Defined benefit plans provide a specific benefit upon retirement.
They require that a business contributes enough money each year
to fund the future benefits. Annual contributions must be calculated
by an enrolled actuary. Defined benefit plans are most beneficial
to older employees who need to accumulate assets rapidly over
a short period of time.
Who May Establish |
Sole proprietors, partnerships, corporations, government and nonprofit entities. |
Establishment Deadline |
Tax year-end. |
Contribution Deadline |
Tax filing date, including extensions. |
Who Contributes |
Employer. |
Annual Contribution Limit |
Determined by actuary. |
Contribution Requirements |
Contributions are required each year based on actuarial computation. |
Employee Eligibility |
All employees age 21 or older who have worked one year (or two years if
100% vesting is provided). May exclude employees who work fewer than 1,000
hours per year. |
Vesting |
Gradual vesting permitted. |
Withdrawals |
Allowed only if certain events occur, such
as termination of employment, death or disability. Subject
to income tax; a 10% penalty may apply before age 59½. |
Loan Feature |
Permitted.1 |
Plan Administration |
IRS 5500 filings and other ERISA requirements. Actuarial certification required
each year.2 |
