Retirement Benefits: Federal
Author: Gary Ceppos, CSB Associates, Inc.
- Defined benefit plans and defined contribution plans are either qualified or nonqualified. See Qualified Retirement Plans; Nonqualified Retirement Plans.
- If the retirement plan satisfies the appropriate requirements of the Internal Revenue Code and associated regulations, it is a qualified plan, which can have certain tax advantages. See Qualified Retirement Plans.
- Qualified retirement plans are governed by the Employee Retirement Income Security Act (ERISA) and by the Internal Revenue Code (IRC). See Qualified Retirement Plans.
- The two basic forms of qualified retirement plans are defined benefit plans and defined contribution plans. See Defined Benefit Plans; Defined Contribution Plans.
- A defined benefit plan provides a specific, determinable benefit upon retirement or other termination of employment. The employer bears the investment risk and contributes enough to the plan so employees receive their retirement benefit based on the plan's formula. See Defined Benefit Plans.
- A defined contribution plan credits each participant's account with employer and employee contributions, along with any gains or losses. The benefit at retirement is dependent upon contribution amounts and investment performance. See Defined Contribution Plans.
- Nonqualified retirement plans are generally provided to select individuals in the organization. These plans do not have to meet most ERISA or IRC requirements. See Nonqualified Retirement Plans.
- Participants in nonqualified plans may defer paying income tax on deferred funds. See Tax Implications for Nonqualified Retirement Plans.
- Employment taxes for nonqualified retirement plans have very specific requirements. See Employment Tax (FICA/Medicare/FUTA) Implications.
- Hybrid retirement plans combine features of both defined benefit and defined contribution plan designs. See Hybrid Retirement Plans.
- A US Department of Labor (DOL) final rule allows small employers to band together to offer retirement plans to their employees through association retirement plans (ARPs). See Association Retirement Plans.
- A DOL final rule allows employers to use electronic media, as a default, to furnish information to participants and beneficiaries of retirement plans subject to ERISA if certain requirements are met. See Default Electronic Disclosure Final Rule.
- Congress made numerous compliance changes to certain employer-sponsored retirement plans through the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and the SECURE 2.0 Act of 2022. See The SECURE Act.
- Retirement plans play an important role in helping employees save for the future. See Helping Employees Prepare for Retirement.
The following states have additional requirements for this topic under applicable state law.
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