We are seeing less of defined benefit plans established over the last decade but if it fits the criteria you and your company are looking for, Our Advisors at SkyOak can design and implement this strategy for your company.

Under a defined benefit plan, employees’ retirement benefits are predetermined by their compensation, years of service and age. For example, the plan may determine that upon retirement an employee will receive 1% of his or her average salary for the last five years of employment for every year of service with the employer. The plan may state this promised benefit as an exact dollar amount, such as $500 per month at retirement.

The employer will make contributions that, based on actuarial assumptions including projected growth of investments, are required to reach the predetermined retirement benefit. Should the performance of plan investments fall below the projected amount, the employer is required to make additional contributions to make up for the shortfall.