Compare distributions for D/B Plan against terminating plan and taking

[Guest chris P]

I am trying to determine if terminating a Defined Benefit Plan and replacing it with a defined contribution plan makes sense for all employees involved.

I need to calculate what the defined benefits would be for employees aged 35 / 45 / 55 / 60 with 5 / 10 / 15 years of service in the D/B plan.

If I terminate the D/B plan and establish a 401k/money purchase plan will the employees be better off? How can I compare employees lumpsum plan values in theD/B plan against the value at age 65 of a Defined contribution plan earning 8% over the same time periods.

[Larry M]

Be careful, this is a complex issue.

Just extrapolating numbers and comparing potential distributions is an insufficient approach to the decision. Doing so will leave you exposed to potential problems.

You should seek the help of a competent pension actuary in your area who will work with you and your client to explain to the client the pros and cons of each type of plan, the implications of changing and whether either type of plan is appropriate for the client.