Defined Benefit Plans
Helping secure the future today
with a well-managed defined benefit plan
Retirement security has been compared to a three-legged stool which rests on individual savings, Social Security, and employer pension plans. While personal savings can supplement income and provide capital, it is the second two “legs” which provide the most support via a steady stream of income.
Defined benefit plans therefore remain a key component of retirement security for millions of Americans. These plans provide a set monthly benefit upon retirement—a benefit usually based on age, earnings and years with the company rather than the performance of investments.
Defined benefit plans can create value directly for the employer, lowering overall employment costs, direct compensation and taxes. Because the benefits paid out of a defined benefit plan increase with the number of years served, offering a defined benefit plan can boost employee loyalty and retention, lowering turnover costs and helping to retain intellectual capital.
While employers assume the risk of investing, they may also realize some advantages if returns exceed expectations, since in that case they will need to contribute less to the plan to deliver the promised benefit. These plans offer other advantages, including allowing employers to make contributions well above the cap set on defined contribution plans. As a result, defined benefit plans are frequently preferable for highly compensated employees.
Newport can provide a well-designed and properly managed defined benefit plan—one which fits the financial and benefit objectives of the sponsor, remains current, and ultimately serves as a valuable source of retirement income for participants. And as a leading provider of qualified retirement plans and non-qualified deferred compensation, Newport can also help sponsors integrate their defined benefit plan into their overall retirement and benefit program.