Plan Types Quick Explanation Chart
Plan Type:
Defined Contribution Plan
Who:
Private & Public Employees
How it Works:
Employee (and sometimes employer) contribute to an individual account; employee chooses investments; final amount depends on contributions and investment growth.
Examples:
401(k), 403(b), 457, Profit Sharing Plans, Employee Stock Ownership Plans, Thrift Plans, Savings Plans.
Joinder or NAI:
Private – NAI
Public – Joinder
Some union plans
require Joinder
Plan Type:
Defined Benefit Plan – Traditional
Who:
Private & Public Employees
How it Works:
Pays a fixed monthly amount based on salary & years of service;
employees sometimes contribute, but employers contribute much more.
Examples:
Pension plans
Joinder or NAI:
Private – NAI
Public – Joinder
Some union plans
require Joinder
Plan Type:
Defined Benefit Plan – Cash Balance
Who:
Private & Public Employees
How it Works:
Pays either a fixed monthly amount based on salary & years of service or can be rolled over as a lump sum into an IRA at retirement; employees and employers contribute; employer manages investments. Can look like a defined contribution plan!
Examples:
Cash balance plans
Joinder or NAI:
Private – NAI
Public – Joinder
Plan Type:
Defined Benefit Plan – Federal Employees
Who:
Federal government employees
How it Works:
Pays a fixed monthly benefit based on salary and year of service.
Examples:
Federal Employee Retirement System (FERS), Civil Service Retirement System (CSRS)
Joinder or NAI:
Plan Type:
Defined Benefit Plan – Military
Who:
Military members
How it Works:
Pays a fixed monthly benefit based on salary, rank, and year of service.
Examples:
Armed Forces Retirement System (military pension)
Joinder or NAI:
Plan Type:
IRA
Who:
Individuals
How it Works:
Personal retirement account funded by an individual or self-employed person
Examples:
Traditional IRA, Roth IRA, SEP IRA, SAR-SEP IRA
Joinder or NAI:
Retirement Benefit Order Drafting Tool
This resource is provided by the California Access to Justice Commission through its State Legal Aid Infrastructure & Innovation Grant.