Employer-sponsored defined benefit pension plans in which the benefit is defined by account value rather than monthly lifetime retirement income. Cash balance plans are often referred to as “hybrids” because they have some of the characteristics of traditional “defined benefit” (DB) pension plans and some of the characteristics of “defined contribution” (DC) plans, such as 401(k). In general, traditional defined benefit plans promise qualified employees an income benefit for life (or some other period) starting at “normal retirement age,” without regard to how much (or little) the employer must contribute to the plan to fund the benefit. Defined contribution plans, on the other hand, promise only how much the employer will contribute to a qualified employee’s account from time to time until the employee retires but they make no promises with regard to investment earnings or results, let alone a monthly income benefit for life. (more…)

Like the peculiar behavior of the dog in the night in the Sherlock Holmes story “Silver Blaze,” one of the obvious but overlooked clues about the insurance orientation of TIAA-CREF appears in the names of the accounts that are given to the various accumulation alternatives available to you. Each account is labeled an “annuity,” and each contribution is called a “premium.” To avoid confusion you should note that what TIAA-CREF labels as an “account,” you probably would call an investment choice or fund.

Stripped to the basics, your Retirement Annuity (or “Retirement Annuity”) boils down to an accumulation agreement between you and TIAA-CREF. (more…)

The maximum 401k contribution per year to a 401(k) plan in 1998 is not to exceed 25% of compensation. Although there is no legal minimum contribution requirement, in order to reduce the plan’s administrative costs, some plans establish a minimum amount that must be contributed.

There is also a limit on total 401 k contributions that employee and employer together can (more…)