan to distribute assets after receiving IRS approval. If interest rates drop and the plan is not properly hedged against interest rate movements, then the plan might have too little money to purchase the annuities needed. The buy-in contract can be put in place, and then the plan sponsor can file the termination paperwork, prepare notices to plan participants and do all of those things it needs to do when terminating the plan. Once the plan sponsor is ready to fully terminate the plan, it would simply write us a letter to request that the buy-in be converted to a buy-out and issue annuity certificates to participants. As far as we know, Pacific Life was the first insurance company to successfully convert a buy-in contract to a buy-out contract.

It's important to mention that the plan sponsor is not required to terminate the plan or convert to a buy-out after purchasing the buy-in contract. In fact, the plan can keep the buy-in contract in place indefinitely or convert to a buy-out, whether they terminate the plan or not.

**PS:** So, to summarize, if the economic environment under the new administration encourages plan sponsors to fully fund their pension plans, it sounds like Pacific Life has some valuable tools for pension plan sponsors.

**Proctor:** The last thing those plan sponsors want is to fully fund their plan and then learn something's happened in the market that has caused them to be underfunded again. Once they're fully funded, they need to put a lid on that plan and secure that funded status. The tools we have available can help them do that.

New Economic Policies – Opportunities for Defined Benefit Plans?

## Maybe Annuities Aren't That Expensive After All

Defined benefit (DB) plan sponsors have been contemplating various pension de-risking solutions more seriously than ever. Some plan sponsors have the preconceived idea that annuities are &quot;too expensive.&quot; But many plan sponsors have not considered, and have not measured, the true economic cost of their defined benefit pension plans. To further investigate the concept of accounting cost vs. economic cost, Alison Cooke Mintzer, editor-in-chief of PLANSPONSOR, spoke with Russ Proctor and Marty Menin, both directors of institutional sales at Pacific Life. They explained the difference between these two types of costs.

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**PS:** What is a plan sponsor's accounting cost?

**Proctor:** Accounting cost refers to the amount of liability the plan sponsor has to report on its balance sheet for its defined benefit (DB) plan. This pension accounting liability is the present value of only the projected benefit payments that the plan sponsor promised to the pension plan participants. It does not include a variety of other direct or indirect expenses that the plan will pay in the future but that the plan sponsor is not required to recognize on the balance sheet now.

**PS:** What's the difference between that and the economic cost?

**Menin:** Economic cost refers to the all-in total present value of the costs that the plan sponsor will eventually pay for the maintenance of the pension plan. The direct expenses the plan sponsor pays includes for example: the annual administrative costs, actuarial costs, legal costs, asset management fees and Pension Benefit Guaranty Corp. (PBGC) premiums. Then there are indirect costs for which the plan sponsor may not receive an invoice that need to be recognized as part of the economic costs of the plan.

**PS:** Can you provide a little more detail about some of those indirect costs?

**Proctor:** An example of indirect cost is downgrades or defaults on bond investments. If the plan assets are invested in a bond that is downgraded or that defaults, then the plan assets will decrease. However, the plan sponsor does not receive a specific invoice identifying this cost. Another example is mortality improvement. The Society of Actuaries is releasing a new mortality table this year that indicates people are living longer. If participants live longer than expected, then the plan will have to pay benefits for a longer period of time, which will result in additional cost to the plan sponsor. This cost may not be realized in the accounting cost until the plan sponsor updates the mortality assumption. It is expected that the new mortality table could increase the liability 4% to 10%, depending on the age of the participants, compared with the table currently used in determining accounting costs.

Although some of these indirect costs such as default risk and mortality can be quantified and added to the economic costs, others are more difficult for plan sponsors to nail down. For example, there is a cost for the time spent by staff to research questions by participants, search for lost participants, conduct a search for a new asset manager, monitor and reconcile actual and expected investment results, etc. Indirect costs include the amount of time executives spend on all these things that take time away from managing the company's core business. Clearly their time is valuable but nobody is quantifying that expense.

There are many costs that plan sponsors just take for granted as part of operating the pension plan. Accounting rules don't require you to book those on your balance sheet, but you've got to take those into consideration when de-risking and comparing to the annuity costs.

**PS:** If a plan sponsor were to add in all of these additional costs you mention, how much higher is its economic cost relative to its accounting cost?

**Menin:** It will vary from plan to plan but could be about 16% higher than what the plan sponsor will show on their balance sheet. The chart we included here shows that, for an average plan, the present value of the future administrative costs, including PBGC premiums, is projected to add about 2% to the economic cost. Future investment management fees (based on a charge of 50 basis points [BPS] per year on assets under management [AUM]) would increase costs another 5%; mortality improvements are assumed to add another 6%; and finally the cost of default protection will add a few percent. Add these up and your true economic cost may be about 16% higher than the accounting cost disclosed on the balance sheet.

![](/images/blog/economic-cost-vs-accounting-cost.jpg)
  
The important part of this is that plan sponsors need to analyze these future costs of maintaining the plan and add them to the current accounting liability.

Whether a plan sponsor believes that its total economic costs are 116% of the accounting liability, as we described, or lower, or higher, it's vital to recognize that these costs are real. Plan sponsors need to be conscious of this when they compare their all-in plan costs with the costs of purchasing an annuity contract, to transfer the risk to an insurance company and de-risk their plan.

**PS:** How does that 116% compare with the cost of an annuity?

**Proctor:** It depends on several participant and economic factors. For example, for a group of retired plan participants, we often see annuity quotes that may range anywhere from 108% to 118% of their accounting liability. This cost is affected by the duration of the annuity contract. Are these people younger or older? How healthy is this group of participants? What industry are they in? The current interest rates at the time they actually purchase the annuity will affect the cost, as well. Costs are typically higher for active or terminated vested participants than for retired participants. This is due to longer duration of the liability, which includes reinvestment risk and more uncertainty of when the payments will commence.

**Menin:** For a long time, people just said, &quot;Annuities are too expensive,&quot; but often no one really sat down and crunched the numbers for comparison to the economic cost.

When the plan sponsor reviews the full calculations, they may find that it is often less expensive on a true economic basis to annuitize and transfer the risk to an insurance company.

**Proctor:** As we talk about comparing your economic cost with the annuity cost, it's also important to look at segments of the plan. Sometimes we see that the annuity cost is much lower than the economic cost might be for a group of retirees with very small benefits. The administrative costs for those small benefits may be 8% to 10% of their liability. So when you look at that small group, your economic costs may be 125% of the liability. If you can purchase annuities at 108%, you can have some significant savings on pockets of participants within your plan—you can pull out pieces of it, shrink the size of your plan and de-risk it in a very economical way.  

Economic Cost vs. Accounting Cost

Many defined benefit (DB) plans were closed to new entrants and/or frozen after the market crash in 2001 and the financial crisis in 2008. Due to many reports of the demise of DB plans, advisers might think all these plans would be terminated by now. However, many are still in existence and are—despite significant market returns during the past few years—still underfunded. As plan sponsors struggle with the volatility of their plan's funded status and the increasing expenses required to maintain them, they are looking for assistance. PLANADVISER spoke with Russ Proctor and Marty Menin, directors with Pacific Life in their Retirement Solutions Division, about the challenges defined benefit clients face, how some of them mirror challenges faced by defined contribution (DC) plans, and the solutions retirement plan advisers can consider to help resolve these issues.

---

**PLANADVISER:** First, why is funded status volatility a problem for frozen defined benefit [DB] plans?

**Marty Menin:** Volatility is somewhat accepted for an ongoing plan that is still accruing benefits for the company's employees. However, once the plan is frozen and employees are not earning any additional benefit, the volatility is just a financial irritation to the company. Add to that volatility the increasing administrative expenses, including Pension Benefit Guaranty Corporation [PBGC] premiums, and now it's more costly than ever to maintain these frozen DB plans.

**PA:** Many companies have not fully funded their plans hoping to earn their way out of this underfunding problem. Advisers know that doesn't work when saving in your 401(k) plan, but how has that worked on the DB side?

**Russ Proctor:** Yes, that's a good comparison. Just hoping your 401(k) plan earns its way into the retirement income that you need is not going to work, without putting some money in, and for the DB plan, this really has not worked out very
well either.

At the end of 2008, the average large plan was 78.3% funded. (1) The total funding shortfall for all of these plans was about $250 billion. At that time, the S&amp;P 500® index was at 826 and the 10-year Treasury was 2.25%.

Move forward to May 31, 2017, the 10-year Treasury is about the same at 2.21% and the S&amp;P 500® index has increased almost 200% to 2,412. On top of that, the Milliman 100 companies have contributed more than $385 billion to these pension plans during this time, more than the underfunding that was there back in 2008.

One would think the plans would be in a surplus position with that level of contributions and the approximate annual 12.8% market returns. Sadly, the funded status is still well short of 100% and stands at only 83.8%, an increase of only 5.5% during that time frame. (2)

**PA:** How is it possible that these plans are still that far underfunded given the increase in equities and that level of contributions?

**Marty:** Not all of those Milliman 100 plans are closed and frozen. Thus, some of those contributions are being used to fund the increases in the accrued benefits. Also, not all of the assets are invested in equities. Most sponsors would find it too risky to be 100% in equities in their pension plan similar to how an individual approaching retirement might not want to be 100% in equities. Therefore, not all of their assets are increasing at that historical rate of 12.8% per year. Other assets may be invested in a fixed income or traditional &quot;Best Efforts&quot; LDI [liability-driven investment] strategy designed to move in the direction of the liability when interest rates change but not close the funding shortfall.

**Russ:** Speaking of interest rates, even though the 10-year Treasury is a common interest-rate benchmark, the pension liabilities for GAAP accounting are based on corporate bond rates (e.g., Citigroup Pension Discount Curve). These bond rates have decreased about 2% from 5.87% at 12/31/08 to 3.77% at 5/31/17. This 2% reduction in the liability discount rate would result in an increase in pension liability of 20% to 30%. The fixed income or LDI assets should increase as interest rates decrease to offset this increase in liability. However, a best-efforts LDI strategy cannot guarantee that assets will increase the same as the liability when the discount rate changes.

Finally, the increasing ongoing administrative expense of maintaining the DB plan is eating away at the funded status.

**PA:** What are the risks for sponsors and advisers as they continue to try to earn their way out of an underfunding situation?

**Russ:** If what they have done for the last eight years isn't working, following the same strategy and hoping that something different will happen is sure to be a problem. They should be asking these questions:

- Do they expect the next eight years to provide the same or better equity returns of almost 13% per year? A market correction could have a huge negative impact on funded status.

- Will interest rates finally increase enough to lower the plans' liabilities? Many have been predicting an increase in rates for the last eight years, but we are still at a 10-year Treasury below 2.50%.

- Is it time to implement a strategy to get the plan fully funded in a timeframe that fits the organization they're working with to move the liability off the balance sheet?

**PA:** What are other ways advisers can help plan sponsors decide when or whether or not to fully fund their pension plans?

**Marty:** In 2019, PBGC variable premium levels are going to be about 4.4% of the unfunded liability. This is a cost that can be completely avoided simply by fully funding the plan. Even if the company needed to borrow the money to fund the plan, they may find the interest cost will be less than the PBGC variable premiums.

Another incentive to fund now is the potential reduction in corporate tax rates. Many plans are looking at accelerating contributions to take advantage of the tax deduction while the corporate tax rate is higher, versus what might be a 15% or 20% tax rate in the future.

**PA:** If a plan sponsor funds its plans to 100%, how can it make sure the plan does not end up at 80% again, like what happened in 2008?

**Russ:** It can take six to 18 months to completely terminate a plan and transfer that liability off the company's balance sheet. So, it's important for the company to remove as much risk from the plan as it can during that process so that funded status can be maintained.

Plans can consider an Insured LDI solution to guarantee the assets move with the liability and protect the funded status.

They can also consider purchasing a Buy-in annuity solution. That really locks in all the costs of those future annuities and transfers the risk to the insurance company without triggering settlement accounting.

Finally, they can purchase a Buy-out annuity for a subset of the participants, usually those with the smallest benefits. That will remove that liability, shrink the size of the plan, and eliminate all future administrative costs related to those transferred participants.

**PA:** For advisers without DB plan specialization, is there enough information and support for them to help their clients with DB plans?

**Russ:** Absolutely. Even though an adviser may not be a DB expert, think of the DB plan as an individual saving for retirement: &quot;I need to help them solve their retirement funding shortfall.&quot; Advisers can reach out to other pension consultants, insurance companies, and the plan's actuary to gather the necessary information to identify the funding shortfall and develop a plan to meet the company's funding goal.

**Marty:** Be the adviser who says, &quot;We are going to develop a plan to get you to 100% funded, and we're going to protect that funded status along the way.&quot; If you can solve these problems for your clients, you can become their trusted adviser. This could easily lead to a growth in other business opportunities—including additional defined contribution, nonqualified plan, or even personal wealth clients.

Invest or Contribute to Solve a Retirement Funding Shortfall?

## How DB pension plan sponsors can solve their &quot;orphaned&quot; DB SERP liabilities

With many corporate defined benefit (DB) plans now closed, frozen or terminated, many of those same plan sponsors may have leftover—i.e. &quot;orphaned&quot;—nonqualified defined benefit supplemental executive retirement plans (SERPs). These nonqualified DB SERPs, which were put in place for the company's executives and typically mirror the benefits of the qualified DB pension plan, are now also likely closed and/or frozen. However, nonqualified DB SERPs are not easily terminated. Pacific Life's Russ Proctor and Marty Menin spoke to PLANSPONSOR about a solution for sponsors of nonqualified DB SERPs—a solution that can help plan sponsors stabilize their balance sheets and solve the investment and mortality risk associated with these nonqualified plan liabilities.

---
  
**PS:** The trend for corporations who have qualified defined benefit pension plans is to de-risk those plans. How does this affect a plan sponsor that also has a related nonqualified DB plan for its executives?

**Menin:** Those plan sponsors that have closed or frozen their qualified DB plans likely took similar steps for their nonqualified plans. Many plan sponsors may not realize that they can't easily terminate those nonqualified defined benefit SERPs. If they were to terminate them, they have to be very careful to avoid triggering constructive receipt for the executives. This could create negative financial results for both the company and the executives under Internal Revenue Code (IRC) Section 409(A).

**PS:** So, if a plan sponsor has taken some action to de-risk its qualified DB plan, how does it also de-risk the nonqualified DB SERP?

**Proctor:** The good news is that one of the same solutions used to solve the qualified defined benefit risk can also be used for nonqualified DB SERPs. Our Pacific Secured Buy-In® solution is an asset that's designed to be owned by the corporation or a rabbi trust to de-risk the nonqualified DB SERP liability. With the Buy-In, Pacific Life makes a bulk payment each month to the company or rabbi trust in the exact amount that is needed for the company to make the individual payments directly to the executives.

**PS:** You're suggesting that a plan sponsor use a Buy-In annuity for its DB SERP liabilities. Could a sponsor use a Buy-Out and be done with it?

**Menin:** The problem with using a Buy-Out annuity contract is that once the insurance carrier issues an annuity certificate to the executive and starts paying the executive directly, then the executive is in constructive receipt of the full present value of the benefit stream.

**PS:** Clearly the Buy-In is a better solution. Are there other advantages to using a Buy-In contract as a solution for managing DB SERP risk?

**Proctor:** One of the main advantages of the Pacific Secured Buy-In annuity is that the plan sponsor would then have an asset to match the liability. The Buy-In asset value and the DB SERP liability on the plan sponsor's balance sheet will move in parallel for the retired participants in the DB SERP covered by the Buy-In annuity contract. This Buy-In solution has not been available to plan sponsors in the past; it's really only recently that it has begun being used for nonqualified plans.

**PS:** You emphasized that the Buy-In contract would cover all of the &quot;retired&quot; participants in the DB SERP, why is that so important?

**Menin:** As with most nonqualified plans, there are subtle tax issues that a plan sponsor needs to remember. The Buy-In contract is structured as a corporate-owned annuity that would be held as an asset of the corporation or as an asset of a grantor rabbi trust. That's the key, because under IRC Section 72(u), a corporate-owned annuity is potentially taxable on the &quot;income in the contract.&quot; The good news is that an immediate annuity is generally exempt from that same taxation. Retired DB SERP participants are receiving annuity payments now, so those would be considered immediate annuities, thus exempt from that Section 72(u) tax rule.
  
