The IRS defines Highly Compensated Employees (HCEs) as individuals meeting one or both of the following criteria: They earned compensation greater than an indexed limit in the prior For example, anyone earning more than $160,000 in 2026 will be considered … Continue reading
Independent Actuaries Blog
What happens if a plan doesn’t pass non-discrimination testing?
Non-discrimination testing is a set of requirements that ensure that all employees are benefited fairly, and that highly compensated employees (HCEs) (including owners and executives) are not disproportionally favored. These requirements are mandated by the IRS, and unless the plan … Continue reading
Why Are Cash Balance Plans So Popular?
Cash balance pension plans have been in existence for decades, but prior to the IRS finalizing Regulations regarding these plans in 2010, many employers were reluctant to adopt them given that there wasn’t a clear roadmap. Since then, they have … Continue reading
What is an actuarial valuation report for a defined benefit plan?
In a nutshell, an actuarial valuation report for a defined benefit (DB) plan outlines specific retirement benefits and gives an estimate of the cost of those benefits. It is a “snapshot” of the plan and determines the plan’s current funded … Continue reading
Do You Need an Actuary to Administer a Cash Balance Plan?
The short answer to that question is, yes. In practice, you always need an Enrolled Actuary to administer a cash balance plan. Since a cash balance plan is a type of defined benefit plan, certain actuarial requirements come along with … Continue reading
Can ChatGPT do my Annual Administration? Why not?
When I entered the question “Can ChatGPT do the Annual Administration of my defined benefit plan?” into Chat GPT, below was the beginning of it’s response: “Short answer: I can support your retirement plan annual admin, but I can’t act … Continue reading
The Importance of the Interest Crediting Rate
The interest crediting rate is one of the most important elements of a cash balance plan. It directly determines how participants’ hypothetical account balances grow over time. It also influences the employer’s cost, risk, and general plan behavior. In addition … Continue reading
Too Much of a Good Thing
Normally, high investment returns are a good thing. It feels nice to watch your account grow without a lot of effort or cash contributions. However, in defined benefit (DB) pension plans, including cash balance plans, it can be problematic if … Continue reading
It’s Not Too Late!
Many business owners are uncertain what their income will look like by the end of a particular year, so hesitate to commit to setting up a new plan by year-end. The good news is that these business owners still have … Continue reading
Qualified Replacement Plans
By law, there is a limit to the amount of retirement benefit that a person can accrue in a defined benefit plan. And there is also a limit to the amount of that benefit that can be paid as a … Continue reading
