Pension Plan Design for Smaller Employers
Smaller employers have the same need to include a pension plan in the total compensation package of their employees as larger employers – attraction, retention, engagement, obligations to long service employees, etc. However, many smaller employers must also be focused on cost stability, risk management and administrative simplicity.
As a result, a capital accumulation plan (“CAP”) has been the vehicle of choice for smaller employers. CAP plans can come in two variants – a defined contribution (“DC”) pension plan or a group registered retirement savings plan. However, a CAP plan is not an effective way to provide retirement benefits. This newsletter discusses how a much more effective solution, a defined benefit (“DB”) pension plan, could work for a smaller employer.