![](/images/blog/new-financing-solution-image.jpg)

**PS:** Is financing these DB SERPs really that important to executives? Can't they just keep on with the typical &quot;pay as you go&quot; method?

**Proctor:** Certainly they could continue with the pay as you go method, but these frozen plans are in a different stage of their life cycle than when they were first set up. When they were first set up, most of these participants were likely active employees, so the company was making very small or no monthly payments. These plans were probably frozen many years ago.

Those executives are now older and, in fact, most have likely retired. Therefore, the monthly benefit payments are now much larger, resulting in a greater liquidity demand on the company than in the past. Our Pacific Secured Buy-In solution provides the exact liquidity needed for the monthly benefit payments, and also transfers the investment, longevity and other risks to Pacific Life. It also minimizes the volatility in shareholder equity on the balance sheet that can occur with an unfunded SERP as interest rates change.

**PS:** Plan sponsors clearly need to ensure that they are aware of and paying close attention to the status of their DB SERP plans, correct?

**Menin:** Plan sponsors should evaluate what they've done with these defined benefit supplemental plans and make sure they are aware of all the applicable rules. A DB SERP usually mirrors the plan sponsor's qualified DB plan in that the benefits are paid as an annuity stream and are due for the life of the executive and likely for the life of the executive's spouse. As a result, these plans could be substantial liabilities for plan sponsors. Sometimes, too, SERP payments are much larger in terms of the monthly benefit than the qualified plan benefits for the company's executives; thus, the SERP benefits play a key role in the retirement planning for the company's senior management team.

New Financing Solution for Frozen Nonqualified Defined Benefit SERPs

Under GAAP accounting rules, plan sponsors of defined benefit (DB) pension plans must recognize the plan's funding deficit on the company's balance sheet. This wouldn't be so bad if it weren't so difficult to match plan assets to plan liabilities. Unfortunately, DB plans are consistently challenged by volatile interest rates and equity markets. While achieving a precise asset to liability match is difficult in the best of times, it is extremely challenging during periods of volatility.

Many plan sponsors use traditional liability-driven investing (LDI) strategies. However, because the pension payments are paid monthly over a very long period and the pension liability is measured annually based on specific corporate-bond rates, matching assets to liabilities is not an easy task. As those corporate-bond rates move, the liability moves as well. The plan assets not only need to deliver the monthly cash flows to pay benefits, they also have to match the movement in the value of the liability as closely as possible. Traditional best-efforts LDI strategies have had trouble with that precise matching, which results in tracking error.

Asset managers will say to a plan sponsor that they &quot;cannot buy the curve.&quot; They're referring to the Citi Pension Discount Curve (CPDC) that's used by many actuaries and plan sponsors to measure plan liabilities. It's a nearly impossible task for an asset manager to buy and hold the same bonds and allocation used to develop the monthly CPDC.

Even if an asset manager could hold all the bonds in the CPDC, it may not be a suitable investment for a pension plan because of the heavy concentration by industry and by issuer of the bonds used in the curve. This concentration increases the downgrade and default risk of the investment portfolio, and thus may not meet the diversification requirements of the plan's investment policy. If a bond is downgraded or defaults during a month, it is simply taken out of the CPDC in the following month. Thus, the CPDC never suffers losses from downgrades or defaults. However, a traditional LDI portfolio that actually purchased those bonds that were later downgraded or defaulted would suffer a loss.

An alternative to traditional best-efforts LDI could employ the services of an insurance company, because an insurance company can guarantee (1) the published rate curve precisely (i.e., mimic the CPDC) and promise to return the same benefit payments as the plan actuary measures when determining the GAAP liability. By employing this approach, an insurance company could &quot;mimic&quot; the curve and create an insured LDI strategy. This would result in no bond credit risk (no downgrades or defaults) and no interest-rate risk. As a result, there would be no tracking error. No matter how the yield curve changes from month to month, the guaranteed or insured LDI strategy will match the plan's projected liabilities; and thus, the plan's funded ratio will remain stable, and balance-sheet volatility would be reduced.

Financial executives and their Boards of Directors spend a significant amount of time trying to understand complex traditional LDI strategies, comparing actual results to expected results and reasons for the variances. By transferring this responsibility to an insurance company that offers an insured LDI strategy, those decision-makers can turn their attention back to the core business.

Of course, this insured strategy must provide flexibility so plan sponsors can adapt it to their needs. For example, this strategy could be implemented on a partial basis, such as stabilizing only the retiree liability. Also, the plan should not be locked in to the contract so that a plan sponsor can exit the contract completely with no penalties or surrender charges. In this way, transferring the liability to an insurance company could provide cash flow for retirees and remove the stress from the plan sponsor despite volatility in interest rates.

Reduce the Impact of Pension Volatility on the Balance Sheet

With the recent drops in the stock market and interest rates, the value and importance of including an insured de-risking strategy as part of your company's defined benefit (DB) pension plan investments are clearer than ever.

---

A de-risking strategy, such as insured liability-driven investing, ensures that your DB plan's assets move in sync with the liabilities as interest rates or equity markets change. Though you may see volatile equity and interest- rate changes in the market, your DB plan's funded status will remain stable. This is particularly important for frozen DB plans for which you intend to eventually fully fund the plan and remove the pension liability from the company balance sheet. There is nothing more frustrating than spending years funding your plan, getting it to the point where you are ready to terminate, and being forced to delay your plans after market volatility reduces your funded status.

You may remember back in 2008, when the S&amp;P 500® dropped 40% and 10-year Treasury interest rates dropped 200 basis points. (1) Companies without a solid de-risking strategy suffered significant reduction in their plan's funded status. For many plan sponsors, this resulted in diminished shareholder equity on the company's balance sheet. 

Although we recovered well in the years since 2008, the 2020 equity market correction reminds us that we need to be prepared for market volatility—and that there are tools that can help maintain a pension plan's funded status. Keep in mind that, for a near-fully funded plan, funded-status volatility in both the positive and negative can cause problems. For instance, if your plan is significantly overfunded, it could be difficult to recover those excess assets in the pension plan, and you may end up paying most of it to the IRS in excise and income taxes when the plan is finally terminated.

## Are you prepared for a sudden positive or negative shift in the market?

Consider the scenario illustrated below, which is a high-level example of what might happen to a plan sponsor under both pessimistic and optimistic economic scenarios. It assumes that equities change 20% and interest rates change by 100 basis points. We have compared the resulting impact on shareholder equity depending on the plan sponsor's efforts to de-risk the pension plan or to continue with the current investment strategy.

The de-risking strategy involves purchasing a guaranteed annuity contract designed to stabilize the plan's funded status. Note that a traditional liability-driven investing (LDI) approach is typically a best-efforts investment strategy that does not guarantee funded status will remain stable under changing market conditions. This example illustrates that not de-risking the plan exposes the plan sponsor to significant volatility in funded status, which results in a corresponding impact on shareholder equity.

It also shows that there is an asymmetric result without de-risking. The plan sponsor suffers 100% of the downside risk but can only gain a portion of the upside benefit due to the 50% reversion tax on excess assets.

Thus, a plan sponsor is not properly compensated for the risk being taken with the pension plan as it approaches full funding. The potential range of outcomes optimistically tops at a $130 million increase in shareholder equity and as low as $211 million decrease under the pessimistic scenario. The results are not symmetric because the plan sponsor ends up overfunded in the optimistic scenario and cannot receive excess assets back into the company as cash. (2)

Under the de-risking approach, the volatility is limited to a very narrow range, increasing or decreasing by only $6 million under the two scenarios. 

These results illustrate why a plan sponsor should consider de-risking now to reduce the impact of equity and interest rate volatility in the future.

Keep in mind that you need not put all your pension assets in the insured liability-driven investing strategy. You can choose a specific portion to dial in the amount of stability that is right for you.

![](/images/blog/prc1623-table-1.png)

![](/images/blog/prc1623-table-2.png)

![](/images/blog/prc1623-table-3.png)

Pension Stability in Volatile Markets

## Reconciling DB asset and pension liabilities

Defined benefit (DB) plans have endured much over the past few years, from new regulations to volatile interest rates and equity markets, all of which has led plan sponsors to find better ways to match their assets to the liabilities of the plan. Alison Cooke Mintzer, editor-in-chief of PLANSPONSOR, spoke with Pacific Life Insurance Company about their innovative Pacific Insured LDI® product. She sat down with Russ Proctor and Marty Menin, both directors of institutional sales at Pacific Life, to talk about liability-driven investing (LDI) and a new strategy for defined benefit plan sponsors.

---

**PS:** What are some challenges for the traditional LDI approach?

**Proctor:** Precise asset/liability matching is difficult for pension liabilities, particularly for traditional LDI strategies. The liabilities are paid monthly over a very long period of time, and the pension liability is measured annually based on corporate bond rates. As those corporate bond rates move, the liability moves as well. The asset not only has to deliver the monthly cash flows, it also has to match the movement in the value of the liability.

Traditional LDI strategies have had trouble with that precise matching, which results in tracking error.

A lot of asset managers talk about the fact that you cannot buy the curve, and they're referring to the Citigroup Pension Discount Curve (CPDC) that's used by many actuaries and plan sponsors to measure the plan liabilities. It would be a difficult task for an asset manager to try and buy all the bonds used to develop the monthly CPDC.

Also, the bonds in the CPDC may not be a prudent investment for a pension plan, due to the concentration by industry and issuer of the bonds used in the curve. This concentration increases the downgrade and default risk of the investments, and thus will not meet the diversification requirements of the plan's investment policy. If a bond is downgraded or defaults during a month, it is simply removed from the CPDC in the following month. Thus, the CPDC never suffers losses from downgrades or defaults. However, a traditional LDI investment portfolio that actually purchased those bonds that were later downgraded or defaulted will suffer a loss.

With Pacific Insured LDI, because it follows the curve precisely and uses the same benefit payment stream as the plan actuary to measure the liabilities, relatively speaking, there is no credit risk (no downgrades or defaults), no interest-rate risk and thus no tracking error.

**PS:** Can you tell me more about this Insured LDI product and how the contract works for plan sponsors?

**Menin:** Pacific Insured LDI was developed in response to plan sponsors' need of a better asset match for their pension liability. Insured LDI provides a guaranteed contract value compared to the traditional LDI strategies that use a &quot;best efforts&quot; approach. Insured LDI is the first solution to precisely match that movement in the pension liability: No matter how the yield curve changes from month to month, Insured LDI will match the plan's projected liabilities; and thus, the funded ratio will remain stable.

Finance executives and their Board of Directors can spend a significant amount of time trying to understand complex traditional LDI strategies, comparing actual results to expected results and reasons for the variances. With Insured LDI, the executives of the organization can now focus their energy on running their operations and not on worrying about the funded status volatility of the pension plan.

Insured LDI is also flexible, so plan sponsors can modify the product to meet their objectives. It does not need to be used for the entire plan. For example, some plan sponsors are looking to start using Insured LDI to just stabilize their retired liability, as illustrated in the pie chart below.

It also provides liquidity through the monthly benefit payments made by Pacific Life to the pension trust. The plan sponsor can also exit the contract completely with no penalties or surrender charges. Thus, they are not locked into the contract.

**PS:** You have a client who's been using this Insured LDI group annuity contract for a couple of years now. Has that product delivered what you—and your client—expected and promised? 

**Proctor:** We're very proud of the performance it's had over the last couple of years. The contract value moved exactly with their plan liability based on the projected benefits that the plan sponsor provided. So, as interest rates moved fairly violently over the last two years from month to month, Insured LDI performed exactly as advertised: It stabilized the funded ratio. Every month, no matter what happened to the yield curve or the equity markets, their funded ratio stayed the same—while providing monthly payments along the way to meet their cash-flow needs.

**PS:** How has the market changed and evolved in the last three years since the product was introduced?

**Menin:** We saw interest rates rise pretty significantly last year, and now they've actually backed off by some 40 to 50 basis points. For a plan sponsor interested in stabilizing their funded status earlier this year, our insured LDI product would have been a great solution for them. Could interest rates continue down another 100 basis points? Perhaps, but with Insured LDI, the plan sponsor does not have to worry if rates move up or down. The product is meant to protect the asset portfolio from those volatile interest-rate changes and to provide a superior asset/liability match.

As funded status improves, shifting into a risk-protected asset like Insured LDI can help lock in the big gains some DB plans made last year. Particularly as they get close to 100% funded, there's not as much upside for the plan. If equities run up another 30%, it doesn't help much to be 30% over-funded, but you certainly pay the penalty if there is a bad year and your funded status decreases. Now is a perfect time to lock in that funded status.

Insured LDI can work for ongoing plans, but it is particularly helpful for those closed and frozen plans that are approaching full funding, now is a great time to use this type of a product.

Asset/Liability Match, Set, Product

Implementing a pension risk-transfer strategy is an important part of a long financial journey. It's important for plan sponsors to work with an insurance company that has innovative solutions, financial stability, and great follow-up service.

These qualities are evident in Pacific Life's long and successful history serving the needs of pension plan sponsors. 

---

## A History of Innovation

In seeking ways to meet a broader spectrum of pension risk-transfer situations and needs, Pacific Life has introduced several firsts to the marketplace. We were the first in the United States to convert a Buy-In contract to a Buy-Out contract, and the first to sell a Buy-In contract for a nonqualified supplemental executive retirement plan (SERP). We were also the first to introduce a new concept in de-risking pension plans: Insured Liability Driven Investing (ILDI).

Wherever you are in the life cycle of your defined benefit plan, Pacific Life can help you achieve your short- and long-term goals, even if your plan is underfunded. For defined contribution plans, we offer [Pacific Lifetime Income®](/lifetime-income/), an open-ended contract allowing plan sponsors the ability to offer participants a guaranteed lifetime income solution for their retirement needs. Our full line of solutions means we can provide one solution or a strategically customized mix that takes into consideration your plan's funded status, employee population, financial obligations, long-term perspective, and more.


## Experience and Stability

Pacific Life counts more than half of the 100 largest U.S. companies as its clients. We sold our first group pension annuity contract in 1941.

Pacific Life's structure is relatively unique among insurance companies. We are organized under a mutual holding company with policyholders as members. We have no publicly traded stock; we are an independent company that remains focused on long-term strategies, our financial strength, and making decisions that benefit our policyholders and clients. This long-term commitment, combined with Pacific Life's disciplined investment philosophy, provide financial stability even during periods of economic uncertainty.

## Organizational Expertise and Commitment

Pacific Life prides itself on providing plan sponsors with outstanding support from beginning to end. We start with a consultative approach to understanding your specific circumstances and identifying an appropriate, customized set of solutions. We have also developed a reputation for exceptional installation and ongoing annuity servicing, so that the process runs smoothly both during and after your pension risk-transfer solution is implemented. Plus, we adhere to strict standards and documented procedures to maintain data integrity and privacy.


## Power of Pacific

The bedrock of any pension risk-transfer strategy is the selection of a strong and stable company with the ability to back its financial promises to you and your plan participants. For more than 150 years, individuals and businesses have relied on the strength of Pacific Life to protect their financial security, and today, we continue to maintain strong financial-strength ratings from major independent rating agencies. (1)  

Before moving forward with a pension risk-transfer provider, consider the following. Has the provider you're considering shown that they can offer solutions for a wide variety of plan sponsors? Have they brought a consultative and innovative approach to developing the right solutions for each plan sponsor? Have they shown a consistent commitment to the marketplace and demonstrated outstanding service to both plan sponsors and their plan participants? Experience and innovation does matter. Because what every plan sponsor needs is a provider that can be relied on for the long run. 

To speak with Pacific Life about a pension risk-transfer strategy, call us at (877) 536-4382 or email us at [GroupAnnuitiesBid@PacificLife.com](mailto:GroupAnnuitiesBid@PacificLife.com)

A History of Strength and Innovation

Many CFOs and treasurers have recently fully funded their defined benefit (DB) pension plan. Some took advantage of the larger tax deduction available for 2017 contributions. Others have benefited from rising interest rates and favorable investment returns. However you accomplished it, congratulations! But the real question is: What now? Should you maintain your current asset allocation and hope there won't be another major market downturn, or take action to lock in your fully funded status no matter how markets perform?

![A chart displaying recent market crashes.](/images/blog/db-plan-image-1.jpg)

## The Importance of Locking In Funded Status 

Most CFOs and treasurers would agree that maintaining their plan's funded status is an important goal. The last thing a financial officer wants is to explain to the board of directors why the funded status of the plan has decreased again due to an interest-rate decline or equity market correction. Remember, too, that your underfunded pension plan required you to make additional contributions and pay increasing variable Pension Benefit Guaranty Corporation (PBGC) premiums. Those premiums equal 3.8% of the plan's unfunded liability for 2018 and will rise to at least 4.2% in future years.

