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A defined-benefit pension plan is an employer-sponsored retirement plan that provides funds for employees upon retirement, based on a formula that uses a number of factors including salary history, age, and duration of employment. Company executives control investment risk and portfolio management. The payout employees receive is defined regardless of the performance of the invested funds. Therefore, companies sometimes have to use discretionary fund or earnings to fund the retirement account if there is a shortfall. There are also restrictions on when employees can withdraw the funds from a defined-benefit pension plan without penalties.
Employers have to consider a number of factors before implementing defined-benefit pension plans such as how often the funds will be deposited and if the money will be there in times of financial hardship. Employers also have to carefully determine investments to ensure a large part of the fund won’t need to come from the company’s earnings when the employee retires.
Call 419-475-8665 or fill out our on-line request form for more information or to schedule an exploratory appointment with our experienced professionals at Savage & Associates.
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