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…)

Corporate sponsors are taking a harder look at their employee benefit plans. Clearly the Employee Retirement Income Security Act of 1974 (ERISA) contributes to this increased attention by formally requiring that pension plans be run solely in the interests of plan participants and by making plan fiduciaries personally liable for any breach of fiduciary duties. The growth in pension plan asset and retirement assets also draws the attention of senior management; when a plan’s size exceeds the assets of the largest corporate division or perhaps the total market value of the outstanding corporate stock, (more…)

Early Retirement Incentive Plans extend the benefits offered to workers or give additional financial inducements that motivate employees to retire prior to the age or time they otherwise would retire. Early retirement incentive plans first appeared on the employee benefit landscape in the late 1970s and early 1980s. The nation was struggling with “stagflation,” and many firms sought to reduce their labor costs without resorting to layoffs. At the same time, the long-term trend toward earlier retirements was proceeding unabated. Many workers expressed a desire to enjoy the “leisure” that could be secured through the early retirement provisions of many companies’ defined benefit plans. (more…)

Having decided that a corporation can afford and should offer some type of employee benefits plan, the next step is to determine what type of plan or plans the company should adopt.

Employee benefit plans that provide some form of deferred benefits (that is, benefits deferred until after the employee retires) fall into two broad categories. A defined contribution pension plans provides an individual account for each participant and benefits are based upon the amount contributed by the company, or by the company and the employee, to that account, together with the investment results of the account. (more…)

The thought of retire early may be an illusion for some and a punishment for others. Everything is, as the saying goes, depending on how you look at it. First, is it the decision whether retirement is voluntary or forced? Often when companies offer their employee early retirement is not really such an offer since the other option is to be fired. (more…)

Among the variety of retirement plans you can pursue, some qualify for tax deferral by the regulations of the federal government, and others don’t. The federal government passed the Employee Retirement Income Security Act (ERISA) regulation in 1974. This legislation and its requirements determine whether a retirement plan offered by employers or an employee organization (such as a union) qualifies for tax deferral of investment and interest until retirement age. (more…)

Do you want your retirement years to be lively? Is your current job, or career, fulfilling for you? If so, then maybe you are going to be joining the happy, busy ranks of those, more than 70% according to a recent A.A.R.P. survey, who are planning a “working retirement.” If working past your retirement date seems grim, then cheer up. There is a silver lining if you know where to look.

1) Continuing at your current job has its positives - you know the job. There are no learning curves, or the awkwardness of being the new kid. (more…)

You are eligible for your employer’s pension plan if you have worked there for one year and at least 1000 hours. Employers offer two basic types of retirement accounts—defined contribution plans or defined benefit plans.

Defined contribution plans are characterized by an annual contribution being made for each employee. (more…)

There are many options for small business owners, but some may be sweeter than others

As no-brainers go, this one is right up there: Rather than sink all your cash back into your business, you should funnel some into your own retirement. But a tough economy like this one often tempts small business owners to skimp, figuring they’ll make up the savings later. Problem is, “later” often never comes: Just 22% of small and mid-size employers have set up employee retirement plans, according to the National Small Business Association. “Many are deterred by the potential costs and find it difficult to navigate the options,” says Tom Biddison, a principal at Cornerstone Financial in Baltimore. (more…)