401(k) & Pension

There are primarily two ways for an organization to provide retirement benefits to its workers: defined contribution and defined benefit plans. For the former type of plan, the organization sets the contribution level and the employee bears the responsibility for the plan results. The two most popular types of defined contribution plans include 401(k) and 403(b) plans. In contrast, defined benefit plans set the ultimate retirement benefit level. The organization is then responsible for the appropriate contributions and investments to meet plan obligations. An organization may actually have both of these types of plans.

Although not as commonly used today, especially by smaller organizations, there can be some significant advantages to utilizing defined benefit plans:

Benefits for employers include:

  • Offering an uncommon benefit that can be used for recruiting, rewarding and retaining top employees
  • The ability to limit the plan to a select group of executives or highly compensated employees
  • Limited ERISA reporting
  • Flexibility in the design of the plan

Benefits for employees include:

  • Deferring income toward retirement
  • Potentially enjoying lower current taxes
  • Assistance in obtaining sufficient retirement income
  • Providing additional support for heirs

If you would like to find out more about what might be right for your organization please click HERE to get more information.