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Author: libc Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Pension Plan Choices Date: 2/23/2001 7:13 PM
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libc, Would you please direct me to any link that substantiates the claim you made that the privatized portion of SS will alter it's structure, even fractionally, to become a defined contribution plan:

[I do not know the details of President Bush's Social Security recommendations. However, as I see it two economic realities could take place: (1) Social Security will consist of part defined benefit and part defined contribution for certain people (folks like me at age 68 will not be in the mix) or (2) Funding for defined benefit and defined contribution in the accumulation process (working years) with a merge of both to produce hopefully a higher defined bbenefit amount.]

"A defined contribution (this what President Bush wants to change part of Social Security to) is NOT a guarantee for life or for any period of time. The amount of money that is accumulated will last for a specific time period...solely dependent upon how it is managed."

[The above is a correct statement for a pure defined contribution plan...at this point I do not know the specifics of what the President has in mind. It may be either #1 or #2 as stated previously or some other blend.]

Even if it would, my understanding is that enrollment will be voluntary. Is this your understanding?

[I do not know the answer.]

I also am of the understanding that it will have zero affect on those currently or soon to retire. Is this also the case?

[Yes, it is.]

Isn't it true that many life insurance wrapped programs can be set up to be either defined contribution or defined benefit?

[When all qualified retirement plans were exempt from the Federal Estate Tax it made a lot of sense when allowed to purchase life insurance within the retirement plan. When the Federal Estate Tax exemption was taken away in 1984, it did not make sense in my view. The face amount of life insurance on a participant within a defined benefit plan cannot exceed 100 times the monthly defined pension benefit. The life insurance premium within a defined contribution pension plan cannot exceed the aggregate contribution by more than 49 percent.]

During the last decade, which type has sold more (as measured in dollars) and which carries a higher sales commission?

[Within the past 10 years, I would have to say defined contribution. Although due to recent changes commentators tell me that a defined benefit plan is making a come back. Should Congress restore the Federal Estate Tax exemption to qualified retirement plans, the purchase of life insurance within the plan when allowed...again will make sense.]

[Regarding commissions the answer depends upon (1) the amount of premium (not the face amount) and (2) the commission percentage paid by the insurance company.]

Thanks for your time and consideration. Regards, pmcw

Thank you for the questions.

LIBC
William D. Brownlie, CLU, ChFC, CIP, LIA

This email advice is designed to provide accurate information in regard to the subject matter covered. It is performed with the understanding that William D. Brownlie is not engaged in rendering legal, accounting or other professional service including actively selling life, disability, long term health care insurance, and investment advice. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

P.S. I know of no website that shares my views

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