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Recent Developments in Benefit Plans

Cash Balance Plans Continue To Grow. IRS Form 5500 data for 2012 (the most recent available) as reported in the 2014 National Cash Balance Research Report show that U.S. employers added 1,722 new cash balance plans in 2012. That’s an increase of 22% from 2011. The increase brought the total number of active cash balance plans to more than 9,600 and participants in those plans to more than 12 million. In 2012, cash balance plans made up 25% of all defined benefit plans, up from 2.9% in 2001. The total assets held in cash balance plans in 2012 were $858 billion.

Qualifying Longevity Annuity Contracts (QLACs). The IRS recently issued final regulations that permit 401(k) and other qualified defined contribution plans, 403(b) plans, 457 governmental plans, and traditional individual retirement accounts (IRAs) to give plan participants and IRA owners an option to use plan account assets to purchase deferred “longevity” annuities. Under the regulations, participants can use up to $125,000 or 25% of their account balance (whichever is less) to purchase guaranteed income for life starting at an advanced age, up to age 85. Until distributions begin, the value of the QLAC will not be included in the participant’s plan account value for purposes of calculating required minimum distributions. (Required minimum distributions normally must begin at age 70½.) The QLAC may provide a life annuity to a surviving spouse or other beneficiary and can offer a return of premium feature.


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