Defined benefit plans are alive and well

For smaller, more mature companies, a defined benefit plan can be a great vehicle to help you and your employees prepare for retirement.

For the most part, the news about Defined Benefit (DB) plans lately has not been particularly positive. Whether a big company could no longer fund its plan or how it was bankrupting their business, headlines have discouraged many businesses from seriously considering a DB plan.

We believe it's time to take another look. For smaller, more mature companies, a DB plan can be a great vehicle to help you and your employees prepare for retirement. With a Defined Contribution plan, it's your employees who make many of the contributions and take on the investment risk. Their retirement benefit is their accumulated balance. With a DB plan, you, as the plan sponsor, make the contributions and assume the risk. Your employees receive a promised benefit at retirement, typically in the form of monthly income.

A DB plan isn't for everyone, but you may find that type of plan may help you meet your tax and savings goals. For example, if you've been focused on building your company but have pushed off saving for retirement, a DB plan can be a tool to help you make up for lost time with substantial contributions. It may even help you retire early if that's something you're considering.

You can also use a DB plan as an incentive to attract new talent. While a 401(k) plan allows employees to contribute to their retirement savings, a DB plan is your responsibility to fund. This can present a competitive advantage if you need to recruit and retain top talent.

But only businesses that have predictable earnings and long-term viability should consider a DB plan, because there are consequences if required contributions are missed.

Questions?

If a DB plan sounds like it might solve some of your retirement and tax planning issues, contact Brad Bechtel using the information below to determine if it's a good fit for you and your business.

Brad Bechtel

Senior Vice President
Employee Benefit Services

Brad Bechtel leads AGH’s employee benefit services (EBS) division, which serves clients nationwide. EBS is one of the region's largest providers of retirement plan recordkeeping services for daily valuation plans. The division provides consulting services to clients on employee benefit plans, including plan design, implementation, operation, fiduciary due diligence, compliance, and through affiliate AGH Wealth Management, discretionary and non-discretionary investment fiduciary services, investment advisory services and employee education.

Bechtel is experienced in executive compensation, including non-qualified, phantom stock, top hat and excess benefit plans, as well as other deferred compensation approaches. He has consulted for numerous Fortune 500 corporations on investment management and fiduciary due diligence. He also provides search and selection due diligence consulting services for companies seeking new investment and recordkeeping providers for their qualified plans. Bechtel is a registered investment advisor who holds Series 7, 24 and 66 FINRA registrations, and he is a member of the American Society of Pension Professionals & Actuaries.

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