Defined Benefit Pension Plan

Plans

Defined Benefit Pension Plan

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Many companies are seeking a way to shrink 20 years of contributions into 10 while simultaneously maximizing the corporate tax deduction. How is this achieved? Defined Benefit Plans.

What is a Defined Benefit Pension Plan?

Unlike defined contribution plans where the resulting benefit is dependent on contributions INTO the Plan, defined benefit plans promise a specific monthly benefit at the time of retirement or when the money comes OUT of the Plan.

Defined Benefit Plan: Pros & Cons

Pros of a Defined Benefit Plan

  • Tax Advantageous: Contributions are fully tax-deductible and benefits accrue on a tax-deferred basis.
  • Contribution Amounts – Significantly higher contribution levels which increase as you get older.
  • Can combine with other types of retirement plans e.g. 401k Profit Sharing Plan
  • Instead of separate accounts like a 401k Profit Sharing Plan, a pool of assets is dedicated to providing benefits to eligible participants. This money is “trustee-directed”;
  • Plan design works best when you have older owners and younger employees

Cons of a Defined Benefit Plan

  • Company is required to make an actuarially determined contributions;
  • Maximum and minimum contributions vary according to benefit promised and investment results;
  • Relatively high administration costs;
  • Not beneficial for younger business owners

Third Party Administrators: PlanPerfect

PlanPerfect is a premier third party administrator that works with companies of all shapes and sizes. We will explore what plan makes the most sense for your business goals and craft a retirement plan to fit your specific needs. Explore our services and contact us today for a free consultation!