Founded: 1991 • ChicagoThe Enron accounting scandal brought to light just how vulnerable pension plans can be for ordinary Americans.
It also brought a slew of legislative actions and awareness by corporations that pension plans need a closer look.
When the nation's largest telecom companies want to rethink their pension plans, many turn to Chicago Consulting Actuaries LLC, a firm started by four former Towers Perrin executives in 1991. Led by President Tom Terry, the 13-year-old firm has made a name for itself in the highly unionized, deregulated telecom industry, which represents 25 percent of business. Clients include SBC, BellSouth, Verizon, and Cingular.
"Our understanding of the union pressures in the telecom industry, and the Communications Workers of America, is of value to anyone we work with in the industry. It's an understanding of the dynamics," Terry says.
CCA earns new clients with its reputation for bringing them into the actuarial process instead of maintaining a mysterious "guru" status and fostering a dependent relationship. Early-on, the firm realized that pension modeling could be done on a PC by the client using CCA and other vendors' software. "Actuaries at other firms were horrified. They thought that we were unprofessional — like putting a loaded gun in a child's hand!" Terry recalls. But as clients used the models, they began asking more intuitive questions and challenged the firm to come up with more customized plans. The young firm with nothing to lose started giving away the models for free, and business picked up.
When it comes to pension valuations, instead of shrouding actuarial work in secrecy, CCA invites clients to participate in the evaluation process. "Having the client sit with us makes us vulnerable," Terry says, but they're often able to identify unexpected cost results that may take consultants weeks to identify. "That's empowerment. We can make our clients smarter. We do better work and they get a better result."
Capitalizing on the success of its software models, the firm launched its technology division in 1996. The group has grown to 25 professionals who create benefits-related software applications such as PenSmart, a flexible system that companies use to administer their pension programs. To date, CCA has developed four proprietary applications. The firm also helped software vendor Winklevoss Technologies LLC in Greenwich, CT, develop its actuarial valuation software, ProVal. Today, the firm employs more than 100 people, including 60 actuaries and 25 technology professionals, at its offices in Chicago, Dallas, Denver, San Francisco, Jacksonville, and Boston. Revenues, which once grew at 30 to 40 percent annually, slowed after Sept. 11, 2001, to about 10 percent annually — but Terry says that business is beginning to pick up again.
Going forward, CCA plans to dive into health benefits consulting, such as corporate healthcare plans, and executive stock option plans in 2004. "The accounting standards group FASB is going to insist that companies record the cost of stock options in their income statements," Terry says. "Actuaries are ideal for this. We see this as a huge area for us."
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