Level cost, as a percentage of payroll, is the preferred basis for financing any retirement plan obligation, which is why 401(k) type defined contribution systems have become the nation’s most prevalent retirement vehicle.
Aware of this development and concerned about pre-retirement spending of accumulating funds by participating employees (loans, premature withdrawals), a group of us have confronted the culprit issues: pension cost volatility and resultant perilous pension indebtedness due to prior underfunding (see Illinois, NJ, and a host of other plans).
We have developed an over-arching, patent pending answer to all of it – Double DB®, which;
(1) Provides pensions, not “employee accessible” cash.
(2) Is “percentage of payroll” financed.
(3) Easily “manages” debt from past underfunding.
While accomplishing the above tasks, Double DB also removes the individual from having to manage these retirement assets.
If you would like to have a conversation about how a conversion of a current defined benefit plan to a Double DB® plan might work, please ask and we can send illustrative language or provide contact with our attorney / actuary.
Finally, It may be of interest to note that Chief Counsel’s Office of IRS regards the Double DB® concept favorably.