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Home > Employee Benefits > Qualified Retirement Plans > Defined Benefit Plans Defined Benefit Plans  Defined benefit plans define the benefit amount each participant will receive at retirement age and then estimates how much must be contributed each year to accumulate the necessary future fund. In this case, the employer contributes an actuarially determined amount sufficient to pay each participant the fixed or defined benefit at his or her retirement. Methods of defining the benefit may be based on a flat percentage of compensation, a percentage that increases with years of service, a percentage that changes at certain compensation levels, etc. This type of plan generally favors older employees, because more of the employer's contributions must go into his or her account to make certain that there will be enough to pay the promised (or defined) benefit at retirement age. Determining whether a defined benefit or a defined contribution plan is best for you will depend on several factors including your goals as an employer, as well as available cash flow. To help provide a more in-depth understanding of the different plans available please download a PDF of our brochure, Choosing the Right Retirement Plan. |
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Securities offered through Registered Representatives of NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. |
