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A shift to using real market returns for interest crediting in defined benefit (DB) plans’ cash balance (CB) features is lessening volatility and making the supplementary retirement accounts more appealing to plan sponsors—especially because this type of formula is more responsive to changing market conditions, according to a recent study.
Yesterday we took a look at Internal Revenue Service (IRS) guidance on how to change interest crediting rates in a cash balance (CB) plan. Today we’ll look at the two approaches that the IRS has discussed to address a change in the interest crediting rate.
The Internal Revenue Service (IRS) issued guidance recently on how to change interest crediting rates in a cash balance (CB) plan. The Issue Snapshot posted on the IRS website on May 31 analyzes some of the implications of amending a CB plan to actually or potentially decrease the interest crediting rate.