               Case Study: CBP vs. DB  Instructions To Perform A Personal Analysis Based on Example One of Case Study The following step-by-step instructions show you how we calculated the numbers at age 55 for Example One, Case Study 1 of the article "Are You Better Off Retiring Under A Cash Balance Plan Or A Traditional Pension Plan?". To perform similar analysis for yourself, substitute data used in the instructions by your personal data. Before you begin, it would be helpful if you print a copy of this instruction sheet by clicking on the printer icon of your browser. It would also be handy to have a printed copy of Case Study. Assumptions Applicable to Both Plans: Assume a new employee hired at age 25, starting annual salary of \$36,000 with an annual pay increase of 4%. Also assume the employee was born 10/27/1953. Cash Balance Account The cash balance account is credited with 5% of pay and 6% of annual interest. Steps: Start Probal (Project Balance Calculator). Enter Basic Information: Current Account Information: 0 As of (mm/dd/yyyy): 11/01/1978 This is the first of month after the 25th birthday. Project to (mm/dd/yyyy): 11/01/2008 This is the first of month after the 55th birthday. Interest Rate: 6.0 As stated in the above assumptions, we assumed this cash balance plan credits an annual interest of 6.0%. Annual Addition: 1800.00 As stated in the above assumptions, we assumed this cash balance plan credits 5% of pay each year. 5% x 36,000 = 1,800.00. Expected Pay Increase: 4.0 As stated in above assumptions, the expected annual pay increase is 4.0%. Click on the "Save" button. This will save the data onto the space allocated to you on our secured servers. It will allow you to recalculate quickly without having to re-enter all information. Click on the "Calculate" button. You should get a projected balance of \$225,008. To print, click on the print icon on your browser. To project the account balance to other ages, you only need to change the "Project to" date and click on the "Calculate" button. Traditional Lump Sum Value Assumptions Used in Traditional DB Plan: The lump sum value is calculated using single life pension commencing at normal retirement age of 65 based on the following benefit formula: 2% x Years of Employment x Final 5-Year Average Pay x Lump Sum Factor. The lump sum factor is calculated based on GATT mortality table and 6% annual interest rate. Steps: Calculate the monthly accrued benefit at age 55. First, calculate the final 5-year average pay. The final average pay at age 55 is the average of pay at ages 50, 51, 52, 53, and 54. For example, pay at 50 = 36,000 x (1.04)^(50-25) = 95,970. Repeat the process for ages 51, 52, 53, & 54. When completed, you should obtained the annual final average pay = 103,960.80 and the monthly average pay = 8,663.40. Second, calculate the monthly accrued benefit. The monthly accrued benefit is based on the traditional pension plan's benefit formula. In this example, it is 2% x years of service x final average pay, i.e. 0.02 x (55-25) x 8,663.40 = 5,198.04. Start Lumpcal (Lump-sum Calculator). Enter Basic Information: Monthly Benefit Amount: 5198.04 This number was calculated in Step 1. Payment Form: Life-Only As stated in the assumptions. For your personal analysis, the normal payment is defined in your company's plan document. Benefit Start Date: 11/01/2018 First of month after your 65th birthday. Determination Date: 11/01/2008 First of month after your 55th birthday. Select Actuarial Assumptions: Mortality Table: GATT As stated in the assumptions. Interest Rate: 6.0 As stated in the assumptions. Miscellaneous: Decimal Place(s): 4 Age Rounding: Completed Months Click on the "Save" button. This will save the data onto the space allocated to you on our secured servers. It will allow you to recalculate quickly without having to re-enter all information. Click on the "Calculate" button. You should get a lump sum value of \$346,595. To print, click on the print icon on your browser. To calculate the lump sum value at other ages, repeat the above steps. 