Employer-Sponsored Retirement Plan

Written By August Jepsen

An employer-sponsored retirement plan is a benefit program set up by a company that enables employees to save for retirement through payroll deductions and often provides employer matching contributions or profit sharing.​

Types of Employer-Sponsored Retirement Plans

  • Defined benefit plans: Guarantee a specified amount in retirement, usually based on salary and years of service, with the employer bearing the investment risk (e.g., pensions).​

  • Defined contribution plans: Specify the amount employees and/or employers contribute, with final benefits depending on investment performance and employee contributions; common examples include 401(k), 403(b), 457(b), SIMPLE IRA, SEP IRA, ESOP, profit-sharing, and cash balance plans.​

These plans offer tax advantages and may include additional incentives such as employer matching or vesting schedules. Defined contribution plans are more common now, and employees generally choose investments within the plan and bear investment risk.

August Jepsen
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