401(k) Fee Disclosure Form. ACLI, working with the American Bankers Association and the Investment Company Institute, developed a 401(k) Fee Disclosure Form designed to assist companies in making informed cost-benefit decisions when selecting 401(k) service providers.
While the trend has been shifting to defined contribution plans, millions of American workers continue to depend on traditional defined benefit pension plans in retirement. These plans typically are funded entirely by the employer, who bears the investment risk. Such plans, which are guaranteed by the federal government, base benefits, on length of service and salary (as a percentage of pre-retirement pay).
Generally, an employee is eligible if he or she is 21 or older, has been employed for one year, and works at least 1,000 hours a year for the sponsoring employer (employers may waive these requirements). Part-time employees usually are not eligible.
A type of defined benefit plan is a cash balance plan. In a typical cash-balance plan, your employer contributes a set amount of money—for example, perhaps 5 percent of your salary—to an account each year. Your employer also guarantees that your account will grow at a certain rate every year. That rate may be either a fixed amount or a variable rate tied to a benchmark, such as the one-year Treasury bill.
When you leave your job or retire, you can take your balance in a lump sum and roll it into an individual retirement account (IRA). Alternatively, you can choose an annuity that will provide a guaranteed monthly payment for the rest of your life.
A worker vested under a defined benefit plan may enjoy a number of advantages, including:
Under a defined benefit pension plan, retirement benefits are based on salary and length of employment. Some questions to ask might include:
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