Target Benefit Plan

A target benefit plan is a defined contribution plan that uses a defined benefit type formula to determine an expected benefit payable at retirement. Contributions are then determined based on the amount necessary to provide the target benefit using actuarial assumptions. Once contributions are deposited to the plan, actual earnings on investment determine the benefits that will ultimately be available to participants, as in any other defined contribution plan.

The target benefit plan is used by employers who wish to provide greater benefits to the older, longer service employees without incurring the fixed obligations of a defined benefit plan.