Скачать или смотреть Defined Contribution Plans

Defined contribution plans involve annual contributions from employers and employees to individual accounts, based on a formula in the plan document. Employers usually contribute a percentage of each participant’s pay, investing funds in vehicles such as company stock, diversified funds, or government bonds. These plans do not guarantee specific benefit amounts; benefits depend on contributions, investment performance, and forfeitures from non-vested accounts. Common types include profit-sharing plans, stock bonus plans, and employee stock ownership plans.

Contributions can come from four sources: employer contributions, employee contributions, forfeitures from non-vested accounts, and investment returns (or losses). ERISA requires a named fiduciary to manage investments, who may delegate to investment managers that diversify assets to balance risk and return. Plans must meet safe harbor conditions, such as a uniform allocation formula, to comply with nondiscrimination rules.

Accrued benefits equal the account balance, and employers cannot reduce contributions based on age or set maximum age limits. Minimum funding standards are met when contributions match the plan’s specified amounts, and “annual additions” cap the total yearly contributions from all sources. Employer deductible contributions vary depending on the type of defined contribution plan.