The Defined Benefit Pension Plan. This qualified plan guarantees specified benefits at retirement. A tax deferred savings for employees along with a provision of adequate retirement benefits for all, regardless of age at time of entry. And, for older, highly compensated employees, maximum tax-deferred retirement savings. Defined benefit plans are more costly to administer.
Employers face an annual funding obligation regardless of company earnings.
Such plans are also more complex to design and often difficult to explain to employees, whose benefits may be greatly diminished if they leave prior to retirement. A Stock Bonus Plan. This qualified plan is similar to a profit sharing plan, in which an employee participant account is invested in the firm's stock. An ESOP is a stock bonus plan that an employer can use as a conduit for borrowing money from a bank or financial institution. Employees receive ownership interest which provides performance incentive, while, at the same time, creating a market for the employer's stock.