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Atlantic Connection Conference

Atlantic Connection Conference. Shared Risk Plans, July 9, 2014. Response to Unfunded Pension Funds. Between 2009 and now - over 45 states have instituted pension plan modifications. Categories of the modifications COLA reductions and implementation contingencies

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Atlantic Connection Conference

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  1. Atlantic Connection Conference Shared Risk Plans, July 9, 2014

  2. Response to Unfunded Pension Funds • Between 2009 and now - over 45 states have instituted pension plan modifications. • Categories of the modifications • COLA reductions and implementation contingencies • Increasing employee contributions • Higher age and service requirements • Replacing DB plan with another type of plan • Defined contribution plan • Hybrid plan • Cash balance plan

  3. 3 Types of Risks to be Shared

  4. Types of Sharing Plans

  5. Cash balance plan, hybrid DB-DC plan, plans in which benefits or employee costs vary on the basis of such factors as investment performance and the financial or actuarial condition of the plan Continuum of Retirement Plan Shared Risk DB Plan, EE and ER Contributions DC Plan, EE and ER Contributions DB Plan, Employer Contributions Only DC Plan, Employee Contributions Only Shared Risk More Employer Risk More Employee Risk Excerpted from NASRA Issue Brief, June 2014

  6. Hybrid Retirement Plans • DB+DC Plan – Indiana, Ohio, Oregon, and Washington - the employer finances the DB component, and the DC component is funded by mandatory employee contributions (ranging from 3 percent to 15 percent of salary). • Cash balance plans - combines elements of traditional pensions with individual accounts into a single plan. Assets are pooled, invested by professionals, and guarantee annual returns to plan participants.

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