Individual Annuity Used in Funding Plan

[austin3515]

Anyone see an issue using an individual annuity to fund a cash balance plan? The attractiveness of this option is that the paying rate on the annuity reasonably mirrors the crediting rate in the Plan.

But in reviewing the paperwork it appears that it is requesting an individual's name as the annuitant? I assume that would have to be the Trustee's name, but is that ok?? Can you use an individual annuity in this way? IS there a "Cash Balance" plan specific annuity provider?

[Belgarath]

What about a group annuity? I seem to recall that they are essentially individual "sub accounts" under the group annuity umbrella, and would presumably have the same crediting rates, etc... - but you'd probably want to contact Ned Ryerson about how it works.

[Effen]

I have always just said "no" to annuity contracts, but then again, I say "no" to most insured products. I know some people use them, but when the insurance company asks the actuary to sign-off on the investment, my alarm bells go off. I can only assume they are expecting to be sued at some point and are looking for people to share the blame.

[AndyH]

Anyone see an issue using an individual annuity to fund a cash balance plan?

Yes, Let me count the ways.

[david rigby]

Is this the net effect: invest in a product that mirrors the crediting rate, without regard to whether that investment has higher net admin costs/fees?

[Mike Preston]

I see no problem with individual annuities as long as the owner remains the plan. Think of the named annuitant as the measuring life for liabilities and conversions but otherwise all payments and rights of conversion remain with the owner. It has been done for years in traditional DB plans. Nothing special about doing it with CB plans.

[AndyH]

Fiduciary responsibility?

[Mike Preston]

What is your concern?

[austin3515]

It seems like the providers the advisor has been talking to will not write these annuities for cash balance plans. Anyone have an educated guess as to why?