So, what kind of strategy can you use to avoid these potential problems? A pension buy-in may be the answer. A pension buy-in annuity contract is a well-tested idea that has been used for many years in the U.K., but has only become available in the U.S. in the last few years.

## Increasing Pension Benefit Guarantee Corporation Premiums

![A chart illustrating how PBGC premiums have increased from 0.9% in 2013 to 4.4% in 2019. That's a 390% increase overall.](/images/blog/db-plan-image-2.jpg)

The buy-in transfers all the pension risk associated with the DB plan liability for those participants covered under the buy-in contract. To complete the contract, the plan sponsor makes a one-time payment to the insurance company. Thereafter, the insurance company pays a monthly lump sum to the DB pension plan equal to the exact amount of benefits due to those plan participants who are still alive and receiving benefits. The pension plan uses this money to continue making individual payments to its participants.

The buy-in contract remains an asset of the plan, and the insurance company provides a monthly contract statement to the plan sponsor for accounting purposes. This means the liability and assets remain on the plan sponsor's balance sheet, but the funded status will remain stable regardless of how long participants live or what happens with the stock market or interest rates.
  
## Flexibility for Plan Sponsors
  
With [Pacific Secured Buy-In®](/secured-buy-in/), the plan sponsor can continue the contract for as long as needed and the plan sponsor remains in control. The contract also can be converted to a buy-out contract at any time for no additional fee. For example, let's say a plan sponsor has just started the plan termination process but will not be ready to complete that process for six to 18 months. With Pacific Secured Buy-In, the plan sponsor doesn't have to worry about what happens to the market or interest rates during this period.

Most plan sponsors will want to convert the buy-in to a buy-out within a few years. This is because, with a buy-in contract, the liability remains on the plan sponsor's balance sheet. Thus, the plan sponsor is still paying all administrative expenses for maintaining the plan. For example, even though Pacific Secured Buy-In can help keep the plan fully funded and help reduce or eliminate future variable PBGC premiums, the plan sponsor still has to pay the fixed per-participant PBGC premiums each year, which will be $80 per participant in 2019.

## No Settlement at Buy-In
  
An important feature of Pacific Secured Buy-In is that it does not trigger the pension settlement accounting transaction while the buy-in is active. Thus, at implementation of the buy-in contract, the company need not recognize in income the unrecognized pension loss it currently has on its balance sheet. With a buy-out, all or a portion of the loss would have to be recognized immediately. For U.S. companies, any pension loss would typically be recognized in income in the year the buy-in is converted to a buy-out. The plan can be terminated when it is most advantageous to the company.
  
## A Bonus for Multinational Companies
  
In addition to all the advantages discussed thus far, Pacific Secured Buy-In offers an additional advantage for multinational companies operating under International Financial Reporting Standards (IFRS) accounting. Under IFRS, not only is any pension loss not recognized in income at the time of the buy-in, but it also may not be recognized in income upon conversion to a buy-out. A company that did not use a buy-in first and, instead, started with a buy-out would have to recognize any pension loss in income in the year the buy-out contract was executed. However, if the company first uses a buy-in and later converts to a buy-out, the pension loss may never be reflected in income. The buy-in transition will simply be accounted for as a balance-sheet adjustment. This makes Pacific Secured Buy-In an important consideration for any multinational company considering a pension risk-transfer transaction for a U.S. pension plan.
  
## A Strategy to Help Secure Your Funding Level
  
How stable are your pension-plan investments? By transferring your plan assets to an insurance company through a product like Pacific Secured Buy-In, you will no longer have to manage the investment portfolio or worry about the fund balances. Instead, you can manage your business.

Your DB Plan Is Finally Fully Funded! Don't Let It Slip Away. 

What Is Your Pension Risk Strategy?

Recent market volatility has convinced many defined-benefit plan sponsors that they need to reduce the risks inherent in their plans, and do it soon. Yet, some strategies they might consider, such as terminating the plan, cannot be completed immediately.

If that's your situation, consider a buy-in annuity contract. A buy-in annuity is a versatile tool that can be used in a variety of situations, including:

**Removing risk prior to plan termination** – If you're not yet ready to terminate your plan, a buy-in annuity can lock down plan costs now, giving you time to file the necessary termination and regulatory paperwork with the IRS and Pension Benefit Guaranty Corporation (PBGC).

**Delaying recognition of settlement accounting** – With a buy-in annuity, you can de-risk your plan without the need to recognize the pension losses on your balance sheet until later when you terminate the plan.

**Facilitating a merger or acquisition** – Because a buy-in annuity locks down plan costs, companies negotiating a merger or acquisition can guarantee what those costs will be after the merger/acquisition is complete.

**Financially securing nonqualified SERP benefits** – A buy-in annuity can guarantee monthly payments under a Supplemental Executive Retirement Plan (SERP).

For more insight on how a buy-in annuity can help achieve goals like these, contact Pacific Life.

Plan Sponsors are De-Risking their Pension Plans... You Can, Too

The Right Path is a Flexible Path

Insured LDI Helps Keep Your Pension Plan On Course

The SECURE Act

How a CEO Got His CFO Back

Stabilizing Pensions During M&A

## Could an annuity buy-out be less expensive?

In 2013 and 2014, approximately $4 billion and $9 billion, respectively, of pension liabilities were transferred to insurance companies by sponsors of defined benefit (DB) pension plans. The first quarter of 2015 likewise saw more than $3 billion transacted in the first two months. To further discuss these ongoing trends in the pension risk transfer (PRT) market, Alison Cooke Mintzer, editor-in-chief of PLANSPONSOR, spoke with Russ Proctor and Marty Menin, both directors of institutional sales at Pacific Life. Here they continue their conversation, which started with last year's &quot;Economic Cost vs. Accounting Cost&quot; interview, now going into greater detail to explore the plan sponsor's economic cost for smaller pension benefits.

---

**PS:** What has changed in our pension de-risking market here in the U.S. since last year?

**Proctor:** There have been significant changes since we spoke to PLANSPONSOR last September. You mentioned the large increase in risk transfer annuity sales. In the fourth quarter of 2014, there were $7 billion in sales, and already in the first quarter of 2015 about $3 billion. Some of these transactions are focused on retirees with smaller benefits, indicating to us that plan sponsors understand the annuity cost may now be lower than the cost of maintaining these liabilities.

Also, the Society of Actuaries (SOA)'s new mortality table was released in October. Many plan sponsors adopted the new table for their 2014 year-end pension liability, increasing that liability by 4% to 10%, depending on the plan. The annuity pricing used by insurance companies already included the improving mortality, so it didn't affect the annuity pricing. Now the liability on plan sponsors' balance sheets is closer to the cost of an equivalent annuity provided by an insurance company.

**PS:** Tell me, how do you define &quot;smaller benefits&quot;?

**Menin:** Roughly around $200 to $300 per month, but the amount will be different for every company because each has a different expense structure. We often encourage plan sponsors to look at their population, evaluate their expenses and fees, and determine the right level for their plan. Our analysis found that for benefits less than $300 per month, expenses typically outweigh the price of an annuity.

**PS:** Plan sponsors have also been telling us how the increased expenses are negatively affecting their DB plans. Is it really that bad?

**Proctor:** It is, particularly for smaller benefits. For example, our chart shows an administrative expense of about 2% of the total retired liability for a typical plan. However, the &quot;per participant&quot; Pension Benefit Guarantee Corporation (PBGC) premiums have a larger percentage impact on the smaller pension benefits. PBGC premiums are now $57 per participant and will rise to $64 next year. For an average benefit, let's say a retiree paid $2,000 a month, the administrative cost for that total annual PBGC premium is about 0.27%. But for the smaller benefits—for example, a retiree paid $200 a month—that's an annual cost of 2.7%. Thus, the total administrative expense of 2% for the typical retiree liability would increase to 5% for retirees with small benefits. 

![](/images/blog/high-economic-cost-image.jpg)

When you add in the investment management fees and investment risks—defaults and downgrades, etc.—the total economic cost for smaller pension benefits can easily reach 113% of the accounting liability.

The annuity cost for these small benefits may be only 105% of the accounting liability. Thus, a plan sponsor may find that the price to buy annuities for these retirees is considerably less than the total economic cost of maintaining those liabilities in the plan, as estimated at 113% in the example above. 

**PS:** Is this a problem for all plan sponsors? Does industry make a difference?

**Menin:** This is true for many plan sponsors because not all of their employees participate in the pension plan for a full career. Even companies with highly paid salaried employees are likely to have a subset of retirees who are vested in a small pension benefit, having worked at the company only a few years before moving on to another company.

There are also industries, such as the retail industry, that typically have a lower-paid, higher-turnover work force. These plan sponsors will naturally accumulate even more small retirement benefit liabilities. Retailers with defined benefit plans typically have lower average benefits and thus a higher average expense ratio.

**PS:** So you're saying plan sponsors can segment out this set of smaller liabilities to an insurance company, and that buying an annuity can reduce expenses while still keeping the plan active?

**Menin:** Yes, absolutely. This is one of the most common forms of risk transfer we see today. A plan sponsor can demonstrate to its board of directors that the economic cost of these smaller pension benefits is more expensive than the annuity cost, even in this low-interest-rate environment.

**PS:** How do plan sponsors know whether this is the right option for them?

**Proctor:** We encourage plan sponsors to talk to their pension consultants and their advisers and ask for help analyzing the expense structure of their plan. In our example above, we show the impact of investment management fees, assuming 50 basis points (bps) per year, creating a 5% economic cost. This can vary widely, so each plan sponsor needs to determine what it actually pays, to pinpoint the true economic cost for the plan. We also show an increase, from 2% to 5%, for the economic cost of administrative and PBGC expenses for small benefits. Adding a default risk cost of approximately 3% gives us a total economic cost of 113%.

The point is plan sponsors can get an annuity quote and compare that against their economic cost to decide if the annuity purchase would make sense for them. They can then determine where their break-even point is for these small benefits, and decide which benefits they should buy out based on this detailed economic cost analysis.  

The High Economic Cost Of Small Pension Benefits

The Future of Sustainable Bonds

The Future of Sustainability 

Innovation in the Financial Industy

The Alternate Universe: Non-Qualified Plans versus Qualified Plans

Customer Experience and Lifetime Income

Effective Communication in a Hybrid Work Environment

Effective Communication in a Hybrid Work Environment — Webinar Series

Looking to learn more about retirement payment options that might align better with employee and organizational goals?

Listen as Pacific Life’s Russ Proctor discusses the need for guaranteed lifetime income with Michael Finke, PhD, CFP, Professor of Wealth Management and Frank M. Engle Chair of Economic Security in this exciting new episode of the Wave Strength podcast. 

The session will cover:

- Do employees currently manage their retirement savings well throughout retirement?
- Do employees want access to guaranteed lifetime income options?

This episode will present information on options and the desire for guaranteed lifetime income. Professor Finke presents some survey results that may surprise you.

The Need for Lifetime Income

Looking to learn more about retirement payment options that might align better with employee and organizational goals?

Watch as Pacific Life’s defined contribution plan expert, Ruth Schau, FSA, EA, FCA discusses the need for guaranteed lifetime income with Michael Finke, PhD, CFP, Professor of Wealth Management and Frank M. Engle Chair of Economic Security in this exciting new episode of the Wave Strength Webinar series.

The session covers:

- Do employees currently manage their retirement savings well throughout retirement?
- Do employees want access to guaranteed lifetime income options?

This webinar presents information on options and the desire for guaranteed lifetime income. Professor Finke presents some survey results that may surprise you. Like and subscribe today!


Solutions for Lifetime Income

In this episode of The Wave Strength, documentary filmmaker Craig Leeson joins host Jim Breen from Glasgow where he’s putting the finishing touches on his latest film. Listen as Craig explains how corporate partnerships and finance make his current project to reduce climate change possible. Craig shares some amazing stories as he discusses the critical connection between film and finance.

---

**About Craig Leeson:**

With the noble goal to “make our world a better place to exist,” Craig Lesson is a journalist, activist, advocate, and adventurer who has dedicated his entire life and career to environmental concerns.

Documenting Sustainability: Filmmaking, Finance, and Fighting Climate Change

In this episode of The Wave Strength, Brian Woolfolk, head of the Institutional Division, joins host Jim Breen to discuss the Division’s first two years, noteworthy accomplishments, and his vision for the future. Listen as Brian shares the challenges of launching a division during a global pandemic, and the remarkable team that established its solid foundation. 

---

**About Brian Woolfolk:**

Brian joined Pacific Life in 2010, where he served as senior vice president of sales and chief marketing officer of the Retirement Solutions Division before his promotion to lead the Institutional Division. While Brian is a proud graduate of the University of Minnesota, he and his family live in Omaha, NE where they are loyal Nebraska Cornhuskers fans. 

Brian Woolfolk & the Institutional Division Celebrate Two Years of Growth and Innovation

**Article Highlights**
- Priorities are like alligators, deal with the closest one to the boat first. 
- Without goals, we might be flying...but it's unclear where we’re landing.  
- A good plan is like a map that takes us to our destination. 
- Finding allies and stepping outside of our comfort zone are keys to retirement success. 

In recognition of Women’s History Month, The Wave Strength proudly welcomed former Thunderbird, and U.S. Air Force Pilot Michelle “Mace” Curran to the Mission Critical webinar. Michelle and host Christine Tucker discussed many fascinating aspects of Michelle’s career, and Michelle shared several lessons, tactics, and strategies that can be applied to financial wellness and preparing for a successful retirement. Here are five key takeaways from the webinar which can help us become retirement ready. 

# 1) Establish Priorities 

One of the many highlights of the Mission Critical webinar was when Michelle shared her strategy for prioritizing: *Focus on the closest alligator to the boat, then deal with the next one.* Applying this strategy to retirement preparedness could mean reducing debt, creating a budget, or enrolling in an employer-sponsored retirement savings plan. 

# 2) Set Goals 

Without goals, we may be soaring, but we’re doing so without a destination, and that could lead to a bumpy landing. Goals serve as our destination and establishing goals will help set a course toward a successful retirement. 

# 3) Make a Plan 

Michelle repeatedly noted the importance of planning in achieving her personal and professional goals. Our plans are like a road map, it's how we navigate toward our goals. After we’ve established our goals, we can then begin planning to achieve those goals. Another important takeaway is realizing that it’s OK to change our goals and plans if our circumstances change. 

# 4) Find Allies 

Michelle emphasized the importance of trust among her fellow Thunderbird pilots. When we’re planning for retirement, it’s critical that we find trusted advisors, resources, and tools that we can depend on for accurate information and advice. 

# 5) Get out of the Zone 

Taking a calculated risk isn’t a bad thing, Michelle calls this “stepping outside of our comfort zone.” When applied to retirement planning, this can mean simply deciding to start the process of becoming retirement ready. Sometimes the first step is the most difficult. For Michelle, that first step was applying to be a Thunderbird, but by taking that risk she was able to soar to great heights. 

If we hope to soar toward retirement, it’s important to recognize that we are the pilots of our journey. And if we’re to make a safe landing, it’s mission critical to establish priorities, set goals, create a solid plan, find trusted allies, and step outside of our comfort zone. 

If you couldn’t attend the live webinar, click [here](https://youtu.be/ITuh82uXKHk) to watch Michelle and Christine discuss how planning and goal setting can help you soar toward your dreams. You can catch it now on The Wave Strength, located on Pacific Life’s YouTube channel. 

---

**About Michelle Curran:**

Michelle Curran has led an impressive career as a Fighter Pilot during her 13 years in the United States Air Force. From 2019-2021, she flew as the only female pilot for the Air Force Thunderbirds and performed for millions across the country and internationally. Michelle was also named the Distinguished Alumna of the Year by the University of St. Thomas in 2021, and has been featured on The Kelly Clarkson Show and CBS Evening News. 

Before joining the Thunderbirds, Michelle was a combat-proven fighter pilot completing missions around the world. Her passion for pushing limits, inspiring others, and changing lives led to the creation of her company, Upside Down Dreams. Through this platform, she is committed to empowering men and women of all ages to overcome obstacles, face the fear of failure, and excel at whatever they are passionate about. 


