Target Benefit Plan Overview

In a Target Benefit Plan, employer contributions are calculated to provide hypothetical projected benefits at retirement based on actuarial assumptions. The actual retirement benefit is based upon the participant's account balance at retirement.

Similar to a Defined Benefit Plan, the annual contribution is calculated as the amount necessary to fund for a projected benefit at retirement, and similar to a money purchase plan, contributions are allocated to individual participant accounts. The actual retirement benefit is based upon the participants account balance at retirement age.
The investment experience (gains/losses) will not result in any increase or decrease in employer contributions. Instead, such experience will increase or decrease the benefit payable to the participant. The employer's deduction is limited to 25% of eligible compensation. The maximum annual addition to an individual participant's account is 100% of compensation or $42,000 in 2005, whichever is less.

A Target Benefit Plan provides proportionately greater employer contributions to employees who are older and highly compensated. The employer enjoys the advantages of defined benefit funding formula without the administrative complications of a defined benefit plan. Target Benefit Plans utilize account balances to record participant benefits, permitting higher retirement benefits from better than expected investment performance.