Variable annuity pension plan reading list

The Variable Annuity Pension Plan (VAPP) is now the Milliman Sustainable Income PlanTM (SIP).

Variable annuity pension plans (VAPPs) are hybrid retirement plans that provide employers an alternative design to the traditional defined benefit (DB) plan and the defined contribution (DC) plan. VAPPs can stabilize contributions for sponsors while offering participants lifelong income. This reading list highlights various information related to VAPPs.

• “Retirement risks side-by-side: DB vs DC vs VAPP”
In this video blog, I discuss the retirement risk allocation between a plan sponsor and the plan’s participants in a variable annuity pension plan (VAPP) structure compared with risk analyses associated with traditional defined benefit plans and defined contribution plans. I also explain how a VAPP can reduce inflation, portability, and interest rate risks.

• “Benefits side by side: DC vs DB vs VAPP”
VAPPs provide secure, lifelong, inflation-protected retirement benefits. VAPPs combine the best of what traditional DB plans do regarding longevity protection and lifelong income and what DC plans do to combat inflation. In this second video presentation, I explain the advantages for retirees of VAPPs compared to more traditional plan structures.

• “Plan funding side by side: Traditional DB and VAPP”
VAPPs provide lifelong inflation-protected benefits to participants. VAPPs can also stabilize plan contributions for employers. In this video presentation, I discuss how funding a VAPP compares with funding a traditional pension plan. The presentation also touches on how Milliman helps plan sponsors stabilize benefits for retirees through reserves.

• “Employee communication: Transition to a VAPP
Some employers have considered switching their current retirement plan to a VAPP. Communicating the change in retirement benefits can be a challenge for plan sponsors. This blog, written by Milliman’s Heidi tenBroek, features a video that explains to employees how a VAPP works, how it affects their benefits, and why it is a stable retirement solution for them and their employer.

• “Milliman infographic: Variable annuity pension plan
The VAPP design combines features from traditional DB plans along with features from DC plans. This infographic illustrates specific retirement plan sponsor needs that VAPPs help address.

• “VAPPs: Coming soon to a retirement plan near you?
In this blog, Milliman consultant Grant Camp summarizes the DB plan and DC plan features of VAPPs.

• “Milliman Hangout: Variable annuity pension plans (VAPPs)”
Camp and I talk about VAPP features in this video. They also discuss the value VAPPs offer sponsors and participants.

“Making the case for variable annuity pension plans (VAPPs)”
VAPP retirement benefits increase or decrease depending on whether a plan’s investments return more or less than the established “hurdle rate.” A benefit stabilization strategy preserves funding stability and diminishes benefit declines. Camp and I discuss the strategy in this article.

“Making the case for variable annuity pension plans (VAPPs): Basic VAPP benefits and design strengths”
This article provides examples of how a retiree’s basic VAPP benefits would change over different historical periods. The article also details the strengths and weaknesses of the VAPP design.

“Making the case for variable annuity pension plans (VAPPs): Stabilized VAPP benefits”
In this article, Camp, Ladd Preppernau, and I discuss the stabilized VAPP model. The design involves building a reserve, spending the reserve in down markets to prevent benefit decreases, and improving benefits if the reserve is larger than is required to prevent benefit decreases.

Making the case for variable annuity pension plans (VAPPs): Shared retirement risks: How VAPPs stack up
There are four main risks associated with retirement plans: investment risk, interest rate risk, inflation risk, and longevity risk. This article, authored by Camp, Preppernau, and I provides perspective on how VAPPs address these risks.

“A balanced approach to retirement risk”
VAPPs address several sponsor concerns like funding and accounting volatility. The design also helps alleviate participant concerns related to money management and inflation. Milliman’s Camp offers more perspective in this blog.

“Variable annuity plans may benefit employers and employees”
In this blog, Milliman’s Ryan Hart provides a chart comparing and contrasting VAPPs alongside DC plans and traditional DB plans.

“Variable annuity pension plans: An emerging retirement plan design”’
In this article, Mark Olleman and I provide historical scenarios of how retirees’ benefits would vary over time under a VAPP structure.

“Variable Annuities: A retirement plan design with less contribution volatility”
Multiemployer plan trustees seeking sustainable ways to provide participants with lifelong benefits that allow for more predictable contributions may want to consider the VAPP design. This paper by Olleman, Preppernau, and I explains the advantages that VAPPs offer single and multiemployers and their employees.

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