DB novice looking for info

[Guest jason]

First,I understand that a DB sponsor must pay a premium to PBGC... how is this determined?

Second,I also understand the defined benefit contribution made for an older employee can be greater compared to someone younger becuase of the time left until retirement, but is there anyway to adjust if the younger person is the owner or a HCE.

Thanks for any input,

Jason

[Lorraine Dorsa]

Many, but not all, DB plans are covered by the PBGC and thus must pay PBGC premiums. The most important categories of plans exempt from PBGC coverage are 1) plans covering only owners and 2) plans with less than 26 participants sponsored by professional employers (drs, attnys, etc).

In a DB plan, contributions atttributible to older employees are higher because the plan promises to provide a certain monthly benefit at retirement (e.g. 50% of monthly compensation) and since there are less years to make contributions and less time for the contributions to earn interest, larger contributions are required.

FYI - Places to look for intro material on DB plans:

- ASPA PA1A Pension Administrators Course, chapter 13

- ASPA 1999 Pension Conference materials, handout for session "DB Plan Administration"

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