Actuaries who work with defined benefit and cash balance/hybrid plans are anticipating a surge in the latter.
That's according to a survey of hybrid plans by the ASPPA College of Pension Actuaries (ACOPA), which found that actuaries currently working with more than 15,000 plans anticipated 2,100 new cash balance plans, on a current base of some 5,600 such plans. Of the latter figure, 240 plans were cash balance conversions.
Those figures would appear to bear out results of another report, from Kravitz, which found that cash balance plan growth has beat industry projections by more than double.
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Other results from the ACOPA survey included the fact that 40 percent of respondents said all the cash balance plans they worked with had a fixed interest credit. Just 17 percent said that none used the fixed interest credit.
Among those who said the cash balance plans had a fixed interest credit, 77 percent said that the credit was fixed at 5 percent. Thirty-nine percent said the majority of their plans used a segment rate for annuity conversion, while 64 percent said that their plans "mostly" used a fixed interest rate (e.g., 5 percent) for annuity conversion and 62 percent said none of their plans provided in-service distribution among all plans.
In addition, more than half (55 percent) of respondents had dealt with a plan termination and restart in the past five years. About 1 in 10 (11 percent) had dealt with 10–20, while 3 percent of respondents had dealt with more than 20.
Cash balance plans are often called hybrid plans because, although they are defined benefit plans, the participant's benefit is described in terms of the value of a hypothetical account to which pay credits (hypothetical "contributions") and interest credits (hypothetical "earnings") are made.
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