Risk Assessment & Mitigation

Managing the ups and downs of retirement contributions is a major concern for multiemployer retirement systems. Because plans can face significant fluctuations in contributions from year to year, you need tools that can help predict how changes in economic and budgetary conditions could affect plan contributions, and what steps you can take to mitigate your risk.

Segal's asset-liability modeling (ALM) is a tool that can be used to make sound decisions regarding plan assets and liabilities. It is particularly helpful in comparing the effects on plan funding of one or more sets of future "what if" scenarios. ALM services are provided by Segal Marco Advisors, Segal's SEC-registered investment consulting affiliate.

ALM can be applied to every part of the plan process: plan design, plan governance and investment management. You should especially consider ALM if you are contemplating changes to:

  • Cash outflow and liquidity requirements
  • Contribution levels
  • Plan design, funding method or asset allocation changes

What is Asset-Liability Modeling?

ALM looks at two different categories of events that can affect your plan: changes that you can control, such as funding method, benefit design or asset allocation; and changes that you cannot control, such as investment returns, market volatility or inflation.

We identify the likelihood and impact of changes in these elements, which allows you to adjust investment and funding policies. In addition, it provides you with a deeper understanding of how alternative investment strategies, benefit designs and funding methods interact and influence funding levels and contribution requirements.

We offer two different types of ALM: deterministic and stochastic.

  • Deterministic ALM: Deterministic ALM models a specific set of assumptions, giving you a sense of how the plan will look under very specific scenarios. While it does not take into account any alternative outcomes, for some organizations, deterministic ALM may be enough.
  • Stochastic ALM: Stochastic ALM gives you insight into the probability of the amount and timing of expected costs, as well as the range of expected results and the likelihood of each outcome occurring. The simulation involves modeling thousands of long-term forecasts under future economic scenarios. The influence that each of these economic scenarios will have on pension liabilities and trust assets is then measured and recorded. Stochastic ALM gives you a view of the overall long-term financing of the plan that neither a single-year actuarial valuation nor a deterministic projection can provide.

Why Should You Use Asset-Liability Modeling?

  • ALM provides a platform for decision-making. By analyzing proposed changes in the asset portfolio, plan design or funding policy, you can see the likely future impact of current choices.
  • The ALM process evidences due diligence in support of fiduciary obligations of the plan sponsor
  • As opposed to asset allocation studies, which only measure the variability of portfolio returns, an ALM study measures actuarial funding risks

Why Choose Segal?

We provide independent consulting advice and are able to make unbiased recommendations because we are not associated with any asset manager or brokerage firms.

We use one of the premier asset-liability software models in the industry, developed by Dr. Irwin Tepper, a leader in the field of ALM. Our results-oriented consulting approach — coupled with input from the plan's investment advisors — combines actuarial and investment expertise with a clear, accurate and objective focus on each client's needs.

Live Modeling

Segal uses a dynamic, real-time modeling tool to increase understanding and facilitate decision-making by allowing plan sponsors to view and assess emerging retirement plan finances.

Our calculation begins with a baseline projection of key outcomes you choose. It then allows you to model "what-ifs" such as investment returns, varying amortization alternatives and modifications in benefit design.

Segal’s live modeling can project recommended contributions, funded percentage and other crucial information of interest to you.

Managing the ups and downs of retirement contributions is a major concern for public sector employers. Because plans can face significant fluctuations in contributions from year to year, you need tools that can help predict how changes in economic and budgetary conditions could affect plan contributions, and what steps you can take to mitigate your risk.

Segal's asset-liability modeling (ALM) is a tool that can be used to make sound decisions regarding plan assets and liabilities. It is particularly helpful in comparing the effects on plan funding of one or more sets of future "what if" scenarios. ALM services are provided by Segal Marco Advisors, Segal's SEC-registered investment consulting affiliate.

ALM can be applied to every part of the plan process: plan design, plan governance and investment management. You should especially consider ALM if you are contemplating changes to:

  • Cash outflow and liquidity requirements
  • Contribution levels
  • Plan design, funding method or asset allocation changes

What is Asset-Liability Modeling?

ALM looks at two different categories of events that can affect your plan: changes that you can control, such as funding method, benefit design or asset allocation; and changes that you cannot control, such as investment returns, market volatility or inflation.

We identify the likelihood and impact of changes in these elements, which allows you to adjust investment and funding policies. In addition, it provides you with a deeper understanding of how alternative investment strategies, benefit designs and funding methods interact and influence funding levels and contribution requirements.

Segal offers two different types of ALM: deterministic and stochastic.

  • Deterministic ALM: Deterministic ALM models a specific set of assumptions, giving you a sense of how the plan will look under very specific scenarios. While it does not take into account any alternative outcomes, for some organizations, deterministic ALM may be enough.
  • Stochastic ALM: Stochastic ALM gives you insight into the probability of the amount and timing of expected costs, as well as the range of expected results and the likelihood of each outcome occurring. The simulation involves modeling thousands of long-term forecasts under future economic scenarios. The influence that each of these economic scenarios will have on pension liabilities and trust assets is then measured and recorded. Stochastic ALM gives you a view of the overall long-term financing of the plan that neither a single-year actuarial valuation nor a deterministic projection can provide.

Why Should You Use Asset-Liability Modeling?

  • ALM provides a platform for decision-making. By analyzing proposed changes in the asset portfolio, plan design or funding policy, you can see the likely future impact of current choices.
  • The ALM process evidences due diligence in support of fiduciary obligations of the plan sponsor.
  • As opposed to asset allocation studies, which only measure the variability of portfolio returns, an ALM study measures actuarial funding risks.

Why Choose Segal?

We provide independent consulting advice and are able to make unbiased recommendations because we are not associated with any asset manager or brokerage firms.

We use one of the premier asset-liability software models in the industry, developed by Dr. Irwin Tepper, a leader in the field of ALM. Our results-oriented consulting approach — coupled with input from the plan's investment advisors — combines actuarial and investment expertise with a clear, accurate and objective focus on each client's needs.

Live Modeling

Segal uses a dynamic, real-time modeling tool to increase understanding and facilitate decision-making by allowing plan sponsors to view and assess emerging retirement plan finances.

Our calculation begins with a baseline projection of key outcomes you choose. It then allows you to model "what-ifs" such as investment returns, varying amortization alternatives and modifications in benefit design.

Segal’s live modeling can project recommended contributions, funded percentage and other crucial information of interest to you.

Contact an Expert

Dave Dean

Dave Dean

SVP, Multiemployer Retirement Practice Leader

Cathie Eitelberg

Cathie Eitelberg

SVP, National Public Sector Market Director

Kim Nicholl

Kim Nicholl

SVP, National Public Sector Retirement Practice Leader