Defined Benefit Plans

A Defined Benefit Plan is an employer-sponsored retirement plan for which retirement benefits are based on a formula involving typical retirement age, years of service and compensation. Under a Defined Benefit Plan, employees earn benefits that are payable beginning at retirement age and continuing for the rest of the employee’s life. Investment risk and portfolio management are entirely under the control of the company.

Small and even one-employee companies can use Defined Benefit Plans to their advantage. A Defined Benefit Plan frequently allows for many times more in tax-deductible contributions than any other type of plan.

In addition to employer contributions, participants may make non-deductible voluntary contributions to their plan. Even though the contributions are not deductible, the earnings on them are tax-free until distributed in later years. The limits of these contributions are 10% each year, and are subject to rules and limits.

Nonqualified Plans

Nonqualified plans, often referred to as deferred compensation plans, are different than tax-qualified plans as they provide a way to shift compensation from now to some point in the future, usually during retirement

The regulations for nonqualified plans are much less restrictive than those governing qualified plans. And nondiscrimination rules do not come into play. The benefit amount can far exceed what qualified plans can provide, and this plan can be offered to as few or as many employees as you wish.

You can choose the plan or plans that work best for your company:

The main drawback of nonqualified plans for businesses is that they don’t have the same tax benefits associated with qualified plans.

NOTE: Investment products offered through Enterprise Bank & Trust are:

• NOT FDIC insured
• NOT guaranteed by Enterprise Bank & Trust or any of its affiliates
• Subject to investment risk and may lose value