Target Benefit Plan
A target benefit plan is a pension plan that has features of a defined contribution plan and a defined benefit plan. The target benefit plan is like a defined benefit plan because the contribution is mandatory each year and 100% funded by the employer. The target benefit plan is also like a defined contribution plan (such as a 401k) because participants make the investment decisions and the benefit provided to participants at retirement is based on the performance of those investments.
The plan sponsor (employer or business owner) has the obligation to make the required annual contribution for each eligible participant, but it is not responsible for the actual investment earnings.
The target benefit plan has a 2013 annual contribution limit of $51,000 per participant.
Pension plans for a one person business, an owner and spouse business or a partnership (no W-2 employees)
Are you self employed and have no employees? If you are then you should consider a traditional defined benefit plan as an alternative to a target benefit plan. Self employed individuals who would like to contribute in excess of the limits of a target benefit plan should consider a traditional defined benefit plan since it has higher contribution limits. Contributions to a defined benefit plan can exceed $100,000 per year.
Learn more about a defined benefit plan.