Two Principal Types Of Plans
Qualified Retirement
Plans can generally be classified as either "defined benefit" or "defined
contribution" plans.
Defined benefit plans define the benefit amount each participant
will receive at retirement age and then estimate how much must be contributed
each year to accumulate the necessary future fund. Interest rates,
ages of participants, etc., will have an effect on the calculation.
The amount of the contribution is generally determined by an actuary.
The investment risk rests on the employer.
Defined contribution plans generally put a percentage of current
salaries into the plan each year. The amount at retirement will depend
on the investment return and number of years until a participant retires.
The investment risk rests on the employee/participant.
Summary
Of Types Of Plans
Defined
Contribution Plans
This document was last modified on July 26, 1999
Copyright ©1999, The Jacobs Company, All Rights Reserved