Subscribe to The Wave Strength

Top 5 Ways Planning & Goal Setting Lead to a Safe Landing in Retirement 

In this episode of The Wave Strength, Jim sits down with Pacific Life’s Kristin Brooks to discuss the research and innovation committed to building a defined contribution lifetime income retirement solution. Kristin explains the Institutional Division’s hearts and minds approach, which meets participants where they are, solves for a variety of their needs, and helps them become retirement ready.  

About Kristin Brooks 

Kristin works on the Solutions Team and is responsible for pension risk transfer transactions which include bid/quote review, new sales development, and post-sale communication and oversight. She is also responsible for defined contribution lifetime income solutions and plays a key role in product research, innovation, and development. Kristin joined Pacific Life in 2008.  

Please be sure to like, subscribe and check out The Wave Strength blog, it’s packed with helpful tools, useful resources, and valuable information for successful retirement planning.

Talking Retirement: Innovating Defined Contribution Lifetime Income Solutions

In this episode of The Wave Strength, Jim sits down with former United States Air Force Fighter Pilot and Thunderbird, Michelle “Mace” Curran to discuss how flight plans can translate into life plans. Listen in as Michelle shares some exciting stories and explains that the planning and goal setting employed by fighter pilots can also be applied to making a safe landing in retirement. 

About Michelle Curran:  

Michelle Curran has led an impressive career as a Fighter Pilot during her 13-years in the United States Air Force. From 2019 to 2021, she flew as the only female pilot for the Air Force Thunderbirds and performed for millions across the country and internationally. Michelle was also named the Distinguished Alumna of the Year by the University of St. Thomas in 2021 and has been featured on The Kelly Clarkson Show and CBS Evening News.   

Before joining the Thunderbirds, Michelle was a combat-proven fighter pilot completing missions around the world. Her passion for pushing limits, inspiring others, and changing lives led to the creation of her company, Upside Down Dreams. Through this platform, she is committed to empowering men and women of all ages to overcome obstacles, face the fear of failure, and excel at whatever they are passionate about. 

How Former Thunderbird Michelle Curran Takes Aim at Achieving Goals

In advance of her debut blog feature, Financial iQ with Dr. Qi, Qi Sun sits down with The Wave Strength and Shea Frates to preview the article and discuss the factors that can influence happiness in retirement. Qi highlights the role that expectations play, and stresses that managing those expectations is key to positive perceptions about retirement. In addition, Qi and Shea discuss how lifetime income favorably impacts financial wellbeing and retirement happiness. Catch the conversation now, on The Wave Strength. 

About Qi Sun 

Dr. Qi Sun is the Financial Economist for Pacific Life’s Institutional Division. Her research focuses on longevity insurance, household asset allocation decisions, and financial well-being. Qi holds a bachelor’s degree in Finance from Donghua University, a master’s degree in Personal Financial Planning from the University of Missouri, Columbia, and a doctorate in Personal Financial Planning from Texas Tech University.  

What’s Your Financial iQ? Find out with Dr. Qi Sun 

Remember pensions? Newer generations might not, but their parents and grandparents certainly do. Once a pillar of retirement financial security, pensions are now rarely a part of retirement portfolios. In this episode of The Wave Strength, Pacific Life’s SVP and Head of Customer Solution Group Paul Hance, and Institutional Marketing Director Jim Breen, discuss how Pacific Life is helping Americans retire with lifetime income, peace of mind, and the financial security that previous generations enjoyed.  

About Paul Hance 

Paul is responsible for leading the Pension Risk Transfer, Defined Contribution Lifetime Income, and Stable Value product lines. Previously, he led the PRT and DCLI product lines. Prior to joining Pacific Life, he was the Chief Actuary at Equitable. Before that, he held a variety of roles at Prudential, including the Head of Pension Risk Transfer Pricing. Paul joined Pacific Life in 2020. 

Retirement Security and the Need for Guaranteed Lifetime Income, Pacific Life’s Paul Hance Explains

*Pacific Life: Protecting Tomorrows for a Life Well Lived*, a new animated, story-driven video produced by Pacific Life’s Institutional Business team, spotlights the challenges confronting retirement plan sponsors and participants, and the strength, stability, and solutions offered by Pacific Life to help participants enjoy financial security in retirement.  

**Top Takeaways :**
- Retirement plan sponsors, administrators, and participants need support  
- They face confusing regulations, complex products, and difficult choices  
- Participants need help becoming retirement ready  
- Pacific Life “gets it,” and we’re here to help  

At Pacific Life, we know that retirement plan sponsors and administrators have a lot on their plates. With never-ending to-do lists, they’re expected to be “Jacks of all trades,” while simultaneously ensuring that plan participants are educated, enrolled, and supported. Navigating the retirement landscape, and helping participants make sound decisions can be an overwhelming responsibility.  

 Administrators and participants need all the help they can get. They need a partner who appreciates their situation and understands the challenges they face.  

**We Get it, and We’re Here to Help**

“At Pacific Life, we’re committed to improving retirement outcomes for plan participants. We want to help them maximize their peace of mind in retirement, and minimize the fear of running out of money,” said Russ Proctor, Pacific Life’s assistant vice president and managing director of pensions. “Retirement planning isn’t easy for employees to do on their own, and it's not easy for plan sponsors to help them. We understand the challenges of planning for retirement, and we’re here to help make the process and decisions easier and clearer for plan sponsors and participants.”  

Many employees may not even know where to begin. According to the Department of Labor, only half of Americans have calculated how much they’ll need to save for retirement, and over 25% of private-industry employees with access to a defined contribution plan did not participate in their retirement plan in 2020<a href="#fn1" id="ref1">1</a>.

“Thinking about retirement finances can produce anxiety, so it’s easy to procrastinate, but planning needs to start as soon as possible,” said Ruth Schau, Pacific Life’s senior director of pension solutions. “Most experts predict we’ll need 70% to 90% of our pre-retirement income to maintain our lifestyle during retirement, and the average American spends about 20 years in retirement<a href="#fn1" id="ref1">1</a>. However, the 20-year average is not the best estimate to build a retirement plan around. That’s because 50% of Americans will need their retirement savings to last longer than 20 years. That’s where Pacific Life can make a positive impact for plan sponsors and participants.”  

Those are sobering numbers, and they can act as a disincentive to employees who want to participate but are discouraged. The keys to financial wellness and a secure retirement are education and sound planning, so it’s critical for participants to know there’s help available for them, no matter where they are in the process. 

“It’s important for individuals to have access to financial tools and resources that consider their immediate and long-term financial needs,” said Chris McGlynn, Pacific Life’s director of pension sales. “Many individuals want to increase their retirement contributions but they're living paycheck to paycheck, or don’t have enough personal savings. There are many of these situations that are barriers to focusing on retirement. Pacific Life continues its support of broad financial education and initiatives to help participants in their financial and retirement journey.” 

**Happy Retirement Outcomes – It’s What We Do**

Pacific Life has over 150 years of experience meeting our customers’ needs and helping to secure their futures. It’s what we do.  

 We start by listening. Through empathy interviews with plan sponsors, employees, and retired participants, we develop a deep understanding of their challenges and issues. By engaging in open dialog and collaboration, we can better understand their concerns and create simple, flexible, and innovative solutions to meet their needs.  

Pacific Life counts over half of the 100 largest U.S. companies as its clients, and in 2022 was named one of the World’s Most Ethical Companies®<a href="#fn2" id="ref2">2</a>, and one of the 50 most community-minded companies in the United States<a href="#fn3" id="ref3">3</a>.

Pacific Life: Protecting Tomorrows for a Life Well Lived

Paul Hance, Pacific Life’s senior vice president for Institutional Customer Solutions Group, joins The Wave Strength’s Jim Breen to discuss customer-centric innovation. By actively engaging with customers to learn about their issues and challenges, the Customer Solutions Group is creating innovative solutions that truly solve customers’ problems. Paul shares the importance of being comfortable with being uncomfortable, building a culture of trust, empowering teams to take risks, and learning from mistakes. Listen in as Paul explains how leaning in, letting go, and affording independence enables agile teams to do their best customer-centric work. 

 **About Paul Hance**

Senior Vice President of Institutional Customer Solutions Group. 

Paul is responsible for leading the Pension Risk Transfer, Defined Contribution Lifetime Income, and Stable Value product lines. Previously, he led the PRT and DCLI product lines. Prior to joining Pacific Life, he was the Chief Actuary at Equitable. Before that, he held a variety of roles at Prudential, including the Head of Pension Risk Transfer Pricing. Paul joined Pacific Life in 2020. 

Innovative Strategies for Customer-Centric Solutions: A Conversation with Pacific Life’s Paul Hance 

aul Hance, Pacific Life’s senior vice president for Institutional Customer Solutions Group, joins Jim Breen, Institutional director of marketing, for a conversation about the challenges facing American retirees, and how the team is meeting those challenges. Paul shares that through a hearts and minds approach, the culture of the Group is to run towards these challenges and solve problems with dedicated teams who are empowered to innovate. Listen in, as Paul reveals how the Customer Solutions Group is helping Americans retire securely. 

 **About Paul Hance**

Senior Vice President of Institutional Customer Solutions Group. 

Paul is responsible for leading the Pension Risk Transfer, Defined Contribution Lifetime Income, and Stable Value product lines. Previously, he led the PRT (Pension Risk Transfer) and DCLI (Defined Contribution Lifetime Income) product lines. Prior to joining Pacific Life, he was the Chief Actuary at Equitable. Before that, he held a variety of roles at Prudential, including the Head of Pension Risk Transfer Pricing. Paul joined Pacific Life in 2020. 

Pacific Life’s Customer Solutions Group is Helping America Retire Securely, Paul Hance Explains

Michael Oler, Pacific Life’s new AVP, head of defined contribution lifetime income, joins Host Jim Breen, Institutional director of marketing, to share his excitement for the future of lifetime income. Michael unpacks the exceptional career path that led him to Pacific Life and describes how his life’s work has prepared him to help Americans retire with peace of mind. Listen in as Michael explains how education, engagement, and communication are the pillars of sound retirement planning and financial wellness. 

**About Michael Oler**

Michael is responsible for leading the growth of the Defined Contribution Lifetime Income business. Before joining Pacific Life, Michael was the Retirement Income Product Manager at T. Rowe Price. His career in retirement services has also included strategic roles at BlackRock, MetLife, and PricewaterhouseCoopers. Michael joined Pacific Life in 2022. 

How to Plan for Retirement? Pacific Life’s Michael Oler Says, Do This First

Seaver Sowers, Pacific Life’s vice president and head of global government & policy affairs joins Host Jim Breen, Institutional director of marketing, for a conversation about the Secure Act 2.0. Seaver reveals that the Act contains approximately 70 provisions that address a myriad of financial issues, many specifically designed to benefit retirees. Listen in as Seaver explains that his role is to help educate government officials so that Pacific Life policyholders can live their best lives in retirement. 

**About Seaver Sowers **

Vice President & Head of Global Government & Policy Affairs 

Seaver is responsible for representing Pacific Life’s policyholder interests to government and regulatory officials. Prior to joining Pacific Life in 2017, Seaver held positions with the American Council of Life Insurers, the American Bankers Association, the Agricultural Retailers Association, as well as serving as deputy chief of staff and legislative director in the U.S. House of Representatives. Seaver is a graduate of Duke University. 

How Does the Secure Act 2.0 Impact Retirement Security? Pacific Life’s Seaver Sowers Explains

How do American workers feel about their financial literacy and financial well-being? How do they feel about their employers and retirement? What are the changing dynamics of the American workforce and traditional retirement? Franklin Templeton’s Jackie Reardon joined Pacific Life’s Ahmet Kamil and Jim Breen to unpack these topics and more on The Wave Strength’s Retirement and the Need for Lifetime Income live webinar. 

**Top Takeaways**

- Franklin Templeton’s *The Voice of the American Worker* 1 survey reveals how employees feel about retirement and what they expect from their employers. 
- The concept of retirement has evolved, and the goal of financial independence has replaced traditional ideas. 
- One size doesn’t fit all: Retirement planning is dynamic, and retirees need guidance, tools, and education to help navigate multiple variables and shifting priorities. 
- A lack of financial literacy can negatively affect retirement outcomes. 
- Financial wellness impacts our mental and physical well-being. 

Using live polling, person-on-the-street interviews, and data from Franklin Templeton’s *Voice of the American Worker* survey, the Retirement and the Need for Lifetime Income webinar highlights how Americans feel about work, financial wellness, and retirement readiness. And, for the most part, employees don’t feel great about any of it. But the webinar also revealed opportunities for employers and providers to help participants improve their financial well-being and achieve their retirement goals. 

*The Voice of the American Worker* survey asked over 1,000 employees how they feel about their financial well-being, work, and retirement—and the results are compelling. Key findings show that the Covid-19 pandemic played a large role in workers reevaluating their relationship with work and their employers: 67% of American workers have reassessed what they want from their employers, and 44% have left or have considered leaving their jobs. And the concept of retirement has evolved, 84% are more focused on becoming financially independent than on a traditional retirement. The survey also highlights workers’ feeling a lack of control over their financial health, with 83% noting that debt is a primary reason. 

# What Happened to Retirement? 

As our panel discussed, the concept of retirement has evolved from traditional ideas, grounded in decades of employer-paid pensions, to modern concepts of financial independence; and this cultural shift appears to have outpaced our educational system. According to Forbes, in the U.S. only seven States require a personal finance class to graduate from high school. 2 It’s reasonable to draw a line from this rare academic requirement to deficiencies in financial literacy. 

Ahmet Kamil underscored that our lack of financial education is partly due to America’s historical approach to retirement, “The assumption that resources like pensions would always be around, probably inhibited us from being more proactive about retirement education.” 

And if you ask random people on the street how they feel about financial literacy, they agree. When *The Wave Strength* asked individuals how they feel about financial literacy, their spontaneous answers made it clear that employees are concerned about their lack of preparedness. One man in Chicago said, “Unfortunately, unless you do your own research, you’re left with what your parents taught you, and for a lot of us, that’s not much.” A beachgoer in California said, “I wish they taught financial literacy in high school and college, [to] make us more prepared for the future.” 

But a lack of education isn’t the only reason for the changes in America’s retirement landscape. As Jackie pointed out, even the word retirement has become a part of the issue. “The industry needs new messaging that speaks to that, the word ‘retirement’ has lost its relevance, 84% of those surveyed said financial independence is their number one priority. People know they need to save for retirement, but they [also] need help with debt, an emergency fund, saving for kid’s school, and financial planning tools.” 

# Where do we go from here? 

As retirement continues to evolve, employers, employees, and the insurance industry can each play key roles in helping ensure successful retirement journeys. As our panel discussed, positive retirement outcomes (however they are defined by the individual) will be the result of each stakeholder leveraging opportunities for improvement: 

## Employees 

Employees can help themselves by being proactive in securing their futures. Taking the initiative to find sound information and trusted advisors is an important step. During a person-on-the-street interview, one Chicagoan put it this way: “You have to make your own little pension.” 

## Employers 

As Jackie referenced in the discussion, the Voice of the American Worker survey shows that 87% of employees would be willing to give their employer additional personal information in exchange for more personalized benefits; such as access to a financial professional (56%), financial planning tools (62%), and financial education (54%). 

## Insurance Industry 

“Employers can play a huge role in helping employees with retirement planning, and it’s the industry’s job to help the employer,” Jackie said. Ahmet agrees and notes that the insurance industry is in a unique position to make a positive impact: “As an industry, we have a really big opportunity to do the right thing by the participants,” he said. “We need to help participants, especially with education, planning, and implementation. We need to start by meeting people where they are.” 

# Helping Americans Become Retirement Ready 

Pacific Life has over 150 years of experience meeting our customers’ needs and helping to secure their futures. As the concept of traditional retirement evolves, we continue to help Americans achieve their goals. It’s what we do. 

Pacific Life counts over half of the 100 largest U.S. companies as its clients, and in 2022 was named one of the World’s Most Ethical Companies®, 3 and one of the 50 most community-minded companies in the United States. 4 

1 [The Voice of the American Worker is a study sponsored by Franklin Templeton](https://www.franklintempleton.com/insights/research-findings/voice-of-the-american-worker-survey) 
2 https://www.forbes.com/advisor/personal-finance/states-mandating-personal-finance-in-school/ 
3 Named Pacific Life one of the 2022 World’s Most Ethical Companies® by the Ethisphere Institute. 
4 Named a national 2022 Civic 50 honoree by Points of Light, acknowledging Pacific Life as one of the 50 most community-minded companies in the United States.

