LOS ANGELES & NEW YORK--(BUSINESS WIRE)--Retirement plan sponsors can now offer diverse investment options within a single Cash Balance plan, thanks to an innovative new plan design developed by Kravitz in response to recent regulatory changes. “Our new Cash Balance product offers a level of flexibility and strategic customization previously unheard of in the hybrid plan market,” said Dan Kravitz, the firm’s president.
In a traditional Cash Balance plan, assets are pooled and invested collectively to meet a single targeted interest crediting rate (ICR). While IRS approval of ‘Actual Rate of Return’ ICRs in 2010 gave plan sponsors greater flexibility and removed some funding challenges, employers were still limited to a single investment strategy per plan. In sharp contrast, the new Kravitz design allows participants to be grouped into different strategies designed to meet diverse goals and risk tolerances. “This new Cash Balance approach is extremely compelling for our larger medical groups and law firm clients,” noted Dan Kravitz. “When you have hundreds of participants with diverging retirement goals and very different lengths of service, you really want to be able to provide more options.”
A case in point: one of Kravitz’ large law firm clients adopted the new design and has Cash Balance plan assets grouped into three pools: a moderate strategy suitable for shorter service participants and those with higher risk tolerance, a conservative strategy for mid-career participants and those with lower risk tolerance, and ultra-conservative for longer service employees and retirees.
All three strategies follow the regulatory guidelines governing market rates of return and risk, and are managed with close attention to IRS compliance testing and preservation of capital rules. The option to allow participant direction in Cash Balance plans is still under study by the IRS, so plan sponsors decide how to group participants. Even so, the capacity to include multiple strategies within a single plan makes Cash Balance an even more compelling option for many employers.
To help educate plan sponsors and clarify the complex issues involved in choosing an appropriate interest crediting rate strategy, Kravitz has published a helpful ICR guide and will be hosting a webcast later this summer. Kravitz also published a helpful overview of the 2014 IRS Cash Balance regulations which allowed for this innovative new multiple-strategy option. Visit CashBalanceDesign.com for more information.
About Kravitz: Since 1977, Kravitz has brought its clients the latest in design, administration, and management of corporate retirement plans. The company designed its first Cash Balance Plan in 1989. Today Kravitz administers over 1,200 plans, including more than 550 Cash Balance Plans, helping over 150,000 people retire successfully. Headquartered in Los Angeles, Kravitz has offices in New York and satellite offices in nine states. Visit www.CashBalanceDesign.com
