A Defined Benefit plan (DB) is considered a traditional pension plan because it guarantees a monthly pension benefit for the life of the participant. A DB plan does not maintain account balances to reflect the accrued benefit of each participant, but must define a benefit formula and how the benefits are accrued under that formula. This type of plan favors older employees with longer terms of service. 

A Cash Balance plan is a type of Defined Benefit plan. By taking advantage of age and salary differences, a Cash Balance plan tilts the contributions towards a desired employee or group of employees. Unlike a traditional Defined Benefit plan however, a Cash Balance plan provides a "hypothetical" account balance for the participants which accrues interest at a pre-defined government rate.

Defined Benefit Plans are ideal for:

• Employers who are older and have more service than other employees
• Employers wishing to maximize contributions
• Employers with substantial resources
• Employers with stable income

A Cash Balance Plan is a type of Defined Benefit Plan that has gained much popularity in recent years. By taking advantage of age and salary differences, a Cash Balance Plan tilts the contributions towards a desired employee or group of employees. Unlike a traditional Defined Benefit Plan however, a Cash Balance Plan provides a "hypothetical" account balance for the participants which accrues interest at a pre-defined government rate.

Cash Balance Plans are Ideal for:

• Employers who are older than some of the staff employees
• Employers desiring larger contributions for certain classes of employees
• Employers with substantial resources
• Employers with stable income

A Profit Sharing plan is a type of defined contribution plan. The employer’s contribution to a Profit Sharing plan is not required to be fixed, nor does it need to be tied to profits. While a plan may have a definite contribution formula, many plans use a discretionary formula under which the employer determines each year how much to contribute.

Profit Sharing Plans are ideal for:

• Employers with fluctuating income that want to make discretionary contributions

A New Comparability or Cross Tested plan is a hybrid plan that combines features of both defined benefit and defined contribution plan generally to skew the employer contributions in favor of the older, higher paid employees. These plans provide the ability to create multiple benefit levels and are flexible in their contributions. The participant's age, service and compensation are taken into account when determining the allocation of these contributions

New Comparability Cross-Tested and Age Based Plans are ideal for:

• Employers who are older than some employees
• Employers desiring larger contributions for themselves and possibly other key employees
• Employers desiring flexible contributions

Money Purchase plans, as well as Target Benefit plans, are older plan designs that were at one time favorable in certain situations. However, with changing governmental regulations providing newer, more flexible plan design options, these two plan types are now less attractive to most plan sponsors. If your company is currently sponsoring a Money Purchase or Target Benefit plan, we invite you to contact us for a free plan design consultation to see how today's current regulations, plan design options and tax planning strategies may result in a superior retirement plan solution for you and your employees.