Defined Benefit Plans are:

• Best suited for established companies with consistent profits and key employees who are 10 to 15 years away from retirement.
• Contribution is not limited (maximum pay per employee to determine benefits is $275,000 for 2018).
• Annual benefit from the Plan may not exceed the lesser of 100% of a participant’s compensation or $220,000, as adjusted.
• Company contributions ONLY
• Vesting schedules are available when using a maximum of one year of service for eligibility requirements.

A Defined Benefit plan could be right for someone who:

• owns a business.
• is making money.
• has made money for several years.
• has a high tax bill.
• needs a large deduction.
• wants to create a substantial retirement fund for himself/herself.
• wants the largest portion of the plan contribution for himself/herself.
• is earning more than his/her employees.
• is 48 or older.
• is older than his/her employees.
• has cash available to fund the plan.
• will have cash available to fund the plan in future years.

Cash Balance Defined Benefit Plans:

• A Cash Balance DB Plan is designed to LOOK like a Defined Contribution Plan.
• The Employer makes Annual Hypothetical Contributions to the Participant’s Hypothetical Account, Interest is added, and the Participant receives a benefit at Retirement.
• Differences Between a Cash Balance DB and a Defined Contribution Plan
• In a CB Plan, increases or decreases in plan assets DO NOT directly affect the promised benefit amount to the Participant.
• Contribution limits are not applicable to CB Plans (as in a DC).
• CB benefits are generally guaranteed by the PBGC.