ASC Summer 2004 Newsletter

In this issue:

Stay ahead of the competition with ASC’s state-of-the-art Defined Benefit Valuation System

Innovative plan designs, such as cash balance plans, floor offset plans and plans with multiple benefit formulas for employee groups are generating a great deal of interest in the defined benefit market. With ASC’s defined benefit system you can offer all these options to your clients with complete confidence that you can provide the professional and accurate administration and valuations they demand. ASC’s defined benefit system is the most flexible Windows-based system on the market and is supported by ASC’s Team of pension and actuarial professionals who understand your business and can help you succeed.

Cash Balance Plans:

Why Cash Balance? These plans typically provide for contribution levels based on some criteria, such as a percentage of pay, which may differ for different groups of employees, and a stated minimum interest rate guarantee. The contributions are then converted to equivalent accrued and projected benefits for funding purposes. The accrued benefits are guaranteed by the plan, as with all defined benefit plans, and since the accrued benefit is the actuarial equivalence of the hypothetical account balance, this account balance is also guaranteed. Unlike defined contribution plans, the participant does not bear the risk of adverse investment results. Why ASC DB System: The ASC system calculates the contribution, converts the contributions to equivalent benefits and calculates the funding requirements in a single process. Hypothetical account balances are maintained and employee reports are available which show the plan participant the current value of his benefit.

Floor Offset Plans:

Why Floor Offset Plans? These plans are typically combined with a defined contribution plan, whereby the benefit provided in the defined benefit plan is offset by the equivalent benefit in the defined contribution plan. This enables the design of plans that together offer account balances to younger employees who might not be interested in a guaranteed monthly benefit many years in the future, and monthly benefit guarantees to older employees who cannot take advantage of many years of investment accumulations. While the participants bear the risk of adverse investment results in the defined contribution plan, they are typically much younger and have many years to “make up” for any negative returns. The participants in the defined benefit plan do not bear the risk of adverse investment results, and therefore are secure in their benefits. Why ASC DB System: The ASC system converts the defined contribution amounts to equivalent benefits for the purpose of offsetting the benefit in the defined benefit plan. This facilitates the process of performing accurate funding valuations; and because the ASC system can perform 401(a)(4) testing on combined defined benefit and defined contribution plans, discrimination testing is simplified.

Multiple Formulas for Defined Benefit Plans:

Why Multiple Formulas? Many plan service providers and designers are looking at the creation of defined benefit plans that provide different formula benefits for different groups of participants. These plans can address varying benefits for different employee units defined by plant location, employment category, or any other classification. Some of these plans are designed using methods similar to those used in designing new comparability defined contribution plans. Why ASC DB System: The ASC system can address up to 10 groups of employees with separate benefit formulas for each group. There is no need to perform separate valuations for each formula and face the tedium of combining those valuations. In addition, the plans using multiple formulas can also use floor offsets, giving added flexibility to the plan designer. Take a look at ASC’s defined benefit system; we know you’ll like what you see. Click here to watch a video demonstration.

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