Defined Benefit Pension Funds are traditional pension plans that normally provide each pensioner a flat monthly benefit. Benefits are generally actuarially determined based on factors such as age, years of service, average hours worked, or compensation earned over a participant's career. This differs significantly from Defined Contribution Pension Funds where benefits are not guaranteed.
Defined Benefit Pension Funds are required to engage an actuary. Some of the services provided by actuaries include: calculating the actuarial present value of accumulated plan benefits, determining whether the plan is in compliance with the minimum funding requirements under ERISA, and determining the liability should an employer withdraw from participation in the Fund.
In general, Defined Benefit Pension Funds do not maintain individual accounts for plan participants. Recently however, a new type of Defined Benefit Pension Fund — Cash Balance Plans — has gained popularity.
Cash Balance Plans are unlike typical Defined Benefit Pension Funds. In a Cash Balance Plan, a hypothetical account is maintained for each participant. These accounts are credited with "contribution credits" and "interest credits". Plans of this type are considered Defined Benefit Pension Funds since benefits are not related to the investment experience of the Fund and the employer is guaranteeing the benefit.
Defined Benefit Pension Funds are subject to the reporting provisions of the Department of Labor, ERISA (Employee Retirement Income Security Act of 1974), the Internal Revenue Code, The Pension Benefit Guaranty Corporation and Generally Accepted Accounting Principles. These funds require experienced and knowledgeable auditors who are familiar with their governmental compliance requirements and who also possess an understanding of the complex auditing issues involved. Whether your plan is a single-employer or a mutiemployer plan, the auditors at Schultheis & Panettieri have the experience to get the job done.
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