Defined Benefit

Fixed, pre-established benefits for a pension-like plan.

Defined Benefit plans provide a fixed, pre-established benefit for employees usually based on a combination of projected pay and projected years of service completed upon retirement. These plans are typically designed for employees who expect to spend their entire career at the same company and the benefits are usually paid as an annuity during retirement. Many employers seek these plans because they allow higher annual contributions (and tax deductions), and employees often value the fixed retirement benefit they provide.

Cash Balance Plans

A cash balance plan is a type of defined benefit plan that offers the underlying features of a traditional pension, but with easier-to-understand benefits that more closely resemble a profit-sharing plan. Like a traditional pension plan, employees do not invest any of their own money in the plan, nor do they have any responsibility for the investment choices. The cash balance plan credits each participant’s account with a set percentage of salary each year, plus an interest rate that is applied to the balance. At retirement, these benefits may be paid as a lump sum or an annuity like a traditional pension plan. Additionally, a cash balance plan allows employers to deliver differing levels of benefits to various business classifications within a company.

Purpose-built retirement planning begins here.