Pension Thaw?

[tuni88]

If we freeze our DB pension plan is there any going back on it? Can we un-freeze it a few years later? Are our only two alternatives (a) leaving it frozen or (b) terminating it?

[WDIK]

It is possible to "unfreeze" a plan.

[Andy the Actuary]

If you freeze a DB Plan and there would be an opportunity for a reversion if the plan were terminated, then all active employees would need to be fully vested. If you later reopened the plan, such employees could not be "unvested." If you later reopen the plan, you would need to watch for possible discrimination regarding grants of past service to HCEs.

[flosfur]

If we freeze our DB pension plan is there any going back on it? Can we un-freeze it a few years later? Are our only two alternatives (a) leaving it frozen or (b) terminating it?

In my opinion, benefit accrual freeze is just an amendment reducing future accruals, albeit to zero, so why should there be a problem in amending the plan to increase future accruals, i.e. unfreeze the plan?

[tymesup]

You'll have to decide whether to give credit for the frozen years. Either way, there is a discrimination issue.

[tuni88]

If you freeze a DB Plan and there would be an opportunity for a reversion ...

Does that ever happen in real life? I thought freezes were for plans that would prefer to terminate immediately but can't cuz there's not enough money in the pot to cover benefits -- they're waiting for assets to catch up to benefits via a cheapening of annuity prices (in a higher interest rate environment, for example) or hoping to get exceptional asset returns or waiting for a future time when they can contribute what is necessary to make up the difference or who knows what. That's what I read in a financial journal anyhow.

If an employer is in a position to pay off all plan benefits why would they not just terminate the plan and be done with it?

What might be the strategic advantages to freezing a plan for a few years and then re-starting it?

[Guest Kabert]

If you freeze a DB Plan and there would be an opportunity for a reversion ...

Does that ever happen in real life? I thought freezes were for plans that would prefer to terminate immediately but can't cuz there's not enough money in the pot to cover benefits -- they're waiting for assets to catch up to benefits via a cheapening of annuity prices (in a higher interest rate environment, for example) or hoping to get exceptional asset returns or waiting for a future time when they can contribute what is necessary to make up the difference or who knows what. That's what I read in a financial journal anyhow.

If an employer is in a position to pay off all plan benefits why would they not just terminate the plan and be done with it?

What might be the strategic advantages to freezing a plan for a few years and then re-starting it?

Employees get very nervous when a plan termination is announced. They start calling the HR office nonstop, worried that they're going to lose their pensions (regardless of what the employee communication said). A freeze is much softer, and even more so when combined with an increase in the matching contribution under the 401(k) plan. Then, perhaps a few years down the road, the company can terminate if it really wants to.

[SoCalActuary]

Some times the Frozen Plan gets a better asset performance than expected. Especially in the year of termination, they could have funded 95% of the benefits, but hit a 15% asset return, and now they are stuck with excess assets.