Major distinctions between pension and profit-sharing plans

PRIMARY PURPOSE

Provide definitely determinable retirement benefits.

Provide for the deferred sharing of employer profits with employees.

LIFE INSURANCE BENEFITS

May provide only incidental life insurance benefits to employees.

May provide unlimited life insurance coverage if purchased out of accumulated contributions. If purchased out of current contributions, life insurance protection must only be incidental.

HEALTH AND ACCIDENT BENEFITS

May provide post-retirement health and accident benefits if such benefits are incidental.

May provide unlimited health and accident benefits if purchased out of accumulated contributions. If purchased out of current contributions, health and accidental benefits must only be incidental.

DISABILITY BENEFITS

May provide disability benefits.

May provide disability benefits.

LAYOFF BENEFITS

May not provide layoff benefits.

May not provide layoff benefits.

WITHDRAWAL OF FUNDS

Employer contributions may not be withdrawn by employee. Employee contributions may be withdrawn under certain circumstances.

Both employer and employee contributions may be withdrawn. Employer contributions may be withdrawn only after a fixed number of years, attainment of stated age, or upon the occurrence of certain events.

CONTRIBUTIONS AND PROFITS

Employer contributions must not be dependent upon profits.

Employer contributions need not be dependent upon profits.

ALLOCATION OF CONTRIBUTIONS

No requirement for a definite predetermined formula for allocating employer contributions among participants.

A definite predetermined allocation formula is required.

FUNDING

Minimum funding requirements apply.

Minimum funding requirements do not apply.

VESTING

Minimum vesting requirements apply.

Minimum vesting requirements apply.

FORFEITURES

Forfeitures may not be used to provide increased benefits for the remaining participants.

Forfeitures may be used to provide increased benefits for the remaining participants.