Defined-benefit plans

Defined-contribution pension schemes take three main forms, which are 401k, profit-sharing, and money-purchase plans. Some employers supplement them with defined benefit plans, employee stock purchase plans, or stock options. 

Among all workers, participation in defined benefit plans has fallen while participation in defined contribution plans has risen. In defined benefit plans, companies promise to pay workers a specified amount in retirement benefits. In defined contribution plans, companies promise to contribute a specified amount, but make no assurance as to the final payout. Among all workers, there has been a decrease in the percentage covered by defined benefit ( payout ) plans and an increase in the percentage covered by defined contribution ( pay in ) plans. For more and more workers, this means that risk — in terms of steady retirement income — has been transferred from the employer to the eventual retiree (Figure A4.8). 

A) in the case of a defined benefit plan, the cessation of an employee s benefit accrual, or the reduction of the rate of an employee s benefit accrual, because of age, or... 

In the case of any employee who, as of the end of any plan year under a defined benefit plan, has attained normal retirement age under such plan—... 

A) The terms employee pension benefit plan , defined benefit plan , defined contribution plan , and normal retirement age have the meanings provided such terms in section 1002 of this title [section 3 of the Employee Retirement Income Security Act of1974]. 

I) In general—An applicable defined benefit plan shall be treated... 

I) In general— The term applicable plan amendment means an amendment to a defined benefit plan which has the effect of converting the plan to an applicable defined benefit plan. 

II) Special rule for coordinated benefits—If the benefits of 2 or more defined benefit plans established or maintained by an employer are coordinated in such a manner as to have the effect of the adoption of an amendment described in subclause (I), the sponsor of the defined benefit plan or plans providing for such coordination shall be treated as having adopted such a plan amendment as of the date such coordination begins. 

IV) Applicable defined benefit plan— For purposes of this subparagraph, the term applicable defined benefit plan has the meaning given such term by section 1053(f)(3) of this title [section 203(f)(3) of the Employee Retirement Income Security Act of 1974]. 

Pension Plan The firm offers a pension plan to qualified employees. In this case, in order for a Y to appear, the editors believe that the employer offers a defined benefit or cash balance pension plan (see discussions below).The type and generosity of these plans vary widely from firm to firm. Caution Some employers refer to plans as pension or retirement plans when they are actually 401(k) savings plans that require a contribution by the employee. 

Defined Benefit Pension Plans Pension plans that do not require a contribution from the employee are infrequently offered. However, a few companies, particularly larger employers in high-profit-margin industries, offer defined benefit pension plans where the employee is guaranteed to receive a set pension benefit upon retirement. The amount of the benefit is determined by the years of service with the... 

Defined Contribution Plans These are quite different. They do not guarantee a certain amount of pension benefit. Instead, they set out circumstances under which the employer will make a contribution to a plan on your behalf. The most common example is the 40 l(k) savings plan. Pension benefits are not guaranteed under these plans. 

Lubrizol offers its employees benefits including tuition reimbursement life, business travel accident and long-term disability insurance a 401 (k) plan a defined benefit pension plan and medical, dental and prescription drug coverage. 

Section 125 plan a term used to refer to flexible benefit plans. The reference derives from the section of the IRS code which defines such plans and stipulates that employee contributions to such plans may be made with pre-tax dollars. 

In some pension plans several employers contribute to a single fund, usually to cover unionized workers. These plans are not relevant to North American chemists, who have no union. The pertinent and also commonplace arrangement calls only for a single company to contribute to one pension fund, which may include a defined-benefit or defiried-ccmtrihutian scheme. Some corporate pension plans include elements of both these schemes, so it s vital to understand them and the differences between them. 

Defined-benefit pension plans. If, in retirement, you receive from your former employer a fixed monthly payment, your pension exemplifies the defined-benefit type. The structure of such a plan makes your employer legally responsible for implementing all of it. It requires the company but not the employee to make a minimum annual contribution, which comes from investments. The employer must make up any investment losses to maintain its annual contribution. It may not end the plan without sufficient assets to provide the promised benefits, and its obligation to continue payments to employees survives bankruptcy. The Pension Benefit Guarantee Corporation, which is wholly owned by the U.S. government, secures payments to employees who participate in defined-benefit schemes. Consequently, participants can never exhaust their benefits while they live, and their spouses may continue to receive pension payments after the participants die. Regular lifetime payments are important features of defined-benefit pension plans, about two-thirds of which disallow lump-sum distributions at retirement (Kehrer, 1995). 

PARTICIPATION, VESTING, ELIGIBILITY, AND SERVICE. Three significant dates and an interval figure in defined-benefit pension plans. 

ACCRUAL OF BENEFITS. Entitlements accrue slowly in defined-benefit pension plans, with most of them coming late in an employee s working lifetime. A representative plot of pension entitlements versus age appears in Figure 8-5. Such a rate tends to keep vested participants working for a single employer for a long time, although the steep rise in pension credits does make early retirements possible. 

Figure 8-5 Present value of a typical defIned-benefIt pension plan (Source I. G. Kastrinsky, Employee Benefits Journal,...

Participation is Defined Contribution and Defined Benefit Retirement Plans... 

Once the options have been clearly defined it will be necessary to carry out a cost-benefit analysis of each option. This has two main objectives. First, the overall cost of the project will need to be assessed to determine whether or not it is financially viable and, second, to ensure that those who will be required to incur expenditure are fully aware of the commitment needed. The financial benefits to users of the waters for recreation, fisheries, navigation, etc., are relatively easy to determine, but monetary valuation of the environmental benefits such as conservation and general amenity will be more difficult to define. As yet this aspect of the cost-benefit analysis has not been fully developed in the UK. Having determined a range of options and costs for eutrophication control in a particular catchment, consultation on the details of the Action plan with all those involved is needed before any plan can be implemented. 

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