With respect to investments, the first task of the corporate sponsor is to set return objectives and broad definitions of characteristics for the investment portfolio that receives the corporate contribution. Setting investment objectives by the corporation for the investment manager or managers was not always considered an important function of the corporate sponsor; objective setting frequently was left to the discretion of the investment manager. However, as funds have grown in size, setting investment objectives has assumed increased importance; written objectives are prepared and then reviewed at regular intervals. Unfortunately, objectives often are stated in very vague terms, such as obtaining the maximum return consistent with prudence. Nevertheless, this problem is getting increased attention, and more specific directions may be expected in the future. (more…)

Employer-sponsored defined benefit pension plans in which the benefit is defined by account value rather than monthly lifetime retirement income. Cash balance plans are often referred to as “hybrids” because they have some of the characteristics of traditional “defined benefit” (DB) pension plans and some of the characteristics of “defined contribution” (DC) plans, such as 401(k). In general, traditional defined benefit plans promise qualified employees an income benefit for life (or some other period) starting at “normal retirement age,” without regard to how much (or little) the employer must contribute to the plan to fund the benefit. Defined contribution plans, on the other hand, promise only how much the employer will contribute to a qualified employee’s account from time to time until the employee retires but they make no promises with regard to investment earnings or results, let alone a monthly income benefit for life. (more…)

As the name indicates, a Supplemental Retirement Annuity (the “SRA”) operates as an adjunct to your Retirement Annuity. If your employer offers an Supplemental Retirement Annuity, you have the opportunity to augment your retirement stash on a tax-deferred basis through a salary deferral agreement, provided you are within the contribution limitations stipulated by law. Again, your benefits office will be able to advise you as to how large a percentage of your salary you may contribute to your Supplemental Retirement Annuity. Not all institutions offer the SRA. If your employer is one who does, try your hardest to take advantage of this feature of your employer’s plan. (more…)