Defined Benefit Plan

A defined benefit plan is the most administratively complex type of retirement plan. It may be used by businesses of any size. Employers can generally contribute more to a defined benefit plan than to other types of retirement plans.

Consult a benefit plan advisor to decide whether a defined benefit plan is best for your business and, if so, to set up the plan.

Defined benefit plan on IRS.gov

 

 

 
  • Can be set up by any employer
  • Participant's annual retirement benefit determined by the plan's benefit formula
  • The maximum annual benefit at retirement is the lesser of $200,0001 or 100% of final average pay
  • An actuary is required to annually certify the amount the employer must contribute to the plan to fund retirement benefits for the employees
  • Must meet minimum coverage tests but can exclude some employees
  • Most complex to set up and operate
  • Annual return must be filed
  • Must satisfy annual nondiscrimination testing
  • Greater design flexibility
  • Plan may allow employees to take loans
  • May delay vesting of participants' accrued benefit

1Dollar limit is for 2012 and is subject to cost-of-living adjustments for future years.

 Maintaining a plan on IRS.gov

 

 

 

Correcting Plan Errors on IRS.gov

 

 

 

 ADDITIONAL RESOURCES