This course covers defined benefit plan options available to plan sponsors, including the different pay- and service-related benefit formulas, plan funding responsibilities, investment decisions and risks, distribution methods and plan termination. This course will provide you a basic understanding of how defined benefit plans work for high-income self-employed clients and family businesses.

The question is: what is a define – benefit plan?

A 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.

The comparison between fully insured vs traditional defined benefits will help you determine the key difference between them. The course will also walk you through the definition of Liability Driven Investing and how it works. You will also come across to new concept of Pension risk transfer. Basically, when a defined benefit pension provider offloads some or all of the plan’s risk retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits. This program summarizes and describes the core provisions of a Defined Benefit Plan, funding, and benefit concepts, with examples and review of alternate forms of defined benefit plans.

Participants at the end of this program will have a clear understanding of the operation of defined benefit plans allowing them to more effectively advise clients and make recommendations.

Major topics covered in this course:

Basics of defined benefit plan Non-Traditional Defined Benefit Plans Fully Insured vs. Traditional Defined Benefit How are “pay credits” and “interest credits” Determined? Liability Driven Investing (LDI) Pension Risk Transfer

Field of Study: Finance