PLANSPONSOR - January - February 2024 - 10
UPFRONT
The Benefits to IBM's Pension-Thaw
IBM'S decision to unfreeze its cash
balance plan is heating up conversations
across the defined benefit plan world as
to whether other firms-including IBM's
competitors-will follow suit.
Long-term U.S. corporate pensionfunding
status models keep increasing,
presenting fertile ground for plan sponsors
to
consider
whether
supports workers,
to open or
enhance their defined benefit plans.
IBM thawing its cash balance plan
is an efficient and
effective allocation of resources to retirement
benefits, and indicates that largeplan
sponsors nearing full funding
status may act to maintain their defined
benefit plans, says Jared Gross, head of
institutional portfolio strategy at J.P.
Morgan Asset Management.
" IBM really has stepped up with
something that is very progressive and
more efficient for everyone involved, both
the participants and the sponsor, " he says.
10 PLANSPONSOR.COM January - February 2024
Early this past November, IBM
announced that it will end 5% matching
contributions and 1% automatic contributions
to employees' 401(k) accounts.
Instead, starting this year, the company
is reopening its DB pension plan, closed
to new entrants since 2004.
" If you step back a few years, and you
look at the common critiques of traditional
DB plans, it was ... often that the
final average pay structure was outdated
and the slow vesting was not attractive to
workers who may move from job to job, "
Gross says. " [IBM] essentially solved both
of those problems with this plan design. "
Zorast Wadia, a principal in and
consulting actuary at Milliman, agrees
that reopening its DB plan benefits both
IBM and its employees, as doing so equitably
spreads the risks of preparing for
retirement.
" The whole idea behind [the
cash balance plan] is to have more of a
Art by Scott Bakal
cost-sharing relationship between the
employer and the employee, " Wadia
says. " It's unlike what we call the dinosaur
plans of the past-the final-averageearnings
types of plans that were highly
leveraged on additional pay and service.
Cash balance plans don't work like that;
they're essentially unit accrual plans. "
In a cash balance plan, employees
accrue assets in two ways: a pay credit
linked to compensation-the employer
contribution-and a guaranteed interest
credit based on performance of an index or
asset, such as a one-year Treasury bill rate.
As in a traditional DB plan, the employer
bears the risk of investment performance.
Data on DB trends show that some
sponsors will
likely continue to pursue
terminating their DB plans entirely: 22%
said ending the plan is a long-term goal,
whereas maintaining the plan is a goal for
the rest, says 2023 data from Aon PLC.
Separate research by MetLife from
http://www.PLANSPONSOR.COM
PLANSPONSOR - January - February 2024
Table of Contents for the Digital Edition of PLANSPONSOR - January - February 2024
INSIGHTS
PARTICIPANT ANALYSIS
RULES & REGULATIONS
UPFRONT
What’s Around the Corner?
A Focus on Guaranteed Income
Navigating ESG
Are You on Track?
Demographic Shifts
Advice on Advice
Fiduciary Best Practices
2 Distinct Roles for When Sponsors Act
The DOL’s Not-So-New Fiduciary Rule
Continuous Good Service
PLANSPONSOR - January - February 2024 - Cover1
PLANSPONSOR - January - February 2024 - INSIGHTS
PLANSPONSOR - January - February 2024 - 1
PLANSPONSOR - January - February 2024 - 2
PLANSPONSOR - January - February 2024 - 3
PLANSPONSOR - January - February 2024 - PARTICIPANT ANALYSIS
PLANSPONSOR - January - February 2024 - 5
PLANSPONSOR - January - February 2024 - RULES & REGULATIONS
PLANSPONSOR - January - February 2024 - 7
PLANSPONSOR - January - February 2024 - 8
PLANSPONSOR - January - February 2024 - 9
PLANSPONSOR - January - February 2024 - UPFRONT
PLANSPONSOR - January - February 2024 - 11
PLANSPONSOR - January - February 2024 - 12
PLANSPONSOR - January - February 2024 - 13
PLANSPONSOR - January - February 2024 - 14
PLANSPONSOR - January - February 2024 - 15
PLANSPONSOR - January - February 2024 - What’s Around the Corner?
PLANSPONSOR - January - February 2024 - 17
PLANSPONSOR - January - February 2024 - 18
PLANSPONSOR - January - February 2024 - 19
PLANSPONSOR - January - February 2024 - 20
PLANSPONSOR - January - February 2024 - 21
PLANSPONSOR - January - February 2024 - A Focus on Guaranteed Income
PLANSPONSOR - January - February 2024 - 23
PLANSPONSOR - January - February 2024 - 24
PLANSPONSOR - January - February 2024 - 25
PLANSPONSOR - January - February 2024 - 26
PLANSPONSOR - January - February 2024 - 27
PLANSPONSOR - January - February 2024 - Navigating ESG
PLANSPONSOR - January - February 2024 - 29
PLANSPONSOR - January - February 2024 - Are You on Track?
PLANSPONSOR - January - February 2024 - 31
PLANSPONSOR - January - February 2024 - Demographic Shifts
PLANSPONSOR - January - February 2024 - Advice on Advice
PLANSPONSOR - January - February 2024 - 34
PLANSPONSOR - January - February 2024 - 35
PLANSPONSOR - January - February 2024 - Fiduciary Best Practices
PLANSPONSOR - January - February 2024 - 37
PLANSPONSOR - January - February 2024 - 2 Distinct Roles for When Sponsors Act
PLANSPONSOR - January - February 2024 - The DOL’s Not-So-New Fiduciary Rule
PLANSPONSOR - January - February 2024 - Continuous Good Service
PLANSPONSOR - January - February 2024 - Cover3
PLANSPONSOR - January - February 2024 - Cover4
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