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Retirement and the Need for Lifetime Income Solutions

In this episode of The Wave Strength, Pacific Life’s Dr. Qi Sun sits down with Digital Media Strategist Shea Frates to discuss Qi’s latest newsletter article which tackles the question: What’s up with inflation? Listen in as Qi and Shea discuss interesting data from the consumer price index, explore inflation’s impact on a household’s wealth and retirement plans, and reveal the winners and losers in a high-inflation economy.  

**About Dr. Qi Sun, Financial Economist**

Dr. Qi Sun is the Financial Economist for Pacific Life’s Institutional Division. Her research focuses on longevity insurance, household asset allocation decisions, and financial well-being. Qi holds a bachelor’s degree in Finance from Donghua University, a master’s degree in Personal Financial Planning from the University of Missouri, Columbia, and a doctorate in Personal Financial Planning from Texas Tech University. 

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From Groceries to Gas: A Conversation about Inflation with Pacific Life’s Dr. Qi Sun

How do Employees Feel About Retirement? Pacific Life’s Kristin Brooks Explains

**Voiceover:** Welcome to The Wave Strength: Innovative Solutions for a Secure Retirement. Presented by Pacific Life.

**Jim Breen:** Hello everyone, and welcome to another exciting episode of The Wave Strength podcast series. I'm your host, Jim Breen, Head of Marketing with Pacific Life's Institutional Division. With us today in the office is Maya T. Pillai and Nicole Brooks, both from Pacific Life's Institutional team. Thank you both so much for joining us.

**Nicole Brooks:** Happy to be here.

**Jim Breen:** Yeah. And we have a great episode going to talk about Stable Value Wrap today in the episode. But first, I'd love for you both to talk a little bit about your role with the Institutional team. Maya, you're Head of Stable Value Wrap. Nicole, you are Stable Value Relationship Manager. So, Maya, let's begin with you. Maybe you can help our listeners and our viewers today understand a little bit more about your role with the Institutional team.

**Maya T. Pillai:** Yeah. Absolutely, Jim. Thanks for having us. As certainly as taking over Head of Stable Value Wrap a few months ago, we have done a lot of work with our team. I head up the client relationship management and product and risk management teams here at PL in our Stable Value team. I also have a dotted line with the Contracts in Legal as well as our Operations groups and our Investment Compliance, which kind of makes up the multi-prong approach for Stable Value Wrap team. I oversee $36.6 billion of business along with all of our team, and you know, we're a strong nine.

**Jim Breen:** That's great, Maya. Thanks for sharing that. And a lot of the great work that the Stable Value team is doing we'll uncover in this episode of the podcast. Let's move to Nicole. Nicole, share with us, if you will, your role. And I know a recent addition to Pacific Life, but maybe a little bit about your background and in the industry as well.

**Nicole Brooks:** Yeah, I actually came from the investment managers side.

**Jim Breen:** Okay.

**Nicole Brooks:** And as the relationship manager here Pac Life, I'm responsible for handling all the day-to-day questions from our clients who are investment managers. I also collaborate internally with different groups: Operations, Risk, Legal, Contracts to manage our clients and to grow the business.

**Jim Breen:** Excellent. Very good. Welcome to Pacific Life. A growing team; a great team. And a testament to our Institutional team as a whole and the resources that are being poured into this new division within Pacific Life, a lot of great things to come, and that is why we're here today to talk about one of those important elements: Stable Value. What I would ask though, would you mind just explaining to our audience a little bit about what Stable Value is for those newcomers that may be interested in learning more about it?

**Maya T. Pillai:** For sure.

**Nicole Brooks:** Yeah! Yup. Stable Value is an investment option in your employer's retirement plan.

**Jim Breen:** Okay.

**Nicole Brooks:** Often looked at as the safe option.

**Jim Breen:** Why safe? Why safe? I've heard that mentioned so many times before.

**Nicole Brooks:** Yeah! The focus is on the principal preservation.

**Jim Breen:** Okay.

**Nicole Brooks:** So the preservation of your investment...

**Jim Breen:** Great.

**Nicole Brooks:** ...with a credited rate of interest, similar to bond funds....

**Jim Breen:** Okay.

**Nicole Brooks:** ...but without the market volatility.

**Jim Breen:** Okay. Wonderful. And where or when is this used?

**Maya T. Pillai:** Great question. One of the biggest things that we focus on is making sure that plan sponsors, the individuals with whom the retirement plans exist, are educated on who should be investing in this option. So, the people that are or would be, tend to be closer to retirement; so, call it 50+. You know, as retirement age continues to increase, though, that number would also increase. But folks that are more conservative investors, safe, as well as those people who are nearing retirement. The other place where we have Stable Value or where Stable Value is utilized is within education savings plans, so 529s, and those, for those people that investing, as you get closer to going to college, if that's how the funds will be used, you would start putting it into Stable Value.

**Jim Breen:** 529 too, not to cut your off, but you know, four kids here, and it's definitely something that's on our radar. So important that opportunity to utilize something like that, because before you know it, these kids are just... I mean, I have a nine-year old who I look at and I'm like, "I was just taking you home from the hospital." It moves so quickly.

**Maya T. Pillai:** Yeah!

**Jim Breen:** And that's why something like the 529 would be so important.

**Maya T. Pillai:** Absolutely. So, the earlier you invest in a 529, the more that money is going to grow by the time your kids, 18 going to college, and then you can use those dollars, to pay for it, or at least minimise how much you have to pay out of pocket. Or they have to pay out of pocket, which is important. But where Stable Value comes in, for that, is typically we start seeing the investment is Stable Valued around 14, 15 years old, so that you have that principal preservation, which Nicole just addressed. And, you know, we make sure that it's still there when they go to college.

**Jim Breen:** Absolutely. It's so important, and you know, to provide that conservative platform, that conservative investment platform, conservative opportunity, that's safe opportunity, is so important. Especially maybe in today's day and age where there's a lot of volatility, we have inflation and a lot going on that might make somebody that that is trying to plan 20 years, 15 years into the future, feel comfortable using this vehicle. So, maybe we can talk a little bit about the type of individual that might consider an investment in Stable Value. I know we talked a little bit about the 529 scenarios, but maybe we can go a little deeper.

**Maya T. Pillai:** Sure. Yeah. So, as any participant joins a retirement plan at an employer when they are first out of college or masters or whatever that might be, you look at your investment options and typically, you get to see the entire suite and you have to decide what do you want to invest in. A lot of employers have moved to a advice model where it says: are you a low risk, a medium risk or a high risk taker relative to your peers? Or what investments they may have in the investment line up. When you are doing that at age 22, your risk tolerance is likely going to be higher. If you survive the great financial crisis in 2008, call it what I'd say had lingering effects until 2014, you would have wanted to be in Stable Value. Unfortunately, there's a lot of folks that weren't and therefore, there was an addition to Stable... There were many dollars that flowed into Stable Value, which benefited the entire industry. But what it really focuses on is the individuals who are getting closer to that retirement age, probably around 45; you might start considering it. Small allocation and it continues to grow by the time you're at the end or nearing like, right before retirement; you would be a significant portion of your assets would be in Stable Value.

**Jim Breen:** That's interesting, Maya. Perhaps you could discuss Nicole, a little bit about the current landscape. Let's discuss what else is out there right now.

**Nicole Brooks:** Well, let's Just talk a little bit about assets and Stable Value. At the end of 2021, there was over 900 billion in assets in Stable Value. There are in the market about 15 different investment advisors and 15 different Wrap providers...

**Jim Breen:** Okay.

**Nicole Brooks:** ...covering the Stable Value business.

**Jim Breen:** Interesting. And you know what sets Pacific Life apart, what makes Pacific Life different?

**Maya T. Pillai:** Great question. Pacific Life's Stable Value team has been in existence since, well, for a very long time; I won't date all of us. But we have had a synthetic product which is the Stable Value Wrap product since 1993. So, we are closing out year 30 of this product here at Pacific Life.

**Jim Breen:** Wonderful.

**Maya T. Pillai:** We have managed to retain assets for all of that time and have contracts that have been, that were incepted in 1993. One the things that we have focused on and we feel like is our value proposition is our tenure in the industry alongside many of the other insurance providers who have been in the industry. And what we feel is that our team is has a deep bench in knowing what is going on in the Stable Value world. So, as everybody knows, there's been quite a bit of volatility in the equity market and in the bond market in 2022, and also the last three years; COVID, and the war in Ukraine. I think the big thing is that what we have to offer is stability in that time and participants know that they can keep investing with the investment managers we provide insurance for.

**Jim Breen:** And that stability is so important. You know, with Pacific Life, our story is so strong; over a 150 years of financial strength and stability founded here in California. So, this 30-year old platform is really based in something strong, something solid with a significant history of financial strength and stability.

**Maya T. Pillai:** Absolutely. Yeah. One of the things that we feel like gives us the, I guess the edge, is our credit rating and our financial stability. And we certainly make sure that our clients are aware of that.

**Jim Breen:** Absolutely. Please, Nicole.

**Nicole Brooks:** I would add that we have a lot of support from senior management; they're very familiar with Stable Value product and very strong relationships with our clients.

**Jim Breen:** Yeah. And I think that's also, tying it back to what we mentioned at the beginning of this episode, you know, that support. And I think we really have the support from our leadership to forge ahead, to engage new markets, and to innovate and to continue to innovate the way in which we can take care of our customers and our clients. Let's switch gears just a bit here and talk about where Stable Value at Pacific Life is growing. Let's talk a little bit about the current landscape, the current business, and maybe you can provide a little insight into that future.

**Maya T. Pillai:** Yeah. Absolutely. So, Jim, I started with Pacific Life four and a half years ago, and at that time we had about $22 billion of assets under Wrap, as we call it in the industry. At this point in time, 9/30/2022, we've got $36.6 billion of assets under wrap. So, quite a large increase of assets over the four and a half years. That's a testament to multiple things. One is senior leadership's desire to continue being a mainstay in this business line. Number two is the added support we've gotten for the team. So, our team's grown in size. We have dedicated support services and functional areas to assist with making sure our Stable Value business continues to grow and continues to thrive for the remainder of the industry. What we have focused on over the last four and a half years is really growing our Stable Value asset manager, Stable Value investment manager base. We used to have nine and now we're at 14 Stable Value investment managers. That's a testament to our ability to diversify for the investment manager and really grow our block in conjunction with them growing theirs. Of course, COVID-19 as well as the war Ukraine added dollars because of equity market volatility. But one of the things that we can say is we've got all the right people to keep us growing. The next piece of that is really just how do we grow, and I think, Nicky, you can handle that one.

**Nicole Brooks:** Yeah. I mean there's exciting things happening right now in Congress. There's in the form of Secure Act 2.0, looking at opening up Stable Value to a broader group of retirement plans and we are watching that closely.

**Jim Breen:** And that's absolutely right, Nicole. We just actually had an episode that we produced with Seaver Sowers, Pacific Life's Head of Government Relations out there in DC, and he outlined a lot of his thoughts on the Secure Act as well. So, I would encourage our listeners or viewers to head over to YouTube and search Seaver Sowers in the Wave Strength and check that episode out as well. But you know, is there anything else either of you would like to add to the conversation before we sign off?

**Maya T. Pillai:** Great question. I think that what we want to focus on is Pacific Life has been here a long time. We've continued to deliver on our products, we want to make sure we're putting our best foot forward, and we want to make sure folks are getting the right education about Stable Value as a product line and we'll be here to answer any questions.

**Jim Breen:** Well, this has been an excellent opportunity. Maya, Nicole, I want to thank you for being here and joining us on today's episode.

**Nicole Brooks:** Thanks so much, Jim.

**Maya T. Pillai:** Yeah. Thanks having us.

**Jim Breen:** Absolutely. And to our audience, I want to encourage you to learn more about what we're doing with The Wave Strength in this thought leadership platform. You can head over to YouTube, Spotify and Audible, search The Wave Strength, and don't forget to hit like and subscribe so you can stay current with the content that we're producing. I also want to encourage you to head down to the comments and let us know what you think about this episode or ask any questions that you might have for our Stable Value team. Thanks so much everybody and have a great day.

**Voiceover:** This has been another episode of The Wave Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life refers to Pacific Life Insurance Company, (Newport Beach, California) and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. Pacific Life Stable Value is a group fixed annuity issued by Pacific Life Insurance Company (Newport Beach, California). Pacific Life Insurance Company does not solicit business in the state of New York, nor is it authorized to do so. This material has been provided for informational purposes only. It is not an offer or solicitation to buy an insurance product or security. This material should not be construed as investment advice or be used as a primary basis for any investment decisions. This material has been prepared for by Institutional, sophisticated and/or qualified investors. This material may not be shared, distributed or in any way otherwise reproduced. This podcast was recorded on November 4, 2022.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like, more interesting content, click one of these links over here.

Pacific Life’s Stable Value Team: 30-Years and Growing

**Voiceover:** Welcome to the Wave Strength: Innovative Solutions for a Secure Retirement. Presented by Pacific Life.

**Jim Breen:** Hello, everyone, and welcome to another episode of The Wave Strength Podcast series. I'm your host, Jim Breen, with Pacific Life's Institutional Division. And joining me today in studio is Paul Hance, also with Pacific Life's Institutional team. Paul, thank you so much for taking time out of your very busy day to join us on today's show.

**Paul Hance:** Yeah, I'm excited to be here, Jim.

**Jim Breen:** Excellent. So, Paul is the Chief Financial Officer for Pacific Life's Institutional Division. Today for today's episode, what I really wanted to dive into was, you know, our DCLI, or defined contribution lifetime income, space. There's so much going on in the market. There's so much happening, even from a legislative standpoint, and also too movement within Pacific Life and the great resources Pacific Life is pouring into this... I can't say new anymore, now almost three years old Institutional team. Maybe you can give a brief rundown as it pertains to the state of our focus right now on Defined Contribution Lifetime Income.

**Paul Hance:** Sure. Absolutely. So, we see a huge opportunity to help serve Americans with Defined Contribution Lifetime Income. We've been making a significant investment in this area, both from a resource and a technology perspective. So, we recently had the great honor of having Mike Oler join us to lead our Defined Contribution Lifetime Income space; he brings a wealth of experience in this space. We also have Destiny Laura, who's leading our Participant and Financial Education area, which we really see as a critical success factor in this area to help our participants and Americans in general really understand both financial education and the value of our products.

**Jim Breen:** Yeah. And key roles too, because, allowing us to have even greater focus on areas that, as you mentioned, are so important. And Destiny and I, and Mike and I, have worked from a marketing perspective on a lot of different projects already, but so many wonderful things to come. And focusing on that participant as it pertains to lifetime income and lifetime income solutions; such an important conversation. And I'd like to jump into that a little bit, Paul, and talk about ways in which we are focusing on that participant and their entire journey. And you shared a little bit about these two new important roles that have been added to our team. But let's talk about the participant; let's talk about that journey and maybe share your thoughts.

**Paul Hance:** Yeah, absolutely. So, we've been doing a lot of thinking around how do we best communicate to participants on our products, our solutions in a way that is simple and transparent and easy for them to understand and appreciate. If we go back 30 or 40 years, a pension plan was very easy to understand; you work for a certain number of years, and you get this pension based upon your salary. So, now what we're working on is how do we communicate in language that our participants understand so that they can fully utilize our solutions to provide that same financial security as a pension used to.

**Jim Breen:** And it's important because you mentioned, you know, as an industry, also too even looking back those 30 years, we have a tendency to perhaps front load a lot of the information: here is the product or the solution, and this is what it does. But also here is every other individual little piece of whether it's minutia of how the product works or the legal or the compliance sections of that solution. And all of a sudden, the participant is inundated with just so much they lose sight of maybe the important elements of that product or solution, and they get lost. But here we are, we're refocusing and looking at ways that we can engage that participant, maybe not just at that one moment, but across that entire journey, whether it's entering the workforce or approaching retirement.

**Paul Hance:** Yeah, and I think that it's really important for us to communicate to the vast majority of people that do not work in finance. I think we oftentimes forget that, but less than 6% of the population actually works in finance. So, it's really important that we focus on what are our participants hearing and understanding, not what we're saying. Because if we communicate in our own jargon and the participant doesn't actually hear and understand what we're providing and how it works, then we've lost the participant, and we've lost that opportunity to really add financial security for our participants.

