| Who funds the program? |
The Plan Sponsor |
The employee, through payroll deduction (although the plan sponsor may also make a "matching" contribution, up to a specified percentage of what the employee contributes). |
| Who makes the investment decisions? |
The Plan Sponsor |
The employee–although certain matching contributions may have to be invested a certain way, such as in employer stock. |
| How is eligibility determined? |
The plan documents specify this: eligibility is usually based on length of service. |
| When are participants 100% vested in benefits? |
Participants are usually 100% vested when they reach a specified age or have completed a certain number of years of service. |
Participants are usually 100% vested in any employer contributions (and their investment earnings) when they have completed a certain number of years of service. Participants are always 100% vested in their own contributions (and their investment earnings). |
| When are participants eligible to collect benefits under the program? |
Usually, the ability to collect benefits is based on age and/or years of service. |
| How are benefits calculated? |
Often, a formula is used to determine how much participants will collect. This may be based on the employee's salary and years of service. |
Benefits are calculated based on how much has been contributed to the participant's plan account and the account's investment earnings. |
| How are benefits paid? |
Usually, in the form of a monthly income. |
It's the participant's choice: He or she may take benefits in the form of a lump sum or in regular periodic payments. |
| Is the benefit amount guaranteed? |
Yes |
No. The account value is based on a number of factors, including amount contributed and investment returns. |
