Consolidating securities definition

Unless employers take explicit steps to protect older employees with long company service, conversions from traditional pension plans (whose benefits are largely determined by years of service and final average pay) into cash balance plans, may impact these employees negatively.

The focus of much of the attention, and controversy, surrounds diminished benefits for employees with long years of service.

Self-Directed Custodial IRAs - Non Bank Deposits 4. Savings Incentive Match Plan for Employees (SIMPLE) H. The Pension Benefit Guarantee Corporation (PBGC) insures the benefits of private defined benefit plans to the extent provided in Title IV of ERISA.

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Economically Targeted Investments (ETIs or Social investing) (4). The plan sponsor (employer or union) is responsible for ensuring that sufficient assets are in the plan to pay those defined benefits.

The participant is entitled to whatever amount the formula results in, and has a claim against all of the plan's assets for payment of the vested benefit.

Another form of defined benefit plan is the "cash balance" plan.

Defined benefit plans involve projecting a host of variables to estimate the amount of benefits payable upon retirement and the amount of assets that must be contributed today to fund those benefits in the future. Due to the extra costs involved, defined benefit plans have become less popular, with many defined benefit plans terminated and replaced by defined contribution plans.

This is opposed to retirements under traditional defined benefit pension plans, where retirees are entitled to lifetime monthly annuities based upon years of service and pay.

When a participant retires under a cash balance plan, he or she is entitled to the balance of his or her vested benefit (similar to a defined contribution plan), which may be taken as an annuity or in a lump sum. In this form of plan, employers credit a participant's account each year with a "pay credit" (typically based on a percentage of compensation) plus an "interest credit" (either a fixed rate, or a rate which is linked to an index, such as the one year treasury bill rate). Cash balance plans differ from traditional defined benefit plans in that they define benefits in terms of a stated "account balance," as opposed to a specific monthly benefit for life under traditional defined benefit pension plans. In order to be tax deductible, an employee benefit pension plan must meet certain minimum standards and have certain provisions required by the Internal Revenue Service (IRS). Most plans operated by private employers are offered, at least in part, because contributions to the plan are tax deductible to the plan sponsor. Benefits calculated in this manner are said to be integrated with Social Security retirement benefits.

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