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Defined Benefit Plans
A Defined Benefit Plan is considered a traditional pension plan because it guarantees a monthly pension benefit for the life of the participant. This type of plan favors older employees with longer terms of service.
Advantages:
 | Can provide key employees with much larger contributions than allowed in Defined Contribution plans. |
| It is the only type of Qualified Plan that guarantees income for life. |
Defined Benefit Plans are Ideal For:
| Employers who are older and have more service than other employees. |
| Employers wishing to maximize contributions. |
| Employers with substantial resources. |
| Employers with stable income. |
Disadvantages:
| Higher annual administrative costs. |
| Required contributions. |
| May require PBGC premiums. |
Following is an example of a Defined Benefit Plan:
| Age | Wages | Annual Contribution | % of Total | % of Wages | |
| Doctor | 60 | 100,000 | 145,248 | 92.6% | 145.0% |
| Part-timer | 21 | 14,627 | 247 | 0.2% | 1.7% |
| Nurse | 41 | 46,356 | 3,450 | 2.2% | 7.4% |
| Receptionist | 32 | 29,652 | 1,138 | 0.7% | 3.8% |
| Nurse | 42 | 44,948 | 3,975 | 2.5% | 8.8% |
| Nurse | 38 | 44,714 | 2,786 | 1.8% | 6.2% |
|
Subtotal |
180,297 | 11,596 | 7.4% | ||
Grand Total |
280,297 | 156,844 | 100.0% |
How Complicated are
Defined Benefit Plans?
Without the proper
administrative services, a Defined Benefit Plan can turn into a nightmare for the plan
sponsor. An integral part of the complexities of a Defined Benefit Plan is
determining the correct actuarial assumptions that will maximize the objectives
of the employer. The key to the design of a Defined Benefit Plan is meeting the needs of the
specific company and its employees, without making the plan any more complicated
than necessary.
Your plan will run smoothly and efficiently if it receives the careful and consistent attention of experienced actuaries and plan administrators, with advanced computer support systems, working closely with your office staff. Our services include all functions necessary for the smooth operation of your plan, including Plan Design, Documentation, Employee Communication, and Complete Administration.
We have the expertise to determine if this type of Plan is for you!
Contact Us Today for a Free Consultation