Qualified Pension Plans

A pension plan provides retirement benefits to employees. There are two types: Defined Benefit Plans and Defined Contribution Plans.

Defined Benefit Plans

A defined benefit plan is a pension plan promising to pay each participant a certain amount of money at the participants normal retirement age.  The amount of money for each participant is often expressed as a formula, for example, “40 percent of the participant’s final average compensation.”

Defined Contribution Plans

Defined contribution plans do not promise specific benefits.  The benefit is instead based upon the amount that is contributed on behalf of each participant. 

• Profit Sharing Plans - When a profit sharing plan is adopted, an account is established for each participant to record the amounts held in the plan for the employees’ benefit. 

• 401(k) Plans - A 401(k) Plan is a low-cost way of providing retirement benefits for employees. The 401(k) Plan offers a number of advantages to employers and employees alike. Those advantages include flexibility, pre-tax investments and employee incentives.
  For more information see 401(k).

• Money Purchase Plans - Money purchase plans also bear a resemblance to profit sharing plans.  Like a profit sharing plan, when a money purchase plan is adopted for each participant, equal dollar amounts or an equal percentage of pay is contributed.

Non-Profit Company Pensions Plans

• 403(b) Plans - A 403(b) plan is a unique tax-advantaged retirement plan that was designed for employees who are a part of one of the following organizations: educational institutions, charitable foundations, hospitals or health care organizations, scientific or research organizations, churches, and religious organizations.  There are two types of 403(b) plans: custodial accounts (invested exclusively in mutual funds), and tax sheltered annuities issued by an insurer.