A defined-contribution (DC) plan is a retirement plan that's typically tax-deferred, like a 401(k) or a 403(b), in which employees contribute a fixed amount or a percentage of their pay checks to an account that is intended to fund their retirements. The sponsor company will, at times, match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties.

A defined-benefit plan is an employer-sponsored retirement plan where employee benefits are computed using a formula that considers several factors, such as length of employment and salary history. The company is responsible for managing the plan's investments and risk and will usually hire an outside investment manager to do this. Typically, an employee cannot just withdraw funds as with a 401(k) plan. Rather they become eligible to take their benefit as a lifetime annuity or in some cases as a lump-sum at an age defined by the plan's rules.

Defined benefit plans define the benefit ahead of time: a monthly payment in retirement, based on the employee’s tenure and salary for life. Their right is not to an account, but to a stream of payments and in defined-contribution plans, the benefit is not known, but the contribution is.

This online continuing education program will provide a summary and explanation with examples of non-traditional designs for defined contribution and defined benefit plans that suit specific business needs including two plan combinations and hybrid plan designs.

Key topics covered in this online CPE webinar:

-What are the alternate contribution plan designs? -What are money purchase plans? -What are target benefit plans? -What is class allocation profit sharing plan? -What is age weighted profit-sharing plan? -What is cash balance plan? -What is floor offset plan?

Field of Study: Finance