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The Original Retirement Plan Returns to Popularity
Back in your grandfather’s day, a retiring worker often received a “pension” that paid him a certain amount of money every month for the rest of his life.
These “defined benefit” plans — so called because they spelled out exactly how much the worker would receive each month — became less popular in the 1980s as “defined contribution” plans like the 401(k) became more common. But defined benefit plans are experiencing a resurgence as an excellent way to reward long-term service, maximize benefits and facilitate special early-retirement programs.
A defined benefit plan generally promises the participant a monthly benefit at retirement. The plan usually states the monthly benefit the participant will receive during retirement as a percentage of salary or flat dollar amount, multiplied by his or her years of service.
Employees generally do not contribute to this type of plan. Instead, the plan sponsor will make regular contributions to the plan at a rate recommended by the Standard’s expert staff and overseen by the Pension Benefit Guaranty Corporation. Contributions are invested by The Standard and grow through the years. The goal is to ensure that the plan has sufficient funding to meet the specified income needs of each participant at the time of his or her retirement.
Defined benefit plans are most beneficial to older, long-tenured employees who generally have higher incomes and more years of service. However, defined benefit plans can provide significant encouragement to younger employees to make a long-term commitment to the firm.
The Standard offers defined benefit plans through our Mainspring Retirement Plan SolutionsSM product.
The Original Retirement Plan Returns to Popularity
Back in your grandfather’s day, a retiring worker often received a “pension” that paid him a certain amount of money every month for the rest of his life.
These “defined benefit” plans — so called because they spelled out exactly how much the worker would receive each month — became less popular in the 1980s as “defined contribution” plans like the 401(k) became more common. But defined benefit plans are experiencing a resurgence as an excellent way to reward long-term service, maximize benefits and facilitate special early-retirement programs.
A defined benefit plan generally promises the participant a monthly benefit at retirement. The plan usually states the monthly benefit the participant will receive during retirement as a percentage of salary or flat dollar amount, multiplied by his or her years of service.
Employees generally do not contribute to this type of plan. Instead, the plan sponsor will make regular contributions to the plan at a rate recommended by the Standard’s expert staff and overseen by the Pension Benefit Guaranty Corporation. Contributions are invested by The Standard and grow through the years. The goal is to ensure that the plan has sufficient funding to meet the specified income needs of each participant at the time of his or her retirement.
Defined benefit plans are most beneficial to older, long-tenured employees who generally have higher incomes and more years of service. However, defined benefit plans can provide significant encouragement to younger employees to make a long-term commitment to the firm.
The Standard offers defined benefit plans through our Mainspring Retirement Plan SolutionsSM product.
