The focus of this module is on the unique characteristics of the different employer-funded defined contribution (DC) plans available for adoption by business owners. These include traditional and cross-tested plans, as well as stock bonus and ESOP plans that invest in employer stock. Integrating a DC plan with Social Security is covered. Particular attention is paid to the advantages and disadvantages of each DC plan type that should be considered by plan sponsors when making a decision about implementing a defined contribution plan.

2–1 Explain common characteristics of defined contribution plans.
2–2 Compare and contrast the basic characteristics of stock bonus and employee stock ownership plans.
2–3 Explain the basic characteristics of the two cross-tested profit sharing plans: age-weighted and new comparability plans.
2–4 Compare and contrast characteristics of different defined contribution plans.

About the Author

Kristen MacKenzie, MBA, CFP®, CRPC® is an associate professor at the College for Financial Planning. Kristen has over 20 years of experience in the financial services industry, both as an active financial planner and as a provider of financial education. She graduated from the University of Connecticut with a degree in economics and later received her MBA at the University of Colorado. You can contact Kristen at kristen.mackenzie@cffp.edu.

Complexity Level: Intermediate