Kravitz notes that Internal Revenue Service (IRS) regulations introduced in 2010 allowed plan sponsors to set the interest-crediting rate to the actual rate of return
, or yield, on plan assets.
In response to "Wind and Solar Costs Can Compete" (Green Gazette, April/May 2015); What is the actual carbon footprint and the actual rate of return
on a solar power system?
The IRS now allows the ICR to be equal to the plan's actual rate of return
, as long as the plan's investments are adequately diversified; therefore, the value of the plan's assets is always equal to its account balances.
However, if the ICR is set to equal the Actual Rate of Return
, the "preservation of capital rule" will apply, which is meant to protect the employees' assets in the plan.
How could this actual rate of return
be so much lower than what their agent, who on his web site touts "his sophisticated mathematical and financial knowledge," had explained, or that Mary (no dummy herself) had calculated?
The systems covered by the NASRA research assume an 8 percent average rate of return over a 25-year period, and in fact, the actual rate of return
over the last 25 years has been 9.25 percent.
He demonstrates, for example, that when these two phases are analyzed separately using the Guaranteed Lifetime Income Benefit variable annuity, the following would be the actual rate of return
: A 7% stated growth rate in the accumulation phase and 5% guaranteed withdrawal rate works out to a meager 2% rate of return.
The internal rate of return of the project is the borrowing rate that the project could just afford to pay, or one could say that it is the actual rate of return
on the project.
These low rates facilitate use of certain estate planning techniques that exploit the difference between the assumed rate of return on an investment under transfer tax law and the actual rate of return
that can be achieved for the investment.
It is the actual rate of return
based on current values.
Contributions made since 1999 are capitalised at the actual rate of return