**Jim Breen:** It's funny you bring that up because we just did a webinar; it was a Pacific Life and Franklin Templeton webinar. And in that webinar, we discussed a lot of data points that were obtained in Franklin Templeton's Voice of the American Worker Survey, a great survey. But in addition to that, we went and filmed some person on the street videos where we really just wanted to find out where people were in their own journey and their own story. And that's something that resonated with folks. And look, I know it's something that I need to do; I just don't know how to get there. And a few of the responses that were consistent in both our respondents, both on the West Coast and in the Midwest where we were, was that need for education, resources. And resources that maybe weren't, you know, I'm talking to you, I'm telling you how to do that more so let me show you how to do it; let me show you the way in which it can be done to teach you so that you understand what's happening.

**Paul Hance:** I think it's really important that we curate that in a way that's incremental so that our participants can understand it. You know, we can't start with finance for 420, right? We're talking about efficient frontiers; incorporating annuities into portfolio, increases your return for the same risk. You know, that works well for you and I, but we have to start with where the participants are with Finance 101, go to 201, and work our way up so that we build that right foundation so that by the time the participant gets to retirement, they're confident in their retirement and they know how to have a secure retirement. But at the same time, we're not overloading them at the end.

**Jim Breen:** Yes!

**Paul Hance:** It's important that we have that journey along the way so that they have that confidence along the way that they'll both have the right financial assets, but also the right education so that they can have that confidence in retirement.

**Jim Breen:** Also, too, you know, you mentioned not trying to burden them or inundate them as they approach retirement; create a process of sorts or a program, right? Where they can have that, those resources and grow into them according to their journey. Like you and I, we have kids. You know, when you first enter the workforce, perhaps, you're not thinking about retirement as much, and then you get married, you have kids, then the house, then you're thinking about the soccer game or the this or the that. And we approach, and we enter into that journey at different times, at different stages, and all of us are at different points of that journey. And to be able to have those resources that meet us where we are so important. Another couple folks that we spoke to in those person on the street videos commented that they felt that high level of anxiety as they were approaching retirement, and they wish they would have had those resources earlier so that when they approach retirement, they wouldn't be in that situation of high anxiety. And really, that anxiety, it can really add stress and really have implications on your well-being, on your health. And if we're able to provide education earlier on, right, it would eliminate that.

**Paul Hance:** Absolutely. Yeah, because it's one of those things where you don't want to procrastinate about things, but you also... we have to make it frictionless; we have to make it easy. Because to your point, people are busy, especially during their peak working years; oftentimes, people have kids and families, and we need to make it really simple and really easy because if it's not, it's not simple and easy, it will always be well-intentioned, but it always be tomorrow; I'll always, I'll work on that tomorrow when I have more time. And then suddenly, you're 50, or 55, or 60, and you realize, well, A) I wish I had more education so that I could prepare best for retirement, and B) I wish I had that education 20 years ago so I could do the right things when I'm 40 in terms of saving and preparing for retirement.

**Jim Breen:** You know, a lot of what you're talking about in terms of the participant, you know, let's talk a little bit about Pacific Life, and maybe the strength and stability and the history of the company, a mutually held company, which is very significant for what we are. And I would say that because of that mutual nature, we have a bit of a paternalistic approach; we are able to have that deep focus on our clients and customers. And I think that's really another way in which we're able to consider the participant in a very unique way.

**Paul Hance:** Yeah. So, we're pretty unique in terms of being owned by our customers. We're also further unique in terms of not having the pressures of policyholder dividends, not having the pressure of shareholder dividends. So, really our focus is, by virtue of being owned by our customers, how can we add the most value for our customers? And that value can be both in terms of financial returns, but it can also be in terms of peace of mind, it can also be in terms of education. And that's really our focus as we work for our customers, ultimately, and that's what we're focused on doing.

**Jim Breen:** So, Paul, you mentioned frictionless, a frictionless experience. Why don't you elaborate a little more about your thoughts on that?

**Paul Hance:** So, we need to be able to connect with everyone. You know, folks today, there used to, whether it's on your Amazon's or whether it's on your phone, there's recommendations that show up in front of you. So, you know, Amazon knows how old my kids are, right? They know what to recommend to me. And as a busy person, that's useful; that's a useful service. And if we can think about that retirement journey, people are in different phases of their retirement journey, and how can we best help them with the appropriate information, the appropriate education at the right time in that journey is valuable, very valuable for the participants and our customers to be able to get the information that best fits where they're at in their journey. It's also very important, as we think about this generation growing up in the era of TikTok, Instagram, etc., we need to connect with people where they're at, right? I love to read long books; not everyone loves to do that, but we need to connect with everyone. So, we need to think about how can we best reach our audience because if we write the perfect 20-page brochure or 100-page prospectus but no one reads it, that's not helping our participants be more educated; it's not helping our participants understand how to have the most secure retirement.

**Jim Breen:** Yeah. Social media, it's such an important part, I think, of that solution, especially as we look at the new generation or generations as we even look further down the road because social media is nothing new, right? I mean, even look back to, I know it's laughable now, but even in the way in which people communicated on MySpace, even, and here we are, fast forward now to things like TikTok and, as you mentioned, Instagram. We really need to look at those as part of the recipe to the ultimate solution; part of a resource of sorts that folks can use is, as we see now, TikTok; they're launching the #TikTokTaughtMe movement, right? Where folks are receiving a lot of information, both financial and otherwise, in specific select groups within the platform. It's a very interesting way to connect. Yeah, you know, it's an important part of the overall solution, especially as we look forward.

**Paul Hance:** Yeah. Absolutely. I think it's very important that we meet our audience where they are. And we need to connect with everyone and help everyone get that appropriate financial education. I know we had a lot of success recently partnering with an advocate, Michelle Curran.

**Jim Breen:** Yes.

**Paul Hance:** Who is a was a very highly skilled, successful Air Force pilot. So, I think that's conversations like that where we can engage with advocates that don't necessarily come from the same financial bubble that we live and operate in every day. And that really helps us make sure that we're connecting and reaching everyone, which is what we need to do when we think about defined contribution lifetime income. It's not just about the 6% of people that work in finance or the high net worth people. We want everyone to have a secure financial, have a secure retirement, and have that financial security.

**Jim Breen:** Exactly. And with the Michelle Curran example, somebody on their own journey, obviously. But the ability for her story to resonate with our audiences was incredible, right? And as you say, I think because we took that leap and that opportunity to communicate a message of, "Look at this person who has set goals, and they've achieved a lot in their life. And here are some suggestions on how you might be able to set goals in your own life as it pertains to retirement, for example." And so, you know, the engagement we saw from that event was incredible. But to your point, I really believe that a lot of that had to do with the fact that she's an everyday person; she's a regular person with an amazing story, right? But she was able to connect. And it's like we've talked about, it's about that story; it's about meeting people where they are in their journey. And I really believe that that's, like you say, Paul, is such an important part of these lifetime income solutions. Well, Paul, I want to thank you so much for joining us here live in the studio today. It's been a great opportunity to again have you on the show and talk to you.

**Paul Hance:** It's been great, Jim. Thanks for taking the time. I appreciate it.

**Jim Breen:** Absolutely. And obviously can't wait till you're back next time. And to our audience, I want to thank you so much for taking time out of your day to join us on The Wave Strength. And I want to encourage you to head over to Spotify, Audible, YouTube and search for The Wave Strength and like and subscribe so you can stay current to our content. Also, I'd love to encourage you to add your comments and thoughts into the comment section to join in the conversation and let us know your thoughts about this topic. Thanks again, and have a great day.

**Voiceover:** This has been another episode of the Wave strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life refers to Pacific Life Insurance Company (Newport Beach, California) and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. This podcast was recorded on October 18th, 2022.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.

Pacific Life’s Paul Hance on Defined Contribution Lifetime Income

What’s in the Secure Act 2.0? Pacific Life’s Seaver Sowers Explains

For women, reaching retirement readiness can present unique challenges. Generations of women were provided with little or no guidance, as retirement education and planning resources were geared toward their spouses and male counterparts. Today, women continue to experience obstacles that are reflective of this bygone era. In this special LinkedIn Live event, Pacific Life’s Paula Lopes and Jim Breen host a panel of retirement experts to discuss financial wellness and the dynamics of women in retirement. This live webinar explores issues such as: 

- What can employers do to support women’s income needs in retirement? 
- What’s working and what isn’t in communication approaches to women? 
- How can employers best reach women when it comes to retirement education? 
- What is the desired role of financial advisors? 
- What are the biggest risks for women in retirement?  

Panelists will include Ruth Schau, Pacific Life; Jacquelyn Reardon, Franklin Templeton; Hyun Swanson, UC Regents; and Suzanne Norman, ALI Fellow. 

Please register for this special LinkedIn Live Event [here](https://www.linkedin.com/video/event/urn:li:ugcPost:7036377065985634304/).

Tune In

How can we Improve Retirement Outcomes for Women?

On this episode of The Wave Strength, Pacific Life’s Nicci Leibold joins host Jim Breen to discuss Pacific Life’s University Relations program and the importance of attracting the country’s best interns. Listen as Nicci explains how outreach, building networks, and fostering relationships are key tools for recruiting today’s top talent. Nicci reveals that modern interns are contributing much more than in previous years, bringing innovation and fresh ideas into the workplace. The result is a competitive advantage, even before the interns grow into future business leaders.  

**About Nicci Leibold**

Nicci is a University Relations Program Manager at Pacific Life. As part of the Talent Acquisition team, she functions within the Human Resources department, specializing in early career talent. Nicci is responsible for recruiting and acquiring entry-level talent for current and future business needs. Nicci joined Pacific Life in 2015. 

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**Voiceover:** Welcome to The Wave Strength. Innovative solutions for a secure retirement. Presented by Pacific Life.

**Jim Breen:** Hi everyone. Welcome to another episode of The Wave Strength podcast series. I'm your host, Jim Breen. I'm head of marketing for Pacific Life's Institutional Team. And with us in studio today is Nicci Leibold. Nicci, thank you so much for joining us today.

**Nicci Leibold:** My pleasure. I'm happy to be here.

**Jim Breen:** Great. And Nicci is our corporate manager for the university relations team. And you know, Nicci, I've known you for many years. You actually helped onboard me for my role when I first started at Pacific Life several years ago. So very grateful, obviously, for that. And we've known each other a long time. And, you know, there's a lot I want to talk to you today about regarding our university, our excellent university relations program at Pacific Life. But before we get into that, perhaps you can share a little bit about your background with our listeners.

**Nicci Leibold:** Sure. So I have been with Pacific Life for eight years now. I started out recruiting in a senior recruiter function for our sales and marketing teams. And about five years ago, my manager and I recognized the need to centralize our university relations function. And so the role was created. I applied, and I have been happily in this role since. And prior to that, my whole background is actually in recruiting. So I've always had my hands in university relations, but never as a full-time role. So living the dream job now.

**Jim Breen:** Living the dream, absolutely. And it's an important role because, you know, at Pacific Life, we're over 155 years old now. And we're really focused on strength and stability and also to reaching out to our communities, becoming close partners with or without the communities in which we do business. And is this kind of a way in which we're doing that with this community outreach or this, I mean, what would you call it? Not so much outreach, but more of this...

**Nicci Leibold:** Partnership?

**Jim Breen:** ...university partnership. Yeah. And how does that work? I mean, do you go to the universities? Do you how do you establish those relationships?

**Nicci Leibold:** Great question. So we've had some of that established through our public affairs team prior to me being in the role. However, I am able to leverage those relationships that have been created with local universities. And then also throughout the nation we have schools that we target for top talent. And so I'm able to get to know the career centers; the students build deep partnerships to help bring on board early, strong, early career talent.

**Jim Breen:** And will you do most of the work on campus, or is it okay? Okay.

**Nicci Leibold:** No, it's a good question. That is the wild card right now. We're we're piloting this year a hybrid approach to both.

**Jim Breen:** And in that hybrid approach. So to just kind of not to necessarily timestamp this episode, but we are hopefully coming out of a pandemic, global pandemic, right? Where I'm sure in the last two years it's made the role challenging. And so let's talk about that post-pandemic here. Hopefully, you know, what does that mean? Well, with this new role and it sounds like you're doing some interesting new things.

**Nicci Leibold:** We sure are. So for the... we had two summers of fully remote internships with around 50 students, remote. So that was an interesting transition. And then this past summer, currently, we've got about 46 interns all on site.

**Jim Breen:** 46?

**Nicci Leibold:** Yes.

**Jim Breen:** Wow.

**Nicci Leibold:** Yeah.

**Jim Breen:** Yeah. Okay. Yeah. And is that across all of our locations or just in our West Coast operations?

**Nicci Leibold:** We have the majority in the West Coast. We have seven in Omaha and one remote, actually.

**Jim Breen:** Wonderful. And it's interesting because I've actually had the opportunity at our Newport Beach campus to talk to several of our new interns. And there seems to be a very excited, motivated, and encouraging vibe that you see from them. And I've heard some of them comment on the program and how they feel very, you know, welcome. They really feel like they're part of the PL experience, the Pacific Life experience, and that must be part of this new hybrid approach or these new efforts that you're putting into this university relations program.

**Nicci Leibold:** Yes. So it is very exciting to have everyone back in the office, the interns have been there for five days a week, and they are loving it because they have been remote, and some of them have never worked in an office or a corporate setting because of the pandemic. And so just having the collaboration and being treated as a team member and employee I think is really a valuable experience for them. They have the opportunity to network live with people, and I think that brings a lot more engagement collaboration. They get to share their innovations and insights with our leaders and impress them and hopefully create long-lasting relationships where we can hire them.

**Jim Breen:** In those relationships you talk about, especially, let's go back to the innovation. You mentioned innovation, and with our Institutional business at Pacific Life, we're very much focused on a couple of things, especially as it pertains to our defined contribution lifetime income side of the house or DCLI, where we're really trying to provide unique opportunities and education, participant experience, working with plan sponsors to help them see that we are trying to tackle the need for lifetime income through the lens of like a very hearts and minds approach. And it seems to me that this university relations program is a fantastic opportunity, right, to tap into, you know, fresh ideas, potential for new talent, and to really have that opportunity to listen to, frankly, new ideas.

**Nicci Leibold:** I 100% degree. I think every leader that meets one of these interns or hires straight out of college learned something from them and their insights are invaluable. We have, I hear it from the managers all the time, and it just creates this energy in the organization. People are during the summer, especially coming in asking me how do I get signed up to have this sort of talent join my team is very exciting.

**Jim Breen:** So Nicci, reaching out to these students via the universities is nothing new. But, you know, just to recap, we do have a very robust actuarial program at Pacific Life. Right? It's been around for.

**Nicci Leibold:** 15 years.

**Jim Breen:** 15 years. 15 years. So this is nothing new, obviously. But you are expanding, it sounds like. Right? I think our data scientist side of the intern program has grown.

**Nicci Leibold:** Yes. Five years ago, we started with seven data analytics interns. We are at 21 this year, so its continuing to grow year by year. Same with sales actually. Sales has six interns, and they'll continue to build that program in order to build a pipeline of future talent. We have hired marketing interns into full-time hires in the past and real estate MBA interns. Some strategy MBAs. Investment management. So yes, we're always open to new areas that are critical to our business.

**Jim Breen:** And that's important too. I mean, obviously the actuarial program, so much success, but there are many other areas within the enterprise that can benefit from such a program. And it's great to hear that we're expanding that. And, you know, as I mentioned earlier in the episode, from an Institutional business standpoint, as we look further down the road for this decline defined contribution, lifetime income space, it's going to be so important for us to look to those interns for thought leadership, these folks that are coming from university with fresh ideas and innovative solutions that perhaps that the current generation is not thought of yet. So these new folks coming in, these fresh ideas, we're very excited about that. And I want to thank you, Nicci, for all your great work that you've done with the university relations program and helping to bring this great new set of talent to Pacific Life.

**Nicci Leibold:** Thank you.

**Jim Breen:** Absolutely. And thanks for joining us also, Nicci, on the episode. We absolutely love to have you back.

**Nicci Leibold:** Awesome. I would love to come back.

**Jim Breen:** Great. Great. Thank you, Nicci. And to our audience, I want to thank you for spending time out of your day with us on The Wave Strength podcast series. I'm your host, Jim Breen. I'd love to encourage you to head over to YouTube, Spotify, and Audible Search The Wave Strength and see new content. But please don't forget the like and subscribe what you see.

