9 January 2018 - Pennsylvania, US-based retirement and college savings services provider Ascensus has acquired California, US-based defined benefit plans
administrator Dedicated Defined Benefit Services (Dedicated DB) to boost benefit plan expertise, the company said.
Cash balance plans will become even more popular as plan sponsors question whether defined contribution (DC) plans can facilitate retirement income like defined benefit plans
do, according to industry experts.
Traditional defined benefit plans
, structured to provide a lifelong pension, have become rare in the private sector.
The common objections we hear about defined benefit plans
are they are inflexible and place too much of a burden on the company.
However, the prevalence of defined benefit plan
income for workers in the private sector will continue to decline, as companies freeze, close, or terminate defined benefit plans
The maximum compensation limit used to calculate contributions or benefits for defined contribution plans and defined benefit plans
is $255,000 (as indexed for 2013).
In 2011, only 10 percent of all private sector establishments provided defined benefit plans
, covering 18 percent of private industry employees.
More than half of the companies in the survey with defined benefit plans
said they have converted to hybrid plans.
There are 586 employers on this year's Fortune 1000 list that sponsor defined benefit plans
, and 208 have frozen at least one plan, according to New York-based benefit consultant Towers Watson.
Compared with traditional defined benefit plans
cash balance plans generally provide greater benefits to younger employees and those with shorter service (but at a higher cost), and lower benefits to older, longer service employees (at lower cost).
If these plans are converted to cash balance defined benefit plans
, lump-sum distributions may be limited or, in many cases, not available.
Actuarial and PBGC aspects of defined benefit plans
result in higher installation and administration costs than for defined contribution plans.