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The increase in flat-rate premium could increase the incentive for a plan to cash out terminated participants, and the increase in variable-rate premiums could increase the incentive for a plan to avoid unfunded vested benefits, according to a bulletin from Sibson Consulting. But if plan sponsors reduce the number of participants in the plan, it will not necessarily just save the $49 rate per participant, Clark said. “The variable-rate premium needs to be considered, as well,” he added. The law will prompt many plan sponsors to consider settling obligations to get participants out of a plan, but they must realize that settling these obligations can change the funding position of the plan, Clark said. Plan advisers must understand how plan sponsors view this law, Clark added. Do they see it as a benefit, or as a detriment because it leads to higher long-term PBGC premiums? Before taking action, plan sponsors and advisers should discuss what option would lead to more savings.
The increase in flat-rate premium could increase the incentive for a plan to cash out terminated participants, and the increase in variable-rate premiums could increase the incentive for a plan to avoid unfunded vested benefits, according to a bulletin from Sibson Consulting. But if plan sponsors reduce the number of participants in the plan, it will not necessarily just save the $49 rate per participant, Clark said. “The variable-rate premium needs to be considered, as well,” he added.
The law will prompt many plan sponsors to consider settling obligations to get participants out of a plan, but they must realize that settling these obligations can change the funding position of the plan, Clark said.
Plan advisers must understand how plan sponsors view this law, Clark added. Do they see it as a benefit, or as a detriment because it leads to higher long-term PBGC premiums? Before taking action, plan sponsors and advisers should discuss what option would lead to more savings.
Corie Russelleditors@plansponsor.com