Variable annuity designs: promise and pitfalls

While corporate America continues to move away from defined benefit (DB) plans, these designs have enjoyed a sharp uptick in popularity in some market segments in recent years. The trend is due in part to enabling legislation (the Pension Protection Act (PPA), enacted in 2006), which has sparked a wave of innovative plan design solutions…. 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… Read More

Possible extension of MAP-21 interest rate stabilization

Lawmakers in Washington have a budget problem, and a small part of the solution being considered is, as we understand it, an extension of interest rate stabilization relief under 2012’s “Moving Ahead for Progress in the 21st Century Act” (MAP-21). The proposal is to extend the MAP-21 25-year average floor at the 90% level through… Read More

MAP-21 and DB plan finance – Looking ahead to 2014

We have been posting articles regularly on the effect of the “Moving Ahead for Progress in the 21st Century Act” (MAP-21) interest rate floor on defined benefit plan funding. IRS recently published MAP-21 rates for 2014. This article briefly reviews the new rates and their implications for plan funding. Background — valuations interest rates under… Read More

ReDB – a better solution for nondiscrimination problems

In September, we published an article on the nondiscrimination problem presented by some frozen plans. Generally, the problem arises because, as part of a plan freeze or similar transaction, employers create a ‘closed group’ of ‘old’ employees who get a different, ‘better’ benefit than the benefit provided to new employees. As we discuss in our… Read More

2014 Increases for Retirement Plans, social Security

The Social Security Administration just announced benefit increases effective in 2014. Current retirees will receive a cost-of-living increase, beginning in January 2014, of 1.5%, reflecting the increase in CPI-W between the third quarter of 2012 and the third quarter of 2013. In addition, the maximum amount of earnings subject to Social Security tax will increase… Read More

Implications of MAP-21 for DB plan finance – 2013

Last year we reviewed the effect of newly adopted rules under the “Moving Ahead for Progress in the 21st Century Act” (MAP-21) in our article Implications of MAP-21 for DB plan finance. At that time, we concluded that if interest rates stayed flat (as of the summer of 2012), typical DB plan sponsors would have… Read More

Treasury/IRS highlight ‘closed plan’ DB issues in Priority Guidance Plan

On August 9, 2013, the Department of the Treasury and the Internal Revenue Service released the 2013-2014 Priority Guidance Plan – generally setting priorities for the allocation of the resources for the period July 2013-June 2014. The first item under the subheading Employee Benefits/Retirement Benefits was “Guidance on frozen defined benefit plans and related matters.”… Read More

PBGC proposes new test for waiver in re-proposed reportable events regulation

In April, the Pension Benefit Guaranty Corporation (PBGC) re-proposed reportable event regulations under ERISA section 4043. The major feature of the new proposal is a waiver of reportable event reporting where the plan sponsor meets a “financial soundness” test. This most recent proposal follows proposals by PBGC to use sponsor financial condition as a criterion… Read More

Multiemployer plans in Crisis

There have been a series of developments earlier this year calling attention to a crisis in multiemployer plan funding. These include: The January 22, 2013 report to Congress on Multiemployer Pension Plans submitted by the Department of the Treasury, the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC) (the “Report to Congress”)…. Read More

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