Terminal Funding Annuities Smooth Rough Seas for Defined-Benefit Plans

September 20, 2022 by Lowell Walters, Carlton Fields

Current volatile market conditions and increasing interest rates are causing defined-benefit plan administrators and sponsors to consider purchasing annuity contracts (often called “terminal funding annuities”) to fund retiree benefits. Since defined-benefit plans (including cash balance plans) guarantee benefits to employees without regard to actual market returns, plan sponsor financial burdens increase when investments lose value. In addition, increasing interest rates generally make annuities more affordable and attractive. Thus, annuity providers are now reaching out to defined-benefit plans and vice versa.

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Originally Posted at JD Supra on September 13, 2022 by Lowell Walters, Carlton Fields.