Originally Posted by
DR K
USMC that is the billion dollar question that will never be answered.
How is it cost prohibitive from a regulatory standpoint to increase our current A fund but we can invest in a similar manner in a “new” pension fund and make it rain without the same regulatory funding issues?
if 2006 legal reform is the given reason, I find it odd that in that environment congress or the irs would have EASED the funding requirements and we were grandfathered in to the older more restrictive laws.
so much to be explained beyond pancakes and inquiring minds want to know and not be dismissed as simple minded.
I’m not sure if this is the direction your question is going, but here is what I found from a brochure describing sponsor premiums.
Even if this is True, Do I Still Have to Pay Big Premiums to the PBGC to Sponsor a DB Plan?
The variable benefit plan is a DB plan and is subject to Pension Benefit Guaranty Corporation (PBGC) premiums. However, the major portion of the premiums paid by current traditional DB plan sponsors is in the “variable rate premium” portion. The variable rate premium is a percentage of the amount of underfunding for the plan. Thanks to three different Congressional actions, this premium, which was less than 1% just a few years ago, is scheduled to increase to over 4% of the underfunding of the plan in a few years. But with the variable benefit design, the plan will always be very close to 100% funded because there is no investment risk by the sponsor. A plan with no underfunding does not pay variable rate premiums!
It is also important to note that as long as the hurdle rate is at least 5%, the plan is not considered a “statutory hybrid plan” per final IRS regulations and thus would be exempt for those special rules.
Findley: Variable Benefit Plan Brochure