The Total View - (Page 47) Funding for Defined Benefit Plans One method to measure a plan’s funded status is to compare the actuarial value of plan assets to the Retirement Protection Act of 1994 (RPA) current liability. The RPA current liability, for plans complying with ERISA, is the present value of accrued plan benefits based on the interest and mortality rates set by RPA. The average RPA current liability funded status declined slightly from 106 percent in 2005 to 104 percent in 2006. The average RPA interest rate declined from 6.0% in 2005 to 5.8% in 2006. Beginning in 2008, a plan’s funded status will be used to determine required contributions, whether any benefit payment restrictions apply, and if plan benefit improvements can be made. A poorly funded plan (less than 60 percent funded) can even be forced to freeze benefit accruals. The ultimate goal of the Pension Protection Act (PPA) is for plan sponsors to fund 100 percent of the current market value of accrued benefits. 120% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 114% 110% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 107% 107% 106% 106% 105% 104% 102% 100% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 90% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 80% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 70% –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 1999 2000 2001 2002 2003 2004 2005 2006 Average RPA Current Liability Funded Status 47
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.