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 –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, ($ 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 Conference FIAP and the Chilean Pension Funds Administrations Association