401k and Pension Plans-What you should know about your retirement plans

The Department of Labor put together an extensive guide on retirement plans. Most employer plans will fall into one of two categories:

1. Defined-contribution (DC) plans are where employees receive contributions to their account which can then be invested in stocks, bonds, or cash. 401k, 403b, and RSA-1 accounts are examples of (DC) plans. These plans are very similar to Individual Retirement Accounts (IRA’s)

2. Defined-benefit plans are where the employer saves on an employees behalf and guarantees benefit based on income and/or years of service or guarantees a contribution and investment return. The latter being known as cash balance plans. At retirement IRA’s can hold the lump-sum value from pension plans.