| The rate of return allocated to participants is guaranteed and is not dependent on the plan's investment performance. The rate of return allocated to participants changes each year and is usually equal to the yield on the 30-year Treasury bond, which in recent years has been around 5%. If the actual investment earnings exceed the amount allocated to participants (the guaranteed rate), the excess will be used to reduce future employer contributions in the following years. Excess returns are not credited to the participants' accounts.
Conversely if the plan's investment earnings are less than the amount necessary to meet the guaranteed rate, then future employer contributions will be increased to make up the difference. Shortfalls are typically amortized over five years.
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