**Jim Breen:** Have a great day, everybody.

**Voiceover:** This has been another episode of The Way of Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life its affiliates, its distributors and respective representatives do not provide any employer sponsored qualified plan administrative services or impartial advice about investments and do not act in a fiduciary capacity for any plan. Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life and Annuity Company. Insurance products can be issued in all states except New York by Pacific Life Insurance Company or Pacific Life, an annuity company in New York. Insurance products are only issued by Pacific Life, an annuity company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. This podcast was recorded on August 5th, 2022.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.

How Pacific Life's University Relations Program Attracts Top Intern Talent 

Jamie Finkral is part of Pacific Life’s Institutional Division’s exceptional customer service team; she joins The Wave Strength’s Jim Breen to share her passion for providing the best customer service in the industry. Listen in as Jamie shares how an innovative, proactive, people-focused philosophy is ensuring a world-class customer experience. Catch it now, on The Wave Strength. 

**Jamie Finkral , Operations Service Analyst**

Jamie joined Pacific Life in 2017; she supports the Operations area for Pension Risk Transfer and Defined Contribution Lifetime Income annuities for the Institutional Division. She is a member of the team that provides industry-leading customer experience through the consistent and accurate handling of transaction requests across the lifecycle of our contracts. 

---

**Voiceover:** Welcome to The Wave Strength: Innovative Solutions for a Secure Retirement. Presented by Pacific Life.

**Jim Breen:** Hi, everybody, and welcome to another episode of The Wave Strength. I'm your host, Jim Breen. I'm a marketing director with Pacific Life's Institutional Division. And with us today is Jamie Finkral, visiting from Colorado actually today. So, first off, Jamie, thanks for making the trek out here from Colorado to California to join us on the show.

**Jamie Finkral:** Yeah. Happy to be here.

**Jim Breen:** And Jamie, you are on the sales team for Pacific Life's Institutional Division. But before we get into today's topic, which is Pacific Life's philosophy as it pertains to customer service and some of the customer service innovations that Pacific Life's Institutional Division is bringing to the market, I'd love for our viewers to maybe learn a little bit about your background and your role at Pacific Life.

**Jamie Finkral:** Yeah, absolutely. So, I've been with Pacific Life since 2017, and one amazing thing that I've noticed with Pacific Life is we're very people focused, whether that's with its own employees or the people we serve, our customers.

**Jim Breen:** That's very true. And you are very; you are, I would say in particular, you are very people focused because we spent some time at a conference last November in D.C., and I remember that was our first time really meeting each other in person. And I remember going, "Wow, you're really good with people, and you really enjoy talking to people, and people enjoy talking to you." And you really have a desire to kind of understand where people are and maybe their process, whether it's a sales process or just their journey as it pertains to our business.

**Jamie Finkral:** Right. Yeah. And that's what attracted me to my current role. So, like you said, I'm with Institutional Sales, and the same goes for this team. We're very people focused, so we're really focused on ensuring the best customer experience.

**Jim Breen:** Now, Pacific Life is known for its excellent customer service. Many customer service awards across the enterprise, across the company. And, you know, talk to me a little bit about your philosophy on customer service and the importance of customer service in the role that you bring to the table.

**Jamie Finkral:** So, I help onboard when we win a plan. And so when I'm onboarding the plan, I'm just really focused on making sure we have a great customer experience, especially with the first interaction with Pacific Life. So, that's what our team is focused on.

**Jim Breen:** And that customer experience, that's really important. I think in years past, sometimes customer experience wasn't always, you know, not just the financial industry, but just in general, customer experience wasn't always the first and foremost focus. I think Steve Jobs and Jony Ive, a lot of what they did at Apple back in the 90s, you know. And even as they, if you move all the way to 2007 with the iPhone, creating something that the people didn't really know they needed or creating something or an experience or an interface that the customers just didn't know they needed yet. And so it is important where you're trying to look ahead and trying to always make sure that the folks that you work with are well taken care of.

**Jamie Finkral:** Right. One thing I like to think about is anticipating needs, just making sure that we're one step ahead and making sure that our clients and customers are well taken care of.

**Jim Breen:** Yeah, And I think that it's important to always make sure that when you're in that position to take care of people or have the opportunity to provide that service, that philosophy that Pacific Life brings to the table where, you know, the "P" in Pacific, right? People: always looking at our people. Looking at, you know, the participants in this case and the conversation we're having right now, making sure that they're taken care of. And it's not always through, right, that, I mean, it's important to always make sure that that customer, that high level of customer service, the actual human interaction there is top notch. And it's also, though, providing innovation, right? What do you think about that?

**Jamie Finkral:** So, innovation is also another very important thing to Pacific Life. We have recently undergone an administration upgrade, and with that, we've implemented some really great innovation with our web experience, for example. Just trying to stay ahead of the curve and making that interaction with Pacific Life that much easier.
 
**Jim Breen:** So when those participants, when they need to have some sort of interaction, whether it's something as simple as uploading forms...

**Jamie Finkral:** Right.

**Jim Breen:** ...or something like that, it's a much more technologically advanced or maybe more user-friendly experience?

**Jamie Finkral:** Right! Like, who faxes anymore, right?

**Jim Breen:** Yeah.

**Jamie Finkral:** So, that's exactly one great example is you can upload a form now, so it's just that easy. So, we're trying to stay ahead of that curve and innovate.

**Jim Breen:** Yeah. And it seems small, but that's a big deal because many systems still, from a document repository standpoint, still require the fax. And especially during the pandemic, when you had a lot of stores, or you couldn't just go to the FedEx/Kinko's and have them scan something. And, you know, I don't know about you, but I threw away my scanner some time ago; or my fax machine, excuse me.

**Jamie Finkral:** I'm a Millennial; I don't have a printer even.

**Jim Breen:** Yeah, fax machine. I don't know. Did they still sell fax machines? Can you go buy a fax machine? I don't even know.

**Jamie Finkral:** That's a good question.

**Jim Breen:** Yeah, that's a good question. I remember what they sound like; I remember that noise. Like noise that they make.

**Jamie Finkral:** [Makes fax machine noises]

**Jim Breen:** Yeah. Yeah. That's pretty accurate.

**Jamie Finkral:** Or, that might be...

**Jim Breen:** A modem?

**Jamie Finkral:** Dial up.

**Jim Breen:** Okay.

**Jamie Finkral:** Okay.

**Jim Breen:** We're getting our sound effects mixed up. But anyway, you're right, though, because it's not just about that opportunity to connect and communicate, you know, person-to-person, but providing those touch points so that your participant feels like they're in a very clean user experience. It's a user experience that's not just easy to use, but they feel thought of, you know, like their needs have been carefully thought of and providing that digital-first experience.

**Jamie Finkral:** Right. Exactly. And we, you know, we're always going to provide that ability to give us a call if you need to; if you still want to call us, if you still want to fax us, we still have that option. But we're just thinking ahead for those that might want to use the internet a little bit more often.

**Jim Breen:** Jamie, this has been great. I want to thank you for taking the opportunity to sit down and just give us a brief overview about your thoughts on customer service as they pertain to Pacific Life in our Institutional Division. Is there anything else you'd like to add?

**Jamie Finkral:** Well, I just really appreciate this opportunity to chat about one of my passions: customer service and the customer experience. You know, Pacific Life has been around for over 150 years, and that is because of our strength and stability. And we just look forward to sticking around for another 150+ years and innovating for that great customer experience we're known for.

**Jim Breen:** Awesome. Well, thanks. Great, Jamie. Really appreciate it. Hopefully, we'll have you back.

**Jamie Finkral:** Yeah.

**Jim Breen:** And to our viewers, I want to thank you for spending time with us today. And I want to encourage you to head on over to YouTube, Spotify, or Audible and make sure you like and subscribe to our content so you can stay current with the most recent episodes. Have a great day, everyone.

**Voiceover:** This has been another episode of The Wave strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life, its affiliates, its distributors and respective representatives do not provide any employer sponsored, qualified plan, administrative services, or impartial advice about investments, and do not act in a fiduciary capacity for any plan. Pacific Life refers to Pacific Life Insurance Company (Newport Beach, California) and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. This podcast was recorded on August 1st, 2022.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.

What does Innovative Customer Service Look Like? Pacific Life’s Jamie Finkral Explains 

Pacific Life’s Institutional Division and members of Pacific Life’s Key Executive Advantage Program (KEAP), traveled to San Diego to attend the 2023 NAPA 401(k) Summit. During the conference, the Institutional team filmed several interviews for upcoming episodes of our innovative podcast, The Wave Strength.  

In this first episode of the series, host Jim Breen talks with Pacific Life’s Kim Coggin and Joanne Gagnon about KEAP’s turnkey solutions, and how they help advisors design non-qualified deferred compensation plans to meet the needs of their executives and senior leaders. Catch it now, on The Wave Strength. 

**About Kim Coggin**

Kim Coggin is a Field Vice President and Point of Sale Specialist at Pacific Life. She is a highly qualified insurance executive with extensive experience building relationships with prospects, referral sources, and market influencers. Kim has considerable background in the executive benefits market and excels at building relationships with C-level executives and Boards. Kim joined Pacific Life in 2021. 

**About Joanne Gagnon**

Joanne Gagnon is a Field Vice President and Point of Sale Specialist at Pacific Life. Joanne brings more than 30+ years in the life insurance and financial services industries. She specializes in helping financial professionals deploy solutions for business employers to attract and retain executives in the non-qualified deferred compensation market. Joanne has been with Pacific Life for over 18 years. 

---

**Voiceover:** Welcome to The Wave Strength. Innovative solutions for a secure retirement. Presented by Pacific Life.

**Jim Breen:** Hi, everyone, and welcome to another episode of The Wave Strength Podcast series. I'm your host, Jim Breen, head of marketing with Pacific Life's Institutional Division. We are live on the conference floor at the 2023 NAPA 401(k) Summit here in San Diego, California. And joining me here in the makeshift studio are two Pacific Life team members that represent the KEAP program. So, Joanne, Kim, thank you so much for joining us today. And I'm excited to learn more about KEAP and what it has to offer.

**Kim Coggin:** Thank you.

**Joanne Gagnon:** Thank you. Excited to be here as well.

**Jim Breen:** Yeah, absolutely. But before we jump into that, Joanne, maybe you can share a little bit about your role and what you do with Pacific Life Insurance Company.

**Joanne Gagnon:** So I have been with Pacific Life for 18 years, so I like to point that out because it's just a great company to work for, which you probably already know.

**Jim Breen:** Absolutely.

**Joanne Gagnon:** And I cover from Maine to Miami as a point of sale specialist for Non-qualified deferred compensation, mostly because it's a specialty and advisors really need help in this area. So, I go out in person or virtually and help businesses, corporations put together executive benefit plans.

**Jim Breen:** Excellent. Thanks, Joanne, and thank you for joining us. Kim, perhaps you could share a little bit about your background.

**Kim Coggin:** Sure. I'm Kim Coggin. I am also a point of sale specialist in the Key Executive Advantage Program for Pacific Life, and I cover the middle swath of the country. So everything between what Joanne covers and Kansas, north to south. And as Joanne mentioned, we are here to work with advisors, with their clients directly with the companies, to build executive benefit plans that really help retain, recruit, and reward their key people.

**Jim Breen:** Great, Kim, thank you. So let's talk a little bit about KEAP. You know, we're at this great conference, and we're talking with a lot of advisors who are interested in a lot of the solutions Pacific Life brings to the table. KEAP being one of them. I would love to learn more about what KEAP does downstream. You know, yesterday in the podcast we did with Kim, you and Matt, you talked a lot about what you've been doing with KEAP lately. I'd love to go a little further downstream. Let's talk maybe a little bit about those participants,the folks that benefit from this KEAP platform.

**Kim Coggin:** Okay. Do you want to start us?

**Joanne Gagnon:** Well, I'll start with the background maybe...

**Jim Breen:** Thanks, Joanne.

**Joanne Gagnon:** ...of how we got here. And I mentioned 18 years of Pacific Life, so I wore a lot of hats in distribution with really primarily life insurance advisors. And the one gap that exists in overall planning, especially for high net worth or high earners, is the ability to save more money on a pretax basis.

And what Pacific Life noticed was that we would have people bring opportunities to us, and a lot of times, the opportunity fell apart. And it was really because the advisor lacked the resources to get a plan in place. So how did we get here? We concluded that it would be ideal to have some expertise available to the field as really a resource, an extension of their office to be able to help the advisor figure out how to get out of their comfort zone of what they talk about every single day.

And again, extension of their office to be able to help these mid-sized corporations complete the retirement scheme, if you will, for the highly compensated individual. So that's sort of some of the background of how we decided to do it. Really turnkey from the standpoint that they don't have to go out and create everything customizable from the standpoint that once you select a plan, if you will, you still have to pick 40, 50 different things within it to have it be your plan.

So that's sort of how we got to, I guess, the background of what we're doing. The really key part is that for highly compensated individuals, even with the most recent changes, with the Secure Act and the ability to put more money on a defined contribution basis into their 401(k) plan, people who are highly compensated cannot put enough money away on a pre-tax basis to retire at the same level as those who are rank and file.

**Jim Breen:** Okay.

**Joanne Gagnon:** So non-qualified plans are about creating the ability to allow those individuals to defer as much money as they want on a pretax basis or, frankly, from the company to use it as a retention tool instead of, say, doing 401(k) match of X percent or safe harbor. We hope that they do that. But then, on top of it that they also are setting aside discretionary dollars for their highly compensated.

**Jim Breen:** And that's important because, you know, in true Pacific Life fashion, a company with 155 years of strength and stability, we try and do everything we can to listen to the needs of our clients and customers. And it sounds like KEAP is an example of that, right? There is a need, and KEAP solved that need. You know, Kim, maybe you can share a little bit about your thoughts.

**Kim Coggin:** Yeah, there was a need in the market, and Pacific Life, you know, given the history and the strength of the relationships with all of the advisors, insurance or otherwise, in the country, there is a gap for the mid-market, and we serve mainly mid-market companies. So we're not serving the big publicly traded companies. They have all of the resources at their disposal, and they have the budgets to pay for that sort of expertise.

The mid-market has really been challenged because to put an executive benefit plan together, you have to find an expert because most people don't specialize. Then you have to find a plan administrator. You have to figure out how the liabilities are going to work. You need to figure out the funding in the account, and all the movable parts. And it's very expensive when you have to go out and find them individually, and there's not a lot of options for kind of the easy button.

That's what keeps us from the corporate sponsor's standpoint because they have to be sponsored by a company. And these plans are not, you know, targeted to individuals, but the individuals participate and benefit. And I think one of the things we enjoy I was mentioning this that we need to explain more to advisors about why you would do it.

It's the pretax component. They can't save enough pretax dollars to replace that income ratio at retirement. But unlike a 401(k), you can have a distribution while employed from these plans without, you know, the 10% penalty and all of that that goes into the 401(k) world. So when companies implement these plans, the question is, who are your key people? What are their ages?
Somebody who's 40 has a different financial need immediately and long term than someone, say 55.

**Jim Breen:** Yes.

**Kim Coggin:** So these plans are built with what we call in-service distributions, which means they can target a bucket to put dollars into that can be paid out at a point in time in the future that they select at the time they open the account.

**Jim Breen:** Okay.

**Kim Coggin:** So let's say I have kids going to college. I want to open up, you know, my employer has one of these plans. I'm going to do an in-service account. I'm going to do a retirement account. And then I'm going to say in seven years, let's say I want those distributions to start being paid to me, and maybe they'll coincide with college tuition for my child.
But I'm saving pretax, which everybody knows in the advisor world. You save your money works faster, and far harder for you if you do it pretax and grow it pretax and then pay the taxes on the back end versus after tax and where it is at the same time frame. So that's one of the important things that when we're designing a plan, understanding who the participants are and making sure that the components of the plan serve the needs of those participants. So they're excited about it. And I'm sure you've seen it in enrollments. When you start to have those conversations with participants.

**Joanne Gagnon:** Yeah. And not only that, but you know, we're talking about participant benefits. You know, sometimes the participant, especially like a tight labor market, you know, what they're seeking is more compensation or, frankly, more participation in the value of the business. And yet a lot of closely held businesses, they don't want to share, say, equity or ownership. And so, from the participant's standpoint, non-qualified plans are a way that they can really benefit and feel vested in the growth of the business without actually having ownership in the growth of the business.

