💰 Retirement Plan Basics
Retirement plans help employees save for the future while giving employers powerful tools for attraction, retention, and tax efficiency.
📘 What This Covers
Retirement plans come in many forms, each with unique rules, tax treatment, and fiduciary responsibilities. This foundation introduces the major plan types and the ecosystem of service providers that support them.
📦 Major Retirement Plan Types
- 401(k) — The most common employer-sponsored plan; employee deferrals plus employer match.
- 403(b) — For nonprofits, schools, and certain public institutions.
- Defined benefit (pension) plans — Employer-funded lifetime income formulas.
- Cash balance plans — Hybrid DB/DC structure with pay credits and interest credits.
🏛️ Fiduciary Responsibilities
ERISA imposes strict fiduciary duties on plan sponsors and committees:
- Acting solely in participants’ best interests
- Prudent selection and monitoring of investments
- Fee reasonableness
- Maintaining proper plan documents
🏢 Key Service Providers
Retirement plans rely on a coordinated ecosystem:
- Recordkeepers — Track balances, transactions, and participant data.
- Third-party administrators (TPAs) — Handle compliance testing and plan operations.
- Investment advisors — Guide fund selection and monitoring.
- Custodians — Hold plan assets.
💵 Contributions and Limits
Retirement plans have annual IRS limits for:
- Employee deferrals
- Employer match and profit-sharing
- Catch-up contributions for participants age 50+
