ACOPA Survey Highlights Cash Balance Trends

A recent survey of hybrid plans by the ASPPA College of Pension Actuaries (ACOPA) suggests a big surge in cash balance plans.

The survey of ACOPA members yielded responses from 128 actuaries, who currently work with more than 15,000 defined benefit and cash balance/hybrid plans, anticipated 2,100 new cash balance plans, on a current base of some 5,600 such plans. Of the latter figure, 240 plans were cash balance conversions.

Cash balance plans, frequently called hybrid plans because while they are a defined benefit plan, they describe a participant's benefit in terms of the value of a hypothetical account to which pay credits (hypothetical “contributions”) and interest credits (hypothetical “earnings”) are made.

Among the survey’s other findings:

• 39% said the majority of their plans used a segment rate for annuity conversion;

• 40% said all the CB plans they worked with had a fixed income credit (just 17% said none used the fixed income credit);

• More than half (55%) of respondents had dealt with a plan termination and restart in the past five years. About 1 in 10 (11%) had dealt with 10-20, while 3% of respondents had dealt with more than 20;

• 62% said none of their plans provided in-service distribution among all plans;

• 64% said that their plans “mostly” used a fixed interest rate (e.g., 5%) for annuity conversion; and

• 77% used 5% as that fixed income credit.

The complete survey results are available here.