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Markets 2020 – effect on PBGC variable-rate premiums and strategies to reduce them

Many plan sponsors’ funding policy – and the response to current interest rate and asset declines – is likely to be framed with a view to reducing so far as possible PBGC variable-rate premiums.

For most plans, 2021 PBGC variable-rate premiums are going up significantly – for a $100 million plan, next year’s premium could jump around $500,000.

January 2020 Pension Finance Update

Pensions got clobbered in January, as stock markets mostly lost ground while interest rates reached new all-time lows. Both model plans we track lost ground last month, with Plan A dropping 4% while the more conservative Plan B lost 1%.

Annuity Purchase Update: February 2019 Interest Rates

February 2019 Duration: 7 Years 15 Years 7 Years 15 Years Range Rate: 3.01% – 3.55% 3.32% – 3.55% Average Rate: 3.25% 3.45% During 2018, the market experienced a favorable upward trend of rising interest rates which generally increased US defined benefit plan funding ratios. As interest rates climbed in 2018, plan liabilities dropped which…Read More

Annuity Purchase Update: 2018 Interest Rates

January 2019 Duration: 7 Years 15 Years 7 Years 15 Years Range Rate: 3.01% – 3.45% 3.37% – 3.55% Average Rate: 3.18% 3.46% During 2018, the market experienced a favorable upward trend of rising interest rates which generally increased US defined benefit plan funding ratios. As interest rates climbed, plan liabilities dropped which led to…Read More

What to Look For in an Annuity Search Firm

As a fiduciary, there is a lot to consider when selecting an Annuity Search Firm. More than ever, informed decisions require diligent research to ensure a respondent’s suitability. Unfortunately, standard RFP/RFI responses will not always include certain key factors. To make the right choice, here’s what you need to know: Due Diligence Find the right…Read More

Advantages to a Market Return Cash Balance Plan Design

As discussed in our Cash Balance (CB) Survey on “Cash Balance Plans – 2018 Survey and Trends”, professional service firms have significantly increased their adoption of Market Return Cash Balance plans over the past twelve years. In addition to the conversion of existing Fixed Rate plans, virtually every new Cash Balance Plan is incorporating the…Read More

How much in taxes do I save by saving in a 401(k) plan vs. saving outside the plan?

Basic Assumptions Contribution Earnings rate (%) Years in plan Annual Household Income at Contribution Annual Household Income at Distribution Filing StatusSingleMarried Filing JointlyMarried Filing SeparatelyHead of Household Tax earnings yearly?YesNo Calculate October Three does not provide legal or tax advice, and the information provided above is general in nature and should not be considered legal…Read More

Cash Balance Plans: 2018 Survey and Trends

In this report we review the use of cash balance features in defined benefit plans sponsored by U.S. employers with a focus on the evolution of interest crediting bases utilized by those plans. Our emphasis on interest crediting is prompted by current and prospective cash balance plan sponsors seeking interest crediting bases that are more…Read More

Legacy stock after Fifth Third Bancorp v. Dudenhoeffer

The United States District Court for the Southern District of Texas, in Schweitzer v. The Investment Committee Of The Phillips 66 Savings Plan (May 9, 2018), recently considered several ERISA fiduciary issues with respect to “legacy stock” (stock of a former employer) held in a defined contribution plan. In dismissing plaintiffs’ complaint, the court found…Read More