Defined Benefit Plans
Chapters in this video
- 0:00 Who loses money when the market crashes: the employer, not the employee
- 1:11 How Carla's payout formula works and the 2026 $290,000 cap
- 2:06 Why actuarially determined means no fixed contribution amount
- 2:38 Why employees cannot direct investments in a defined benefit plan
- 3:03 PBGC coverage limits: private defined benefit plans only
- 3:59 How marriage triggers the QJSA default under ERISA
- 5:13 The strict two-step spousal consent to waive the QJSA
- 5:35 Defined benefit versus defined contribution: four critical differences
- 6:09 Rapid-fire exam recap of the five biggest takeaways
What this video covers
- Why the employer bears 100% of the investment risk in a defined benefit plan, and why the employee's payout is immune to market crashes
- What "actuarially determined" employer contributions really means: no fixed dollar amount, but a moving target set by an actuary each year
- The 2026 maximum annual benefit of $290,000 or 100% of the highest three consecutive years of compensation, whichever is less
- Why plan trustees manage the portfolio and employees have zero investment direction authority in a defined benefit plan
- What the Pension Benefit Guaranty Corporation (PBGC) insures and excludes: private-sector defined benefit plans only, never 401(k), 403(b), government, or church plans
- How ERISA defaults a married participant's payout to the qualified joint and survivor annuity (QJSA), and the strict written, witnessed spousal consent required to waive it
- The four-way showdown between defined benefit and defined contribution plans on investment risk, individual accounts, PBGC coverage, and funding method
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