And so it, you know, it's a motivational thing. It works in their favor. They are, you know, basically, they know that their talent is being recognized as part of the organization because, unlike really every other benefit that a company offers, this one says it has to discriminate.

**Jim Breen:** Yeah.

**Joanne Gagnon:** And so, you know, the first thing when I help an advisor with an enrollment, the first thing I say to the group of participants is, "Congratulations, you've been selected to be part of this group."

**Jim Breen:** Interesting.

**Kim Coggin:** So you're a small select group.

**Joanne Gagnon:** Small select group.

**Kim Coggin:** Yeah, I don't think that can be said enough. And Joanne mentioned the closely held companies; most of the companies in the mid-market are closely held. One or two owners or a family that's been in business. And either they can't give equity or they won't because it's a family-owned business, or it's a tight group, or they're looking at key people and saying, "I'd like them to succeed me one day." And these plans can be utilized to, "Okay, I'm going to contribute on your behalf because you perform really well. You're very important to the business. I can't give you equity, but I want you to feel a partnership, an equitable partnership, and then maybe in the future, 10, 15 years down the road, let's look at that pot of money," and maybe that helps you seed the buying out of the brothers or the family to become that business owner.
I've got a couple of clients doing that right now. So it really is sponsored by the employer, but it is really customized for those employees and based on that type of business. And I think it's very unique in the market. You can't really discriminate in any other plan out there because our employee broad based.

**Jim Breen:** Let me ask you both a question here. You both have a lot of history and experience in the industry. We mentioned "feel it" moments a bit ago. You know, can either of you share any kind of "aha" or, you know, story that you know is appropriate to share with the audience? We don't have to reveal names or anything like that. But where you felt, "Wow, you know, what I'm doing is making a difference."

**Joanne Gagnon:** I have one. It's very specific. I helped a an advisor put a plan in place and say November of 2021 and the company was closely held. They are bio lab a research but closely held so a lot of big publicly traded competitors and the one owner of this very large business wanted to do something to basically compete. And then that's what they said.
I have a hard time competing against these other publicly traded companies. So we put this plan in place like 17 individuals, where the employer was carving them out and putting specific dollar amounts aside for them, you know, so discretionary contributions, and then they're making, you know, really investment choices comparable to their 401(k). Okay, fast forward a year later, and the advisor and I are on the phone with the director as we're getting ready for the 2022 or the enrollment of November 2022.
And he said, we have five new participants. And I said, "Wow, that's awesome. Business must be really good." And his response was, "Well, business is okay, we're actually cutting costs in other places, but not here," he said. "We're expanding this plan. In fact, we recruited some of those new participants because of this plan, because they're accustomed to say getting equity or stock options and we can't give it. We don't want to give it. But this plan enables us to create that same feel." So that to me was an "aha" moment because the plan went from X like really a 25% increase of participants in one year because the employer recognized the value of what they were giving.

**Jim Breen:** Amazing. That's a great story.

**Kim Coggin:** I think it's important to note that when you're talking, especially in the mid-market and in these plans in general, these are not hundreds of people. It's generally ten, 15, 20 participants. So you get more of that one-on-one real interaction because we do the enrollments, we sit with the participants and the advisors and explain the plan because there's a lot of movable parts. But because of that smaller group, but it's a very important group, we get to see firsthand the impact of a plan, get their reactions, get their questions, their concerns.
And we can directly, you know, help them understand A) like you said, congratulations. You're in this plan. And, you know, one of the plans that I enrolled, the owner is one owner, one person. She has all these people. They don't sell products or services. They recruit people to place with other companies; Headhunter Recruiting Group. And she was on the calls and just it was a it was a way for her to be able to tell her employees individually, "You are really important to me. You are the core of why this company's successful because of the highly paid salespeople."

And that's really how they generate revenue is placing these people. And they had, I think, a better appreciation of their value to her. These people are in their thirties, so think about that. They're not near retirement. The world is their oyster. So you know how that is. People are calling them and, you know, talking to them about changing jobs, but they all kind of walked away with that, "She really means it, like we're really important here." So when somebody comes calling and throwing money at them, that's a different internal decision process of, "Well, she really does care. She's really talking to me personally, versus I'm just another employee in a mammoth machine."
So it really is if advisors will open it up and start talking to their clients; I think they'd be surprised at how those relationships vary and are very strong versus the broad-based employee benefit plans they may be working with.

**Jim Breen:** Thanks, Kim. Thanks, Joanne. You know, I want to thank you both for sitting with us today and talking about KEAP also sharing these stories that obviously mean a great deal to you both. And I'm hopeful that our audience members enjoyed that as well. So thank you to each of you for being here.

**Kim Coggin:** Thank you. Thank you.

**Jim Breen:** Absolutely. And to our audience, thanks for joining us once again here. We're live on the conference floor at the 2023 NAPA 401(k) summit live in San Diego, California. I want to encourage you to head over to YouTube, Google, Spotify, and Audible. Search The Wave Strength bi pacific life and do me a favor subscribe and like that content so that you can stay current with new content as it becomes available. Again, thanks for joining us, and we'll see you next time.

**Voiceover:** This has been another episode of The Way of Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed.
Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life its affiliates, its distributors and respective representatives do not provide any employer sponsored, qualified plan, administrative services or impartial advice about investments and do not act in a fiduciary capacity for any plan. Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life and Annuity Company.
Insurance products can be issued in all states except New York by Pacific Life Insurance Company or Pacific Life, an annuity company in New York. Insurance products are only issued by Pacific Life, an annuity company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products IT issues. This material is provided for informational purposes only and should not be construed as investment tax or legal advice, which are subject to change at any time.
Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations. This podcast was recorded on April 3rd, 2023.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.

How is Pacific Life’s KEAP Team Helping High Earners Save Pre-tax Dollars?

For some of us, what we think our retirement is supposed to be like could lead to a big letdown. On the latest episode of The Wave Strength, Dr. Qi Sun and host Shea Frates highlight the new issue of Qi’s newsletter: I Didn’t Sign Up for This: Don’t Let High Expectations Ruin a Perfectly Good Retirement. Listen in as they discuss the generational shift in retirement, financial education, and retirement planning. Catch it now, on The Wave Strength. 

**About Dr. Qi Sun**

Dr. Qi Sun is the Financial Economist for Pacific Life’s Institutional Division. Her research focuses on longevity insurance, household asset allocation decisions, and financial well-being. Qi holds a bachelor’s degree in Finance from Donghua University, a master’s degree in Personal Financial Planning from the University of Missouri, Columbia, and a doctorate in Personal Financial Planning from Texas Tech University.  

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**Voiceover:** Welcome to The Wave Strength: Innovative Solutions for a Secure Retirement. Presented by Pacific Life.

**Shea Frates:** Hi, and welcome to another episode of The Wave Strength Podcast. My name is Shea Frates, Digital Media Strategist for Pacific Life's Institutional Division. And back with us today is Financial Economist Dr. Qi Sun.

**Qi Sun:** Hi Shea. It feels good to be here again. And as always, I'm very excited for this episode.

**Shea Frates:** Absolutely. And this is the third article that you've written for us. I know it's a continuation of your first article. This one it's called "I Didn't Sign Up for This," which is very cute. "Don't Let High Expectations Ruin a Perfectly Good Retirement." So, I know today we wanted to talk about that retirement planning process. We wanted to talk about our process as millennials, talk about our parents, and how your parents are currently retired; my mom is planning for retirement. And, of course, just wrap this up back to the importance of financial education. So, Qi, as a millennial and as a doctor of financial education, how are you currently planning for retirement?

**Qi Sun:** So, here I want to share my personal experience. So, I always say because I work for Pacific Life, which is an industry company, so I know that 401K, which one types of the defined contribution plans will be my main saving vehicles. But I do plan that when I reaching the income peak period, I may also use IRA too as additional funding for my retirement plan. And in terms of a retirement age, so, I'm thinking age 65, as you know, very normal retirement age. But my plan is I don't want to make 65 as a cutting point like, oh, immediately enter retirement after 65. I want to make it like a smooth and gradually transition. So, I probably will kind of easing my working load and maybe transferring to part-time job like five, seven years between 65. And 65 will be my officially definition for start receiving retirement income.

**Shea Frates:** Okay, I have a personal question. At what age do you plan on investing in your IRA?

**Qi Sun:** So, I think that's a very interesting question. It's all according to theory because, you know, I learned this from my Ph.D. program. So, according to the lifecycle theory, people's income normally will reach the peak period around like 35/40. So, that's kind of the time thinking to set up IRA for both retirement savings purpose and income tax saving purpose.

**Shea Frates:** That is good to know because I have been wanting to invest in an IRA for quite some time. Personally, I'm not quite there yet; I have my 401(K) through Pacific Life, and then, of course, the company does match your contributions up to, I think, about 6%, so, I personally take advantage of that. I have an HSA; I unfortunately, I've had some health issues this past year, so I haven't been able to invest in my HSA as effectively as I would have wanted to. But an IRA is my next step. So, this is good advice for me and, of course, great advice for our listeners as well.

**Qi Sun:** Yeah, sure.

**Shea Frates:** Do you have any other tips or tricks?

**Qi Sun:** Not tips and tricks. I think it's like people have different occupation. They work for a different industry. Their retirement story will be definitely different from us. But I do want to share a story from my friend. So, he works for a university; he's a university professor. So, his retirement savings story a little bit complicated because he has, I think the normal word will be the pension plan from the university. And because the university provide a pension plan so their defined contribution plan will not be as generous as the industry firm. So, that's kind of force him to start citing the IRA earlier than what I just said before. So, that's why now he has three source of retirement savings. So, that's kind of very interesting. Different from us.

**Shea Frates:** Yeah, definitely. And I know that your parents are currently retired. They also have a pension plan. And how is that working out for them?

**Qi Sun:** So, yeah. I am happy to share this story from my parents because both of my parents have already retired. They have already started receiving their first check, first paycheck of their retirement, right? So, I would say my parents, they are very lucky because they are fully covered by the pension plan. Yeah. So, they have this guaranteed lifetime income until the last day of their life. And the best part, I would say, for their pension income is this income is actually adjusted by inflation rate.

**Shea Frates:** Oh, awesome!

**Qi Sun:** Yeah. So, that's kind of very unique feature; it's not very common for pension income, actually. So, their income will be adjusted like every five years, I'm not quite sure, but it sounds like that, every five years according to the inflation rate. So, that's why my mom the other day, she told me, "Oh, my income increased." I was like, "Yes because income is adjusted by inflation." So, that's kind of my happy parents. And I would say the good thing for the pension income is I feel like they have a really good understanding about how much are going to receive even before retirement because they know this is a paycheck they are going to receive from the pension plan, right? So, that's kind of make their transition, their retirement transition, very smoothly. And they did not actually increase our living standard to a luxury retirement life. And they did not kind of tight their living expense because this reduced the income because everything kind of stayed the same.

**Shea Frates:** Yeah. So, it sounds like they set those realistic expectations ahead of time.

**Qi Sun:** Right.

**Shea Frates:** But they were also educated properly on what retirement life was going to be like.

**Qi Sun:** Right. So, that's kind of one of the main points I talk about in the article that a lot of people, they kind of fall into this behavioral trap called effective forecasting like people will think the future you want to be extremely good or bad, then it turns to be. So, people will actually have this unrealistic expectations on their retirement. And this kind of gap between their expectation and the reality cause they have this kind of unhappy retirement life.

**Shea Frates:** My mom, I had this conversation with her this morning. It's like, "Hey, mom, how are you planning for retirement?" And we had a really interesting conversation about it. We kind of went on a couple of different tangents, but she was pretty much telling me she has a 401(k) set up. We recently got her on an HSA as well because I was telling her the benefits of that; she's very excited about her HSA. And my mom is so good at saving money; she is like a super saver. She has a high-yield savings account, so she's going to continue to save money there. But I think her biggest regret, and I feel like so many other older adults, this is their concern, is they wish they started sooner. My mom says, "Oh, I just wish I started my retirement savings process so much earlier." But life got in the way like the recession back in 2008 got in the way. So, there's just a lot of obstacles for so many different people, and it's challenging sometimes. How can we set realistic expectations when maybe a hard challenge comes across, and how can we get people back on track?

**Qi Sun:** Yeah. So, I think that is a really good question. And this is not only your mom's question; I guess this will be a very common question for the coming generations of retirees. The main reason why I say this because I also mentioned this in the article that we do see the retirement income structure is changing right now. So, for our grandma, they, like the normal people, they have the pension plan, right? They used to the pension plan and then back to the 70s, and I think 80s, around that time, like we do see the pension plans start to disappear, and they're replaced by the defined contribution, which means people need to save the money and manage the money by themselves. So, you mention your mom is a saver.

**Shea Frates:** Yes.

**Qi Sun:** And she is very happy about saving money, but that can now put us on this pending question. Okay, people are so used to saving, but when they get a stage, they need to spend the money; how they spend the money, right? So, this is something I think very is kind of why we're here, why we're doing the lifetime income, why we're so enthusiastic about promoting the lifetime income for people. Because when people get into retirement stage, they face a lot of risk, not only from the financial market but also from this uncertain life expectancy, right?

**Shea Frates:** Yeah.

**Qi Sun:** So, that's why we think that bring the pension back to the defined contribution, that's kind of a new concept, very popular recently, is very important to help defined contribution participant, the 401(k) participant, to secure their retirement life, and also help them to set this realistic expectation before the real retirement starts.

**Shea Frates:** Yeah, definitely. And I know we wanted to talk about the importance of that financial education.

**Qi Sun:** Yeah.

**Shea Frates:** My mom, she worked in the insurance industry; it must have been like 20 years ago. So, she had a really great understanding of the value of a retirement plan, of a savings plan. Again, life gets in the way; not everybody has a luxury to continually invest in that retirement. So, how can we set people up for successful retirement?

**Qi Sun:** Yeah. So, I think this is you mentioned that this is kind of why we want to talk about the importance of financial education. And I think we have already kind of start doing that. You do see a lot of employer and also universities that provide a financial education program or courses to help people to better understand why I need to start saving earlier, why I need to plan the distribution during my retirement. Saving is not only the task; you also need to plan to how to spend the money, right? So, I also mentioned this in the article, right? So, we know that because people are kind of heavily rely on for 401(k) right now. So, the employer, they have, I would say, a heavier burden or, you know, responsibility, more responsibility to educate the participant because we do not expect every participant they have a financial advisor they can work with, right? I would say the main education will still be or from the employer. And I think I heard this concept from the webinar I think on Wednesday, last Wednesday; I really like this concept. So, the speaker talked about we need to actually change the fear-based approach to the hope-based support approach, right? We don't want people to fear about their risk, their retirement; we don't want people to fear about running out of money doing the retirement. We want them to put this hope that they will have a really happy and secure retirement life. That's how I think we need to change our mindset a little bit through the financial education.

**Shea Frates:** Definitely. I am petrified of retirement. I have such a long ways to go, but I'm in a much better position than a lot of people. You know, I match my contribution, my employer's contribution to my 401(k), I have the HSA, could be saving a little bit more, you know. But even I'm afraid, and I still need education on to how to best prepare. So, it's so great that we're talking about this, we're thinking about this, and we're getting that message out there for people to have a great retirement because it's so important.

**Qi Sun:** Yeah. I think this is also, you know, I studying this field is also my personal mission, trying to get more people educated about their retirement saving, planning. So, just help people to feel released from this fear.

**Shea Frates:** I might schedule a session with you sometime if you don't mind?

**Qi Sun:** I'm happy to, but I may charge for you.

**Shea Frates:** That's okay! No worries. Qi, it was so good talking with you today. Again, you provide so much experience in this area and so much knowledge. We're always so happy to have you on the podcast, so please come back next time, and we're looking forward to it.

**Qi Sun:** Definitely. Would love to do that.

**Shea Frates:** Perfect. Thank you so much.

**Qi Sun:** Thank you.

**Shea Frates:** And again, thank you so much for watching The Wave Strength, and we'll see you next time.

**Voiceover:** This has been another episode of The Wave Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life, its affiliates, its distributors and respective representatives do not provide any employer sponsored, qualified plan, administrative services, or impartial advice about investments, and do not act in a fiduciary capacity for any plan. Pacific Life refers to Pacific Life Insurance Company (Newport Beach, California) and its affiliates, including Pacific Life & Annuity Company. Insurance Products, are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products at issues. This podcast was recorded on January 20th, 2023.

**Jim Breen:** Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content. Click one of these links over here.

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