Hi guys,
is there any impact from high staff turnover on Defined benefits plan? Lower Risk Tolerance?
and is there any impact on the liabilities exposure? Larger liability noise?
i remember I have encountered a question before but could not locate it. Thanks
what’s the reason behind the turnover?
the only thing i can think of is increased in defered benefit… Lower risk tolerance, reduced liabilities duration and smaller liabilities noise if the turnover leads to a higher ratio of inactive to active employees
Higher staff turnover should increase risk tolerance. When staff terminate, especially on final salary db plans the benefit paid to them would be a refund of their contributions or their accrued benefits, that is their benefit due based on current salaries.
the DB LIABILITY held for these terminated members would be based on FINAL SALARY AT. Retirement and not current salary.
consequently when there is staff turnover it increases PENDION PLAN SURPLUS and therefore increase the plans ability to take risk