Top Visited Articles for 2014

New mortality table recommended by Society of Actuaries

In February the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries released its Exposure Draft RP-2014 Mortality Tables, recommending new mortality tables for the valuation of defined benefit plan liabilities. In this article we review the SOA RP-2014 report, focusing on its consequences for regulatory purposes. We begin with a discussion of the regulatory framework and then proceed to a discussion of the exposure draft and its implications. Read More

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

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

Roth vs. ‘regular’ 401(k): the math

From the point of view of plan participants and plan sponsors, Roth math can be a little confusing. In this article we begin with a discussion of Roth tax benefit math (that is, Roth math from the participant’s point of view) – the relative value of Roth tax benefits in different scenarios. We’ll then briefly describe Congress’s Roth budget math – which is what drives Roth policy generally. We’ll conclude with a brief review of possible Roth policy changes. Read More

2014 review of defined benefit plan issues

In 2014 there were several major DB policy developments, including a significant extension of MAP-21 funding relief, new mortality tables and the finalization of the hybrid plan regulations on ‘market rate of return.’ In addition, the year-end federal spending deal included ERISA section 4062(e) legislation. In this article we review these developments, beginning with the legislation Congress just passed. Read More