2014 Retirement Webinar Series. Risk. Reinsurance. Human Resources.

Transcription

1 2014 Retirement Webinar Series Risk. Reinsurance. Human Resources.

2 Perspectives From Our Clients Leading the Way Cindy Cattin, Managing Director, Investments Operations and Risk Management, Exelon Corporation Akash Raj, Assistant Treasurer, Motorola Solutions Barb Hogg and Ari Jacobs, Aon Hewitt Risk. Reinsurance. Human Resources. 2

3 Agenda Today s seminar highlights two very hot topics for retirement programs Section 1 Section 2 Pension Settlements Investment Redesign 3

4 Pension Settlements Motorola Solutions Risk. Reinsurance. Human Resources. 4

5 Options for Settling Pension Liabilities Lump Sums Annuities Actives Active Transfer Terminated Vesteds TV Lump-Sum Window Retirees Retiree Lump- Sum Window Retiree Annuitization 5

6 Motorola Solutions: Who We Are Motorola Solutions provides mission-critical solutions and services for public safety and commercial customers Through leading-edge innovation and communications technology, Motorola Solutions enables its customers to be their best in the moments that matter Communication solutions span infrastructure, devices, services and software Founded in ,000 employees in 58 countries 50,000 customers in 100 countries Headquarters: Schaumburg, IL Ticker symbol: MSI 2013 annual sales $8.7b 2013 R&D spend $1.1b 6

7 Background: Pension Overview Global Plans U.S. Plans Pension Benefit Obligation (PBO) $9.3b $7.3b Plan Assets $7.6b $6.1b Funding Deficit ($1.6b) ($1.2b) Funded % Status 82% 83% Participants ~ 95,000 ~80,000 As reported 12/31/2013 Observations MSI pension liabilities are outsized relative to scale of business as a result of previous divestitures and spin-offs Company will only have 15,000 employees following close of Enterprise sale, while carrying global pension obligations for 95,000 participants 7

8 U.S. Pension Actions Taken In the past Significant cash contributions Asset/liability matching Recently Large scale lump sums Annuitization Closed plan to new participants Froze benefit Rationale for current actions MSI subject to significant funded status volatility and risk of large unexpected cash funding requirements if unaddressed Market conditions and economics are favorable to reduce obligation now 8

9 Actions Retirees Signed agreement with Prudential Purchasing a group annuity contract ($3.1b) Assuming annuity obligation for 30,000 participants Terminated Vested Offered voluntary lump-sum payments offered to 32,000 terminated vested participants Targeting $1.1b pension obligation reduction Funding Contributing $1.1b into the U.S. pension plan in 2014 Expected reduction in U.S. pension obligation: ~ $4.2b Targeting close of transactions by the end of

10 Results Pension Benefit Obligation (PBO) Pre- Transactions $8.4b Post- Transactions $4.2b Plan Assets $6.7b $3.4b Funding Deficit ($1.7b) ($0.8b) Funded % Status 79% 81% Participants ~80,000 ~30,000 40,000 Allows MSI to decrease pension obligation Improves risk profile and financial flexibility of the company Provides flexibility and security to all plan participants Proactively take advantage of market conditions that allow us to meet obligations and de-risk the balance sheet Based on pro-forma U.S. pension results as disclosed on September 25, 2014 investor call 10

11 Investment Restructure Exelon Corporation Risk. Reinsurance. Human Resources. 11

12 Investment Redesign is Happening Many employers are reconsidering their investment/fee approach to their defined contribution plans Custom target date funds Complete Recently 12% Very Likely 2% Somewhat Likely 5% Prevalence of white label funds Yes 24% Restructuring administrative fees Completed Recently 21% Somewhat Likely 13% Very Likely 5% Source: Aon Hewitt s 2014 Hot Topics in Retirement Source: Aon Hewitt s August 2014 Pulse Survey on White Label Funds Source: Aon Hewitt s 2014 Hot Topics in Retirement 12

13 Exelon: Who We Are Exelon is the nation s leading competitive energy provider Participates in all stages of the energy business, from generation to competitive energy sales to transmission to delivery Business unit (Constellation) provides energy products and services to 100K business and 1m retail customers Utilities deliver electricity and natural gas to 7.8m customers in: Central Maryland (BGE) Northern Illinois (ComEd) Southeastern Pennsylvania (PECO) 26,000 employees 48 states plus the District of Columbia and Canada Headquarters: Chicago, IL Ticker symbol: EXC Annual revenue $24.9b 35K megawatts 13

14 Savings Plans at Exelon Before Changes Two primary plans Legacy Exelon 21,000 participants 15 investment options (incl. Exelon stock) + target date fund series Collective trusts and institutional mutual funds Constellation 8,000 participants 13 investment options + target date fund series Collective trusts and institutional mutual funds 14

15 New Fund Line-Up Option A Do It For Me Option B Do It Yourself 12 custom target date funds Includes up to 27 different investment managers Glidepath customized for Exelon Recognizes pension Age 61 retirement Through retirement 7 asset-class based options 3 actively-managed, multimanager options designed for Exelon 2 passive funds Cash Exelon stock Default Target date fund (except balances in Exelon stock) In addition: Moved to fee transparency for recordkeeping and administrative fees 15

16 Rollout April May June Announcement (4/28) New funds Managed accounts Workshops and webinars Transition mailing (mid- May) New plan and blackout (transitioning plans) Fund fact sheets Fee disclosure Notices Workshops and webinars continue Re-enrollment period June 1 June 29 Live July 1 16

17 Results Significant movement to the new custom target date funds 69% of assets 65% of participants Before (May 31, 2014) 25% 46% 12% Reduction of money market/stable value concentration from 12% to 3% 8% 6% 4% High rate of active elections: about 1/3 of all participants After (July 1, 2014) 15% 4% 5% Legend Target date International equity Fixed income Domestic equity Exelon stock Money market/ stable value 69% 4% 3% 17

18 Questions & Answers 18

19 Upcoming Events and Contact Us Upcoming Webinar January 21, 2015 Learn the results from our 2015 Hot Topics in Retirement Survey Contact Us For any additional questions, please contact us at 19

20 About Aon Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchester united to learn about Aon s global partnership with Manchester United Aon plc This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Hewitt's preliminary analysis of publicly available information. The content of this document is made available on an as is basis, without warranty of any kind. Aon Hewitt disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Hewitt reserves all rights to the content of this document. 20