Defined Benefit Plans

Defined benefit plans are qualified employer-sponsored retirement plans, which offer tax advantages to employers and participating employees.  As an employer, you can deduction the contributions made to the plan, and your employees do not have to pay taxes on those contributions until they begin receiving distributions.

A defined benefit plans guarantees an individual a certain benefit upon retirement depending on salary, age, years of service, and vesting.  Each year pension actuaries determine the required contribution to the plan to fund the future benefits.  Employers are normally the only contributors to defined benefit plans.  The two basic kinds of defined benefit plans are pensions and cash-balance plans.

Many defined benefit plans allow you to choose how you will receive your compensation.  In a single life annuity, you receive a fixed monthly benefit until you die.  In a qualified joint and survivor annuity, you receive a fixed monthly benefit until you die, and your surviving spouse will receive benefits until his / her death.  In a lump-sum payment, you receive the entire value of the plan in one payment.

Defined benefit plans can be a major source of retirement income because benefits are not affected by the performance of investments.  You know ahead of time how much you money you will be receiving.  Most benefits are insured up to a point by the Pension Benefit Guaranty Corporation.

Kolinsky Wealth Management specializes in designing and administering employee sponsored retirement plans.  Contact us today to see if a defined benefit plan is right for you and your firm.

Steven Kolinsky is a Representative with Kolinsky Wealth Management and may be reached at http://www.kolinskywealth.com, (201) 474-4011 or skolinsky@kolinskywealth.com.

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