What Types of Pension Plans Are Available?
What Types of Pension Plans Are Available?
When you consider a potential job offer, it is important to consider the benefits offered in addition to the pay scale. Health care, disability, pension, and retirement benefits are essential aspects of your employment, and it is important to understand your rights to these benefits. According to Chicago pension lawyers, pension plan benefits are some of the least understood benefits. Attorneys advise that there are two main types of pension plans: defined benefit plans and defined contribution plans.
What to expect from a defined benefit plan
In a defined benefit plan, employee participants receive a specific monthly benefit once they retire. In most cases, the benefit is calculated by a plan formula that is based on the employee’s salary and years of service. For example, a plan may provide for a percentage of the employee’s average salary for every year of service, with the average based on the last five years. Another plan option is a set dollar amount paid on retirement, such as $500 a month. The main idea of a defined benefit plan is that a specific amount is promise and that the employee knows exactly how much to expect when he or she retires.
What to expect from a defined contribution plan
Unlike a defined benefit plan, a defined contribution plan does not promise a specific amount of benefits at retirement. In these plans, the participating employee, the employer, or both contribute to the participant's individual account under the plan. In general, these contributions are made at a set rate or percentage of annual earnings. During the employee’s years of employment, these contributions are usually invested on behalf of the employee. On retirement, the employee receives whatever funds are in his or her account, considering the contributions and any investment gains or losses. Typical types of defined benefit contribution plans you may participate in include the following:
- 401(k) plans
- 403(b) plans
- Employee stock ownership plans (ESOP)
- Profit-sharing plans
If you participate in a defined benefit plan, your employer, or anyone with discretionary control over plan management or assets, must comply with certain fiduciary duties. If the fiduciary breach his or her duties, a Chicago ERISA pension attorney can help bring an action in court to hold them responsible for restoring losses to the plan.
Help understanding your pension rights
For help understanding your pension, including enforcement of your rights to your pension funds, contact a Chicago pension plan lawyer. The lawyers of Daley, DeBofsky & Bryant focus their practice entirely on employment and benefits law, allowing us to cultivate the expertise you need to protect your pension. Contact Daley, DeBofsky & Bryant or call 1-888-374-2591 today for help with pension rights and employment law.
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