The Federal Reserve has posted the November Treasury interest rates. The 10 year constant maturity yield is 2.76%, which is near a record low. This rate is the basis for many cash balance plan interest crediting rates. Perhaps this low growth rate will inspire plan sponsors to change the interest credit index. This is allowed […]Read More… from Cash Balance Interest Credits: Rates Near Record Lows
Many municipalities, school districts, and other governmental entities have established OPEB trusts as a way of starting to prefund their postretirement benefit promises to employees. In addition to the perceived fiscal responsibility of prefunding OPEB benefits, setting aside assets can also help the plan sponsor’s GASB 45 accounting. This post deals with certain situations where the […]Read More… from OPEB Trust Investment Return
We’ve been waiting quite a while for some official guidance on many of the technical issues involved with cash balance and other hybrid retirement plans. Last week we received final regulations for some issues, and proposed regulations for others. This post focuses on what constitutes a Market Rate of Return. A brief recap: typically a […]Read More… from Final Hybrid Plan Regs: Market Rate of Return
Freezing a defined benefit (DB) pension plan has become common practice over the past decade. Plan sponsors give many reasons for freezing the DB plan, but one of the most common is that the funding requirements are too expensive and volatile. In a recent article, two actuaries from Milliman dissected a sample pension freeze and […]Read More… from To Freeze or Not to Freeze (A Pension Plan)
A recent article by Vanguard addresses the apparent tradeoff of interest rate risk for investment risk when converting a traditional pension plan to a cash balance pension plan. A couple of quick thoughts on this topic: This is likely true for a traditional corporate pension plan where the plan sponsor has to worry about the […]Read More… from Cash Balance Plan Investment Risk
A while back I read a blog post titled “The Beer Napkin Annuity” (BNA) that I found intriguing (if nothing else, the name is catchy). The basic premise was that perhaps we could adjust our retirement tax deduction rules to transfer some deduction opportunities traditionally reserved for defined benefit (DB) plans to defined contribution (DC) […]Read More… from Retirement Deduction Limits and Employee Risk
As we’ve mentioned in previous posts, there has been a lot of press this year about cash balance plans and how they can provide great retirement deferral opportunities for certain types of plan sponsors: law firms, physicians groups, and small employers. However, there is the occasional case of buyer’s remorse with these plans so I […]Read More… from Cash Balance Plans: Eyes Wide Open
Earlier this year, the Department of Labor and the Treasury put out a Request for Information (RFI) on lifetime income options for retirement plans. Last week was the deadline, and they got some great responses. My favorite is from the American Academy of Actuaries. Not surprising, since I’m an actuary. But they pointed out something […]Read More… from Lifetime income from DC plans
Just ran across this, in Consumer Reports of all places. It’s about the new DB(k) plan, a 401(k)/defined benefit combo that came in as part of the Pension Protection Act of 2006 (PPA), first available in 2010. We’ve never thought the DB(k) would have much appeal, but what do we know? I thought cash balance […]Read More… from The new DB(k) plan
