Lesson 18 What Can Go Wrong
DB Plan Termination
Your grandfather’s defined benefit (DB) pension plan may be an endangered species. DB pension plans subject companies to high costs and risk that many prefer not to assume. As a result, it’s becoming increasingly common to see such plans eliminated.
Voluntary Freezes or Terminations
If companies freeze existing plans, the plans continue, but employee participants accrue no further benefits. The company may need to make further contributions if the plan is under-funded when frozen.
If the company terminates the plan, the accrued benefits (including all unvested benefits) must either be paid out as a lump-sum equivalent, or the plan must purchase a commercial annuity from an insurance ...
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