IRS finalizes cash balance regulations, adds more flexibility for ReDB® designs

On September 19, 2014, IRS published long-awaited final regulations on permissible interest crediting rates in cash balance plans. The new regulations are very good news. They confirm IRS's proposed rules establishing the market-based cash balance design (what we call ReDB®), and they permit significantly increased flexibility in cash balance plan design. In this article we discuss the headlines. Read More

The cash balance capital preservation guarantee: quantitative analysis

This is the second article on the capital preservation guarantee ('floor') applicable to cash balance plans that use a ‘market-based’ interest crediting rate (we call such a plan a ReDefined Benefit (ReDB®) plan®). In our first article we discussed how the ‘floor’ works, the challenges it presents, and different design alternatives that may address those challenges. The question we explore in this article is: how does the floor affect outcomes for sponsors under a ReDB® plan compared with the simpler DC design? Read More

Market-based cash balance plans and the capital preservation rule

We begin a series of three articles on the ‘capital preservation rule’ applicable to cash balance plans that use a ‘market-based’ interest crediting rate – most commonly, a rate based on the performance of trust assets. (We refer to this sort of plan as a ReDefined Benefit (ReDB) plan®.) Read More

Market-based cash balance plans: myths and reality

As required by the Pension Protection Act, in 2010 IRS issued regulations that allow a cash balance (CB) plan to base interest credits on ‘market rates of return.’ This new plan design allows the employer to transfer investment risk, and reward, in a cash balance plan to the participant – just like a defined contribution plan. Some actuarial firms are uncomfortable with this new design. Here’s what some firms are saying, and here's our response. Read More

Why use a ReDefined Benefit strategy?

In this article we provide a summary of why we think employers should consider a ReDefined Benefit (ReDB™) design, rather than a 401(k) or other defined contribution (DC) plan, as a core retirement plan for employers. Read More

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