FAQ - Defined Benefit Plans
Eligibility: Is an employee required to satisfy an eligibility condition to participate in the plan?
Generally, yes. The Employer selects the eligibility requirements
for the plan. Some plans allow immediate entry, while others may adopt a minimum age and/or service condition. The greatest minimum age and service requirements are age 21 and one year of service (in a 401(k) plan). If the plan it not a 401(k) plan, the employer may set a longer service requirement, but not to exceed two years.
Contributions: Upon satisfying the eligibility conditions in a Defined Benefit Pension Plan how are contributions allocated?
A defined benefit plan does not maintain account balances; therefore, contributions are not allocated or credited to the participant’s account.” Instead, eligible participants accrue a benefit which is determined by the formula stated in the plan. The method of accruing the benefit depends on the design of the plan (please refer to your Summary Plan Description or contact your Retirement Plan Consultant). The contributions made to the plan and earnings from the plan’s investments are used to pay the benefits accrued under the plan.
Contributions: Is a participant required to make salary deferrals?
Contributions: How much can a participant defer?
Contributions: Can a participant modify or discontinue salary deferrals?
Yes, the plan will specify the period in which the participant can change, modify or discontinue the amount they defer into the plan.
Loans: May a participant borrow from his account?
Loans: How is the maximum loan amount determined?
Distribution: When may a participant receive a distribution from a Defined Benefit Pension Plan?
Each plan must define the rules, provisions, options and events
for receiving a distribution from the plan. Your plan may not permit
distributions in every situation noted below, but in general a plan may permit distributions upon:
- separation from service
- stated age, i.e., 65
- retirement
- death
- plan termination
FAQ - Defined Contribution Plans
Eligibility: Is an employee required to satisfy an eligibility condition to participate in the plan?
Contributions: Upon satisfying the eligibility conditions in a Defined Contribution Plan how are contributions allocated?
Contributions: Is a participant required to make salary deferrals?
A 401(k) plan can be designed to provide for automatic salary deferrals, but most 401(k) plans have voluntary enrollment.
Contributions: How much can a participant defer?
Contributions: Can a participant modify or discontinue salary deferrals?
Yes, the plan will specify the period in which the participant can change, modify or discontinue the amount they defer into the plan.
Loans: May a participant borrow from his account?
Loans: How is the maximum loan amount determined?
Distribution: When may a participant receive a distribution from a Defined Contribution Pension Plan?
ach plan must define the rules, provisions, options and events
for receiving a distribution from the plan. Your plan may not permit distributions in every situation noted below, but in general a plan may permit distributions upon:
- Separation from service
- Stated age, i.e., 59 ½
- Hardship
- Disability
- Retirement
- Death
- Plan Termination
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