Defined Benefit Plans
Defined benefit plans provide a fixed, pre-established benefit for employees at retirement. Employees often value the fixed benefit provided by this type of plan. On the employer side, businesses can generally contribute – and therefore deduct – more each year than in defined contribution plans.
Defined Corporate Contribution Plans
A defined-contribution plan is a retirement plan in which a certain amount or percentage of money is set aside each year by a company for the benefit of each of its employees. The defined-contribution plan places restrictions that control when and how each employee can withdraw these funds without penalties.
A cash-balance plan is a pension plan under which an employer credits a participant’s account with a set percentage of his or her yearly compensation. The plan’s funding limits, funding requirements and investment risk are based on defined-benefit requirements: as changes in the portfolio do not affect the final benefits to be received by the participant upon retirement or termination, the company solely bears all ownership of profits and losses in the portfolio.