After years or relatively low and stable inflation, the 2022 retirement plan benefit limits just announced in IRS Notice 2021-61 stand apart with a notable increase due to the higher inflation seen over the last few months. Broadly speaking, the limit increases will lead to higher qualified plan benefits for highly-paid employees while increasing tax-deferred savings options for DC plan participants. Here is a table of the main limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans. Qualified Plan Limit 2019 2020 2021 202 ..read more

By now most single-employer pension plan sponsors know of the significant minimum required contribution relief in the American Rescue Plan Act of 2021 (ARPA). These include (1) extending the length of time for paying down unfunded liabilities and (2) adjusting the interest rates used to calculate liabilities and payment amounts. However, the default timing of when these two relief provisions apply (payment period and interest rates) are not coordinated. Plan sponsors must make two important elections. 1. The extended 15-year amortization period doesn’t apply until the 2022 plan year, unless pl ..read more

IRS Notice 2020-79 just announced the 2021 retirement plan benefit limits and there are minimal changes since 2020. However, even static IRS limits have implications for employer-sponsored retirement plans. Here is a table of the main limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.   Qualified Plan Limit 2018 2019 2020 2021 415 maximum DC plan annual addition $55,000 $56,000 $57,000 $58,000 Maximum 401(k) annual deferral $18,500 $19,000 $19,500 $19,500 Maximum 50+ catch-up contribution $6,000 $6,000 $6 ..read more

The 2021 PEPRA compensation limits will be $128,059 for Social Security members and $153,671 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later. “Classic” members hired from 1996 through 2012 are subject to the higher §401(a)(17) pay limit that applies to private sector employees. Each year, the California Actuarial Advisory Panel (CAAP) publishes an “unofficial” calculation of the PEPRA compensation limit. The 2020 limits are p ..read more

IRS Notice 2019-59 just announced the 2020 retirement plan benefit limits and there are many changes since 2019. What does it all mean for employer-sponsored retirement plans? Here is a table of the main limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans.   Qualified Plan Limit   2018   2019   2020 415 maximum DC plan annual addition $55,000 $56,000 $57,000 Maximum 401(k) annual deferral 18,500 19,000 19,500 Maximum 50+ catch-up contribution 6,000 6,000 6,500 415 maximum DB “dollar” limit 220,000 ..read more

The 2020 PEPRA compensation limits are $126,291 for Social Security members and $151,549 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later.  “Classic” members hired from 1996 through 2012 are subject to the higher §401(a)(17) pay limit that applies to private sector employees. Each year, the California Actuarial Advisory Panel (CAAP) publishes an “unofficial” calculation of the PEPRA compensation limit.  The 2020 limits are publ ..read more

Now that the first round of GASB 75 OPEB valuations are complete (and some are already onto their 2nd or 3rd rounds), it’s time to take a quick look at some common actuarial pitfalls. These are gotchas that employers and auditors may not be expecting, or notice, when reviewing a GASB 75 report. Unsupported actuarial assumptions. ASOPs 27 and 35 require actuaries to disclose the rationale for selecting the assumptions used in an actuarial valuation. Look for it in your GASB 75 or OPEB funding reports – it’s helpful for employers and auditors because it provides assurance that the actuary has ..read more

Lump sum windows and other pension risk transfer strategies continue to be popular among many defined benefit (DB) pension plan sponsors. Paying lump sums to terminated vested participants can reduce long-term plan costs and risks by permanently eliminating these liabilities. However, the cost of the lump sum payments is heavily influenced by the underlying interest rate and mortality assumptions. Although there is some flexibility when selecting the interest rate basis for a lump sum window, this post estimates the potential 2019 lump sum effect using the November 2018 interest rates as a pro ..read more

The 2019 PEPRA compensation limits are $124,180 for Social Security members and $149,016 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later.  “Classic” members hired from 1996 through 2012 are subject to the higher §401(a)(17) pay limit that applies to private sector employees. Each year, the California Actuarial Advisory Panel (CAAP) publishes an “unofficial” calculation of the PEPRA compensation limit.  The 2019 limits are publ ..read more

IRS Notice 2018-83 just announced the 2019 retirement plan benefit limits, and there are many changes since 2018. What does it all mean for employer-sponsored retirement plans? Here is a table of the primary benefit limits, followed by our analysis of the practical effects for both defined contribution (DC) and defined benefit (DB) plans. Qualified Plan Limit 2017 2018 2019 415 maximum DC plan annual addition $54,000 $55,000 $56,000 Maximum 401(k) annual deferral $18,000 $18,500 $19,000 Maximum 50+ catch-up contribution $6,000 $6,000 $6,000 415 maximum DB “dollar” limit $215,000 $220,000 $225 ..read more