Generate Pension Report Create Account Log In How It Works Online Demo Sample Report Download Pension Form Print Pension Form QDRO Request Forms FREE Download Book Basics of Pensions In Depth Analysis Special Issues Actuarial Standards Sample Authorizations Pension FAQs QDRO FAQs Glossary Join Our Mailing List About Our Company About Our Analysts Contact Us Phone Consultations Our Fee Schedule Testimony Your Privacy Security Terms of Use Customer Support	The Basics of Pension/Retirement Plans Future Benefit Plans: A pension plan is a tax deferred savings plan which falls under the category of a future benefit plan. A future benefit plan is a general term which describes any benefit plan instituted by a company to help ensure the future well being of its employees. A future benefit plan provides an employee with income at some point in the future. This is different from a salary which is received at the present time. A future benefit plan typically has two parts: a retirement portion, which provides benefits to employees after they retire; and a disability portion, which provides benefits in case of a work-related disability. Any plan which provides benefits in the future in exchange for services rendered at the present time is typically considered a future benefit plan. Classification of Future Benefit Plans: Based upon the principles of property division, as well as those of retirement benefits, a future benefit plan is typically categorized according to the status of the employees' benefits. A plan that is currently providing benefits to an employee is considered to be matured. Those plans which have not begun distributing benefits are considered unmatured. If the employee's right to receive benefits under the plan is permanent, even if such employee were to leave employment immediately, the plan is said to be vested. If the employee's right to benefits would be forfeited if he or she left employment immediately, such plan is said to be unvested. Typically, under most retirement plans, an employee's benefits will become vested after completing a required number of years of service. Such requirement usually falls somewhere between 3 and 20 years. All matured benefits are vested, due to the fact that the employee is receiving benefits even though he or she terminated their employment. Conventional retirement plans can also be categorized according to the way in which the employee's benefits are defined. If the plan defines an employee's benefit as a periodic dollar amount, for example a $1000 per month, the plan is considered a defined benefit plan. If either or both the employee and the employer make contributions to a retirement plan account, and the employee's benefits are expressed in terms of the present balance in his or her account, the plan is a defined contribution plan. A defined contribution plan typically expresses the employee's interest in terms of his/her account balance. However, the employee does not have to receive his/her interest from the plan in the form of a lump sum payment. Most defined contribution plans use the balance in the plan account on the date of retirement to purchase an annuity. This annuity will pay periodic benefits, usually on a monthly basis, to the employee for the remainder of his or her lifetime. The primary difference between defined benefit and defined contribution plans lies in the manner in which the plan benefits are determined, and not the form in which the benefits are to be received. Retirement plans can also be categorized relative to the manner in which the benefit is funded. If the benefit is funded entirely by the employer, the plan is considered noncontributory. However, most plans provide the employee with the option of contributing his or her own funds (often through salary deductions), to acquire additional benefits within the plan. Some plans require the employee to contribute towards his or her benefits. In cases where the benefits are derived from contributions made from both the employee and employer, the plan is said to be contributory. Return to In Depth Analysis

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