Defined Benefit Plan

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Defined benefit plans provide a fixed, pre-established benefit for employees at retirement. Employees often value the fixed benefit provided by this type of plan. On the employer side, businesses can generally contribute (and therefore deduct) more each year than in defined contribution plans. However, defined benefit plans are often more complex and, thus, more costly to establish and maintain than other types of plans.

If you establish a defined benefit plan, you:

  • Can have other retirement plans
  • Can be a business of any size
  • Need to annually file a Form 5500 with a Schedule SB
  • Have an enrolled actuary determine the funding levels and sign the Schedule SB
  • Can’t retroactively decrease benefits

Source: Defined Benefit Plan | Internal Revenue Service (irs.gov)