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Future Rise in Interest Rates Might Bring Defined Benefit Plans Roaring Back
Financial Planning Link to more items from this source
Sept. 30, 2012
"In today's low interest rate environment, defined contribution plans hold a clear cost advantage over defined benefit plans. The typical DC plan cost is 5% to 6% of plan payroll versus 17% for the typical DB plan ... But with a rise in interest rates defined benefits plans would become more cost-effective very quickly. Interest rate increases of 300 to 400 basis points, roughly equal to rates that prevailed in 2006-2007, would not only decrease defined benefit pension costs by 30% or more but would give defined benefit plans surpluses of 115% to 125% of liabilities[.]"

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