Defined Contribution Retirement Plan

DefinedContributionRetirement Plan


DefinedContributionRetirement Plan

Asmall company likes the Mt. Water Corporation, which have a highlynon-organized labor, requires a retirement plan that will take intoaccount the employs contribution and current salary. It requires adefined contribution plan, which an employee also contributes to theretirement benefit. In this, the employer would act as a sponsor tothe plan, and would give it to another security or insurance companyto manage and administer it (Deshmukh, 2012). Therefore, Mt. WaterCorporation would consider having the 401{k} and 403(b).

In401(k), the employee is to contribute to the plan many times beforetax. Sometimes the employers choose to matchup the employees’contribution close to his salary and other like to indulge in profitsharing contributions. In addition, the employee chooses whichinvestment plan will be offered. This will enable the company to makesure that every employee chooses what they want, and it will also bein line with their salaries. Lastly, the 402(k) offers a tax differedinvestment until retirement. In the 403(b), it is similar to the401(k) although this offers a wide range of providers to manage andadminister the plan. These include investment and insurance companiesfor the employees to choose from. Many employees also prefer this tobe the primary retirement plan. As it an additional platform in theretirement befits (Deshmukh, 2012).

Inconclusion, these two retirement plans are suitable for the companysince they offer a platform for every employee to benefit from. Asthey, both are inclusive, take into consideration, what the employeesearn in their current position and push it to their retirement. Inaddition, the 403(b) is also best if an employee will want to changejobs (Deshmukh, 2012).


Deshmukh,S. (January 01, 2012). Defined Benefit Pension Plan.