Will one plan be enough or should there be a retirement package?

Many pension experts feel that an actuarially funded pension plan (i.e., a defined benefit plan) should be the basic or primary plan. A profit-sharing plan or some other form of incentive compensation can then be added on top. The pension plan will be principally concerned with providing an adequate retirement income. The profit-sharing plan may, by pursuing a more aggressive investment policy, hold out the hope of eventual retirement benefits that will be more than adequate. Those individuals who participate in the investment of a plan's assets should note, however, that they may be held accountable for the improper handling of plan assets (including investments) under the strict fiduciary standards of ERISA [see What is ERISA and how does it affect retirement plans? at ¶47,110 and Do plan managers have special responsibilities? at ¶47,810 ].

The question of any added plan costs for a defined benefit pension plan (as the basic plan) to meet the funding and plan termination insurance provisions of ERISA also must be considered.

Because of recent changes in the workforce and rising costs of benefits, employers might want to consider adopting a cafeteria plan. These plans solve the problem that arises when one member of a two-income family is covered under an employer plan that provides benefits not only for the employee but also for the spouse and dependents, leaving the other member with no independent need for such benefits. Under a cafeteria plan, participants may choose among two or more benefits that may be nontaxable benefits, cash, property, or other taxable benefits.