DEFINED BENEFIT VS DEFINED CONTRIBUTION
01.Core Concepts
Defined Contribution Defined Benefit Characteristics 25% of covered compensation Any amount within a statutorily defined minimum and maximum range calculated by an actuary. Annual Contribution Limit? Employee Employer Investment risk? Reduce plan costs, pay plan administrative expenses, or allocate to participants Reduce plan costs How are forfeitures allocated? No Yes (except professional firms with less than 25 employees)* PBGC coverage? Yes; usually separate No, they are commingled Separate accounts? No Yes Credit for prior service? * ERISA Section 4021, 29 U.S.C. Section 1321.