Annuity Purchase interest rates hit a record-setting high in June, with the average duration 7 rate at 3.82% and average duration 15 rate at 3.87%.
The combination of higher interest rates and a strong stock market have significantly improved pension funding. For some sponsors looking to exit the DB system, this improvement in funding may put them in a position to consider plan termination. In this article we briefly review some of the key issues the project of terminating a plan presents.
Vice President Biden’s suggestions on tax policy changes address corporate and personal tax rates. But these changes will potentially impact corporate pension plans, too.
We are proud to present our fourth annual report on the PBGC Premium Burden, a comprehensive analysis of the experience of roughly 5,000 US pension plans. Since 2008, single-employer plan sponsors have paid a stunning $46 billion in PBGC premiums. For thousands of pension sponsors, sound pension management has become, in large part, management of…Read More
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
I posted here earlier this month about a provocative Wall Street Journal piece in which the creators and early adopters of the 401(k) retirement-savings vehicle lament the revolution they started. Their point: They had no intention of watching the concept turn into the sole — and highly inadequate — savings receptacle for employees. Now, on…Read More
The movement to a DC-oriented private retirement system has raised concerns by policymakers, employees and even some of the employers who have embraced this trend. The chief concern can be summed up as the total shifting of risks to employees – the risks that they won’t save enough, the risk that they will use the…Read More
Many sponsors maintain cash balance plans, either as (1) their main retirement benefits program, (2) a program for a specific group of employees (e.g., employees ‘grandfathered’ in connection with a ‘soft freeze’), or (3) a legacy benefit for certain employees (in connection, e.g., with a ‘hard freeze’). In 2014, IRS finalized cash balance plan regulations,…Read More
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. We’ve provided a detailed…Read More
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…Read More