Dutch Plan Sponsors Could Choose to Boost Reputation By Upping Contributions
24 August 2012 (PLANSPONSOREurope.com) - Some Dutch plan sponsors could choose to enhance their reputation among their employees by increasing contributions to their pension funds, Kristel Kusters-van Meurs, Mercer’s DB Risk Leader for the Netherlands has told PLANSPONSOR Europe.
Dutch newspaper De Volkskrant has reported that Social Affairs Minister Henk Kamp is currently considering changes to the discount rates for pension funds. Current discount rules have been come under fire from pension funds due to the funding ratio volatility they can create.
Kusters-van Meurs told PLANSPONSOR Europe that with funds facing a benefits cuts plan sponsors may choose to step in. “Some funds have an agreement that the sponsor has to pay. Those funds then don’t have to cut benefits. You first have to look at all other possibilities - especially if there is an agreement that the sponsor has to pay. If there is not such an agreement the fund will explore the possibility of the sponsor being willing to pay even if there is not an agreement.
“If the sponsor isn’t able to do that and it’s not in the agreement then he is not required to pay. There are some sponsors that might consider it because they don’t want the pensions of their employees to be cut down so they could consider it.
“It depends on the size of the company and the fund. Sometimes you have a fund that is very big in relation to the capital of the sponsor so it’s not an option. There are a lot of industry-wide pension funds where there is not one single sponsor but a whole group of sponsors and most of the time it is not an option. If the sponsor is a company with a lot of capital they will definitely consider this.
“It is good for the reputation of the sponsor. Some sponsors are not that interested in cash but in the end they look at accounting numbers and in accounting terms it doesn’t have an implication if you pay because your situation stays the same it is only a cash injection so companies largely look at their accounting numbers and not as much at their cash numbers. What they always have to look at is if they do it once employees and the fund might think they will do this again so that could be a reason to not have an additional financing.”