A typical defined benefit formula
(Jacobs and Watkins, 1984 and Ippolito, 1986) is:
7% at 55 benefit formula
which will remain applicable only to pre-July 1, 2012 hires.
If they do not, or if undersaving is a more isolated problem, then shortfalls where they exist might be better targeted through means-tested transfer benefits or adjustments to the Social Security benefit formula
These provisions were intended to address qualified retirement plan designs that take advantage of flexibility in existing nondiscrimination rules-which allows them to provide a special benefit formula
for selected employees-but are not using a formula that is based on certain business criteria.
Many countries have also made reforms to their pension programs over the past two decades, such as increasing the retirement age or reducing the generosity of the benefit formula
As employers strive to remain competitive in recruitment efforts, they will be seeking the right benefit formula
to offer the greatest value at the lowest cost.
To ensure that benefit promises are sustainable, trustees and finance officers must be equipped to make decisions about copayments, where to set the DB plan's benefit formula
multiplier, and many other plan features.
Generally, if the benefit formula
is uniform and one of the following is satisfied, the plan will be deemed to be nondiscriminatory:
10) In this event, the wages forgone by DB members would depend upon neither the size of the employer's (normal) contribution, which could vary for a given benefit formula
with the actuarial assumptions adopted by the employer, nor any special contributions required by the employer to finance an unanticipated funding deficit.
The regulations would define a "statutory hybrid benefit formula
" as a "benefit formula
that is either a lump sum-based benefit formula
, or a formula that has an effect similar to a lump sum-based benefit formula
," officials write.
Matters are made worse by legislatures that juice up the benefit formula
when the stock market is up and the value of pension funds is high, only to find the systems saddled with even larger unfunded liabilities when the market turns sour.
Shifting the benefit formula
away from being a certainty for family members to the whims of individual workers would not be acceptable.