The plan provides a guaranteed level of benefits on retirement. Usually, the promised benefit is tied to the employee's earnings, length of service, or both. Can be funded by employer or employee contributions or both. Benefit payable at retirement is based on money accumulated in each employee's account. The final amount reflects the total contributions plus investment gains or losses.
Employees contribute pretax dollars to an investment until they retire or leave the company.
These funds generally develop stock portfolios that balance the potential for appreciation with the potential for dividend income. A portfolio manager is the professional who actually manages the fund. Most compli cated, but have the most generous contribution limits. Also called H.R. 10 plans. Always subject to certain legal restrictions.