One big happy pension fund.

• Author: Wolfarth, Al
• Position: Pension-Fund Management

Does your company have a pension fund in every port? You can save a bundle on fees by consolidating your plans, but there are some hitches. Find out what they are before you dive in.

You thought you'd seen the last of the paperwork on your company's acquisition of a French firm. But now you're pondering a slew of pension-fund issues that arrived with the new unit. The French company had its own pension fund, but your company also has a pension fund in France set up through its French subsidiary. It doesn't seem too efficient to keep both, you muse. But what's the best way to simplify plan operations? And how many people does it take to run an overseas pension fund?

As companies become increasingly multinational in scope, more and more financial executives will be asking themselves those questions. The typical global company manages pension funds of various sizes in many countries. As it acquires new businesses, it inherits more funds - and more duplication of services and fees. Therefore, you need to examine the costs of delivering pension benefits to several groups of participants. Maintaining multiple funds in one country is seldom the optimal approach. At Monsanto, we began globalizing our pension-fund assets in 1993, and we're still ironing out the kinks. We hope to put most of the finishing touches on our global pension-fund management program by the end of this year.

Some degree of pension-fund integration has always been a sound idea, and as companies continue to get leaner and more efficient, integration is starting to look better and better. Traditionally, the finance or human-resources staffs in each geographic area hired and supervised pension-plan service providers. The pension officer at a central location either supervised the local staffs or allowed them autonomy over the pension assets.

It's true that complying with local regulations and knowing the investment environment are essential to carrying out fiduciary responsibilities, and a local representative is best at handling those aspects of pension-fund management. But companies these days often don't need multiple staffs in a country to manage pension assets. Many large organizations, including Monsanto, conduct most of their pension-fund activity from a central location in the United States, enabling them to cut back on their local pension-fund personnel. We have a master trust for some of our North American and European funds, and we pool assets in other countries wherever we can, a process that generally takes us six to 18 months to complete. With our new setup, we expect to save five to 10 basis points in costs annually.

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