Your Defined-Benefit Retirement Plan

There are many ways for employers to assist long-time employees with their retirement. One of the most common and effective ways is through a defined-benefit retirement plan. 

What’s a Defined-Benefit Retirement Plan?

A defined-benefit retirement plan is a fixed, predetermined benefit built out for employees at retirement, generally in the form of a pension. This plan guarantees a specific payout or benefit for employees upon retirement.

How Does a Defined-Benefit Retirement Plan Work?

Employers make regular contributions, generally a percentage of an employee’s pay, into an account. This account grows tax-deferred. While it varies from plan-to-plan, some employees may be able to make contributions to their accounts as well. 

A defined-benefit plan is calculated using an advanced formula that accounts for variables such as age, earnings, and years of service. A defined-benefit retirement fund differs from other pensions, in that, when poor returns result in funding shortfalls, employers need to account for the lost funding. 

At retirement, the plan may be annuitized to be paid throughout the employee’s lifetime, or it may be delivered as a lump sum.

Advantages of a Defined-Benefit Retirement Plan

Both employees and employers can enjoy the advantages of investing in a defined-benefit retirement plan. 

Employers can:

  • Contribute more each year

Being able to contribute more allows employers to deduct more from their taxes, saving significant funding year-to-year.

  • Offer an uncommon benefit

While providing a defined-benefit retirement plan isn’t unheard of, it certainly isn’t universal. Employees will be attracted to a benefit like this, and for good reason.

Employees enjoy a retirement plan that:

  • Requires no investment directly from them

  • Has predictable payout

  • Delivers a fixed income throughout retirement

While these plans do have many advantages, employers should keep in mind that defined-benefit plans are often more complex and thus, more costly to establish and maintain than other types of plans.

Types of Defined Benefit Plans

At TrueNorth Retirement Services, we offer assistance in administering many different defined-benefit retirement plans in Salt Lake County, Utah and Boise, Idaho. 

Owner-Only Plans

Additional Options

An owner-only defined-benefit plan is a plan that is ideal for business owners with no employees other than their spouses (including self-employed individuals, corporations, and partnerships) who desire to maximize their retirement contributions.

Want to learn more about owner-only plans? Visit our owner-only plans defined-benefit plans page.

A Plan Your Employees Will Value and Trust

If you want to offer the employees of your Salt Lake County, Utah or Boise, Idaho business a retirement plan that will benefit them for the rest of their life, turn to the retirement plan advisors at TrueNorth Retirement Services.

While a defined-benefit retirement plan may not be the right approach for every business, we can help you discover the best fit for yours or offer information on other retirement options like 401(k) plan providers. Our goal is to understand your needs and then try to create a plan to address those needs. We appreciate the opportunity to assist you, your company’s retirement plan, and your participants.

Want more information? Talk to one of our experts by calling 801-285-0780.