Defined Benefit Plans

Traditional Defined Benefit Plan

The employer makes an annual tax-deductible contribution to the plan. Tax deductions are subject to Internal Revenue Code limitations. This amount is actuarially determined each year and is usually a formula based on a combination of compensation and years of service. The plan is funded entirely by the employer and annual contributions are required.

Cash Balance Plan

A cash balance plan is a type of defined plan that has the characteristics of a defined contribution plan. Each year a participant's account is credited with a pay credit card and an interest card. The pay credit is dependent upon each participant's compensation. The Growth of the participant's accounts depends on the pay credits that the employer contributes. A cash balance offers more profitability than traditional pension plans since participants can take his/her vested account as a lump sum upon termination of employment.

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