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Contribution Rates and Benefits of the U.S. Pension System. International Pension Conference FIAP and the Chilean Pension Funds Administrations Association. Structure of Contribution Rates. Limitations: Defined Contribution Plans Pre-tax contribution limit: $10,500
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Contribution Rates and Benefits of the U.S. Pension System International Pension ConferenceFIAP and the Chilean Pension Funds Administrations Association
Structure of Contribution Rates • Limitations: Defined Contribution Plans • Pre-tax contribution limit: $10,500 • Annual Allocation Limit: $35,000 or 25% of compensation
Structure of Contribution Rates • Limitations: Defined Benefit Plans • Maximum total annual accrued benefit - $140,000 • Minimum funding rules: • Normal cost + unfunded past service liabilities + investment gains/losses + changes to actuarial assumptions + other items
Structure of Contribution Rates • Other Limitations: • Compensation limit • Nondiscrimination rules • Top-Heavy rules
Structure of Contribution Rates:Trends in Contributions ($ Billion)
Structure of Contribution Rates • Current and Future Issues: • Inadequate Savings • Retirement Savings Legislation • Pension Fund Surpluses
Benefits Granted • Defined Benefit Plans • Form of Payment: Life Annuity with Spousal Benefit • Benefit Formula Based On • Dollar Amount (23%) • Earnings (67%) • Cash Account (6%) • Percent of Contributions (3%)
Benefits Granted • Defined Contribution Plans: • 90% pay benefits in a single sum (“lump sum”) • Less than 30% provide an annuity • 40% offer benefits in fixed installments
Benefits Granted: Amounts Distributed, 1977-1996 ($ Billion)
Benefits Granted • Current and Future Issues: • Non-retirement uses of benefits (“leakage”) • Will participants run out of retirement income?
Contribution Rates and Benefits of the U.S. Pension System International Pension ConferenceFIAP and the Chilean Pension Funds Administrations Association