Lump sum windows and other pension risk transfer strategies continue to be popular among many defined benefit (DB) pension plan sponsors. Paying lump sums to terminated vested participants can reduce long-term plan costs and risks by permanently eliminating these liabilities. However, the cost of the lump sum payments is heavily influenced by the underlying interest […]Read More… from Pension Lump Sums Likely More Expensive in 2017
As mentioned in our July lump sum interest rate post, many defined benefit (DB) plan sponsors are considering lump sum payouts to their terminated vested participants as a way of “right-sizing” their plan. The ultimate goal is to reduce plan costs and risk. The IRS recently released the November 2013 417(e) rates, which will be […]Read More… from Preview of 2014 Lump Sum Interest Rates
Many defined benefit (DB) plan sponsors are considering lump sum payouts to their terminated vested participants as a way of reducing plan costs and risk. This post shares a brief update of the interest rates used to calculate deferred vested lump sums and the impact it could have on potential lump sum payout strategies. Background […]Read More… from Lump Sum Interest Rate Update – June 2013
Many defined benefit (DB) pension plans were closed to new entrants over the past several years. Oftentimes, these plan closures were done with a focus on short-term cost control without understanding some of the long-term compliance implications. Then, one day, the plan sponsor gets an unwelcome surprise from their actuary – their DB plan is […]Read More… from Beware Nondiscrimination Pitfalls for Frozen Pension Plans
Freezing or terminating a defined benefit (DB) pension plan can have unforeseen implications for a company’s profit sharing plan. This is especially true if the plans are top-heavy or rely on IRS cross-testing methods (e.g., professional firm cash balance plans). This post explores changes to minimum profit sharing benefits that occur when plan sponsors freeze […]Read More… from Employers Need to Understand Minimum Profit Sharing Benefits for Frozen/Terminated DB plans
The IRS recently released the October interest rates for pension plans. What do they hold in store for plan sponsors? This post summarizes some of the important rates along with our observations. Funding Segment Rates The interest rates used to determine pension plan liabilities for IRS funding purposes are composed of three segment rates (unless […]Read More… from Plan Sponsors Should Prepare Now for 2012 Pension Interest Rates
During the plan termination process, one issue often overlooked is the consequences of investment risk prior to paying out benefits. This can lead to disastrous results. Benefits may be fully-funded when the termination decision is made, but significant contributions will be required if assets are not invested conservatively and a market downturn occurs prior to […]Read More… from Pension Plan Termination Investment Strategies
We are receiving requests from a few multiemployer pension clients to estimate their withdrawal liability as they contemplate getting out of the pension business. One common problem that these clients experience is that the withdrawal liability they get from the pension fund is not as current as they thought it would be. For example, a […]Read More… from Timing of Multiemployer Plan Withdrawal Liability Estimates
We’re starting to see a lot of interest from prospective cash balance plan (CBP) clients as we march towards the end of 2010. Small and midsize businesses are attracted to the large retirement deduction opportunities of CBPs. After explaining the technical details of these plans, prospective clients invariably ask the question: What are the fees […]Read More… from Cash Balance Plan Fees
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)
