Pensions defined contribution

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. 

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. 

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]. 

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... 

Employee pharmacists must make many decisions regarding financial management. Among the most important is the specific types and extent of benefits provided by the employer. Benefits often amount to an additional 30 percent of an employee s salary and include such things as health, life, and disability insurance and retirement planning issues such as 401(k) contributions and defined pension benefits. 

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). 

MONEY-PURCHASE PLANS. Defined-contiibution pension plans include a variant in which the employer promises annually to contribute a certain percentage of salary to each employee s account. These plans, known as money-purchase plans, allow the employer to avoid taxes on as much as 25% of the recipient s salary. In this sense they are comparable to 401k plans. Money-purchase plans, imlike profit-sharing plans, forbid employees to withdraw funds before retirement. 

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