Q4 Interest Rates Announced | Pension Fund Raises Benefit Accumulation Account Interest Rate to 4%
INDIANAPOLIS (Sept. 26, 2023) – Pension Fund of the Christian Church has announced that the interest rate on the Benefit Accumulation Account is increasing to 4% effective October 1, 2023. “As part of establishing interest rates, we consider not only the current year returns and the funding status of the product but also the marketplace,” shared Rev. Dr. Todd A. Adams, President and CEO. “Given the current interest rate market, many banks are offering teaser rates to attract new money to stem the outward flow of deposits, while decreasing lending due to their own risk-tolerance profiles.” Fourth-quarter interest rates for other products will remain the same.
Pension Fund approved the following interest rates for the fourth quarter of 2023:
- The Benefit Accumulation Account (BAA) rate will increase to 4.0 percent
- The Tax-Deferred Retirement Account 403(b)/Roth 403(b) (TDRA 403(b)/Roth 403(b)) rate remains at 4.0 percent
- The 457(b) Plan rate remains at 3.5 percent
- The Roth IRA rate remains at 3.5 percent
- The Traditional IRA rate remains at 3.5 percent
While Pension Fund does not provide investment advice to our members, Jessi Rueter, Sr. Content Marketing Manager, interviewed Brett Gobeyn, our Assistant Vice President of Investments, to talk about the difference in products that may appear to compete with the Benefit Accumulation Account – products like Money Market Mutual Funds, Money Market Funds, and Certificates of Deposit.
Jessi: Brett, I received a flyer with a rate of 5.2% for a Money Market Mutual Fund (MMMF). What is a MMMF?
Brett: MMMFs, offered by investment and brokerage firms, are not FDIC insured. These are still highly liquid and safe investments with stringent regulations. As investment accounts, MMMFs tend to offer rates in the upper 4% to lower 5% range. MMMFs can invest strictly in U.S. government securities with no credit risk, but some products take on credit risk to increase yields. The accounts offer a “teaser rate” tied to a minimum deposit of new funds with the institution. If your account balance falls below the minimum, there can be fees assessed to the account and a lower interest rate. The 10-year return on a MMMF is less than 1%. Fees on the account, which range from 0 bps to 50 bps or .5%, reduce the rate.
Jessi: So, a teaser rate of 5.2% could be lower because of fees or if I needed to access the money?
Brett: Exactly. It is important to read the fine print, understand the fees charged on the product, if this is a promotional rate, and what happens if your balance falls below a certain level.
Jessi: Let’s talk about another high-yield account. What is a Money Market Savings Account?
Brett: A Money Market Savings Account is FDIC insured up to $250,000. These accounts currently offer yields between 1-3%. Interest rates and fees, tied to the average daily balance in the account or bonus interest offer, require large deposits to earn short-term bumps in interest rates or reduced fees. The 10-year average is less than 1% usually closer to .20%.
Jessi: What about Certificates of Deposit – they seem to have higher interest rates, but is that money I agree to not touch for a period of time?
Brett: Yes, a Certificate of Deposit has a rate based on the amount of money you deposit and a period that you agree for the bank to hold your funds. If you need access to the funds sooner, you often pay a penalty or forfeit the interest you have earned. Certificates of Deposit are FDIC insured up to $250,000 at member banks.
Jessi: How is Pension Fund’s Benefit Accumulation Account (BAA) similar to and different than the other products we have discussed?
Brett: Pension Fund invests the BAA for the long term with moderate risk, which is far different from cash equivalents. With the BAA at 4%, members receive a competitive yield, daily liquidity, no investment risk, and the opportunity to experience higher long-term returns because of the investment strategy. Additionally, we do not charge fees to our members’ accounts regardless of your balance, and we award Good Experience Credits when approved by the board. The member sees 100% of the upside with no downside risk.
Jessi: You mentioned the 10-year return on some of the other savings accounts can be a lot lower than what you’d expect, so what is the 10-year return on the BAA?
Brett: The 10-year return is 6.67%*.
Jessi: Thanks for your time, Brett. It was really helpful to discuss the differences between some of the high-yield savings accounts on the market. The increased interest rate for the BAA only makes it that much more appealing as a reliable liquid savings option that is available to all Pension Fund Members and their spouses/qualified domestic partners.