Articles by Nyhart

If We Freeze Our Pension and Move to a 401(k), How will Employees be Impacted?

Tuesday, June 28th, 2011

The impact of stopping benefit accruals in a defined benefit (DB) plan and using a defined contribution (DC) plan going forward depends on the employee’s age and years of service at the time the DB accruals stop.

For the employees within a year or two of retirement, a move to a DC plan will have very little impact because they have already earned almost their whole career’s benefit under the DB plan. However, employees still a decade or more away from retiring at the time of the DB plan freeze and who have earned ten or more years of service are often severely impacted.

Younger employees who only have a few years of service may benefit from the plan change, depending on the employer contributions to the DC plan. In fact, the DC plan will provide the younger employee with more years of investment earnings. In a good investment market, the benefits earned early in a person’s career may be the most valuable in a DC plan.

It is more difficult to predict the impact on mid-career employees. read full article »

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Small business owner: Use cash balance plans to increase retirement savings

Friday, June 3rd, 2011

Cash balance plans are defined benefit plans (pensions) that appear to the participant as being account balance based. Participants receive an annual statement displaying the amounts in their account, along with the amount the employer is crediting to them for the current year.

These plans are particularly useful for small business owners who need to accumulate a significant amount of retirement savings in a short period of time. If the owner needs to accumulate over $45,000 per year (the 2011 annual limit for defined contribution plans), has a steady cash flow, and is already providing a 401(k) benefit to employees, a cash balance plan may be the solution.

Depending upon demographics, a contribution of up to $200,000 could be attained for the owner, which could accumulate to over $2,000,000 in a cash balance account Other employees would also receive a contribution, but generally speaking they may only be 10%-20% of the total contribution to the plan.

Charles Munsell
Nyhart
www.nyhart.com

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Press Release: Education Series to Focus On Pension Sustainability & Costs

Monday, May 9th, 2011

(Indianapolis) – Nyhart, one of the nation’s largest independent actuarial and employee benefits consulting firms, has announced an educational series for CFOs and defined benefit plan sponsors in government and private businesses who currently offer pension benefits. Actuaries will teach pension plan sponsors on the ongoing expenses and costs of defined benefit plans

The series of three seminars, available both as a webinar and in-person as Nyhart’s headquarters in Indianapolis, will be geared to highlight how ongoing regulatory changes and financial factors are impacting the viability of pension benefits.

Sustainability of Costs in Public Pension Plans
Thursday, June 16 at 11 a.m., featuring Actuary Heath Merlak

The liability in public pension plans keep increasing while the government entity supporting the plan is not. With most public pension plans currently underfunded and operating budgets feeling pressure, where are these plans headed? Will costs continue to rise? Will benefit promises need to be revised?

High Pension Costs: When and Where is the Peak?
Thursday, June 23 at 11 a.m. featuring Actuary John Dowell

For private pension plans that must comply with the funding rules introduced by the Pension Protection Act of 2006, investment performance and interest rate levels drive the contribution requirements. The collapse of the stock market in 2008 has been followed by extremely low interest rates in 2009 and 2010, increasing costs in nearly all U.S. private pension plans. How high will they get and when will we get over the hump?

Managing a Frozen Pension Plan – Should Our Strategy Change?
Thursday, June 30 at 11 a.m. featuring Actuary John Dowell

Once benefit accruals are frozen in a pension plan, the game is changed. The indefinite horizon becomes finite. If plan termination is the ultimate goal, the desired horizon is likely five years or less. Should strategic changes be made given this reduced timeframe?

Individuals interested in attending the events in person or via webinar may contact James Burnes at connect@nyhart.com to be added to the invitation list. There is no cost to attend the program. Seating is limited.

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NYHART STUDY REVEALS AVERAGE 401(K) PARTICIPANT CAN’T AFFORD TO RETIRE UNTIL AGE OF 73

Friday, December 3rd, 2010

STUDY REVEALS AVERAGE 401(K) PARTICIPANT CAN’T AFFORD TO RETIRE UNTIL AGE OF 73

December 1, 2010 (Indianapolis) – Nyhart (www.nyhart.com), one of the
nation’s largest independent actuarial and employee benefits consulting
firms, released their _Fall 2010 401(k) Retirement Readiness Study_ today as
part of the firm’s ongoing look at the effectiveness of the traditional
401(k) retirement benefit.

The 6-month study reviewed nearly 10,000 retirement accounts from employees
at 110 public and private companies. The study evaluated how contributions
to their 401(k), the primary retirement tool for most of these employees,
would affect the age at which they could retire.

Key results in Fall 2010 401(k) Retirement Readiness Study include:
* 81% of employees 18 or older will not be able to afford to retire by the
age of 65
* The leading cause impacting employees’ ability to retire on time is
their failure to contribute enough of their income towards retirement
* Employees above the age of 55 will need to contribute more than 45% of
pay through the remainder of their career to retire by age 65. Employees
age 45-55 must contribute 19% of pay to retire by 65.
* The average participant, relying on their 401(k) as a primary retirement
vehicle, will not be able to retire until the age of 73.
* Most employees age 60-64 will likely need to work until the age of 75 to
be able to afford to retire at their current levels of contribution to
their 401(k).
* 30% of employees age 24-and-under do not participate in a 401(k)
benefit.
* 7 in 10 employees age 24-and-under are not expected to retire by age
65.
read full article »

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