Defined Benefit Plans

Question 1

characteristics of top heavy DB plans

Answer 1

• > 60% of total accrued benefits are benefiting key employees;
• must fund 2% x years of service x compensation factor;
• vest at least at 2-6 graduated schedule or 3 yr cliff

Question 2

difference between top heavy DB vs DC plan

Answer 2

• same 60%+ of a/c balances benefit key employees
• DB=2%xyrsxcomp factor; DC= 3% to all eligible employees (or match what is contributed to key emp’s)
• same vesting @ 2-6 graduated or 3 yr cliff