This may be a bit "inside baseball," but it's sure to be of interest to folks participating in defined benefit pension plans:
"Sponsors of defined benefit pension plans will be able to use excess money in their plans to fund the purchase of life insurance for their retirees for the first time under a provision of legislation passed by Congress"
First, some background. There are basically two types of retirement plans: defined benefit and defined contribution. Social Security is an example of the former, and your401 201(k) of the latter. Under a DB plan, the employer promises that, at retirement, you'll receive X number of dollars every month. Under a DC plan, your employer promises to put X number of dollars towards your retirement, and it will grow (or not) as time goes by.
The nice thing about DB plans are their certainty: you know how much will be coming in each month. The downside is twofold: for the employee, it puts a cap on the amount one will receive. For the employer, it's a huge burden (just ask the Post Office).
So what's the big deal about life insurance in one of these plans? Well first, it's rare that one has an opportunity to pay for life insurance with "qualified" (tax-advantaged) funds. For another, it will hopefully "enable employers to maintain retiree coverage." This is a very real concern in this sluggish economy, so every little bit helps.
"Sponsors of defined benefit pension plans will be able to use excess money in their plans to fund the purchase of life insurance for their retirees for the first time under a provision of legislation passed by Congress"
First, some background. There are basically two types of retirement plans: defined benefit and defined contribution. Social Security is an example of the former, and your
The nice thing about DB plans are their certainty: you know how much will be coming in each month. The downside is twofold: for the employee, it puts a cap on the amount one will receive. For the employer, it's a huge burden (just ask the Post Office).
So what's the big deal about life insurance in one of these plans? Well first, it's rare that one has an opportunity to pay for life insurance with "qualified" (tax-advantaged) funds. For another, it will hopefully "enable employers to maintain retiree coverage." This is a very real concern in this sluggish economy, so every little bit helps.
Pensions and Life Insurance
![Pensions and Life Insurance]()
Reviewed by ndolpit
Published :
Rating : 4.5
Published :
Rating : 4.5
