Defined Benefit Plan Contribution Limits 2024

Defined benefit plans are a type of retirement plan in which the employer promises to pay a specified benefit to the employee at retirement. The amount of the benefit is based on a formula that takes into account the employee's salary, years of service, and other factors.

Defined benefit plans are different from defined contribution plans, such as 401(k) plans, in that the employer bears the investment risk. With a defined contribution plan, the employee chooses how to invest the money in the plan, and the amount of the benefit at retirement depends on the performance of the investments.

Contribution Limits for Defined Benefit Plans

The contribution limits for defined benefit plans are set by the Internal Revenue Service (IRS). The limits are based on the employee's age and years of service.

For 2024, the annual contribution limit for a defined benefit plan is $265,000. This limit is up from $260,000 in 2023.

In addition to the annual contribution limit, there is also a lifetime contribution limit for defined benefit plans. The lifetime contribution limit is $1.5 million. This limit is not indexed for inflation, so it has not changed since it was first set in 1986.

Benefits of Defined Benefit Plans

Defined benefit plans offer a number of benefits to both employers and employees. For employers, defined benefit plans can help to attract and retain employees, and they can also provide tax savings. For employees, defined benefit plans offer a guaranteed retirement income stream, and they can help to reduce the risk of outliving their savings.

Drawbacks of Defined Benefit Plans

Defined benefit plans also have some drawbacks. For employers, defined benefit plans can be expensive to fund, and they can also be complex to administer. For employees, defined benefit plans can be less flexible than defined contribution plans, and they may not provide as much investment growth potential.

Is a Defined Benefit Plan Right for You?

Whether or not a defined benefit plan is right for you depends on your individual circumstances. If you are an employee who is looking for a guaranteed retirement income stream, and you are not concerned about investment growth potential, then a defined benefit plan may be a good option for you. However, if you are an employee who is looking for a more flexible retirement plan, or if you are concerned about investment growth potential, then a defined contribution plan may be a better option for you.

Frequently Asked Questions About Defined Benefit Plan Contribution Limits

Q: What is the annual contribution limit for a defined benefit plan for 2024?
A: The annual contribution limit for a defined benefit plan for 2024 is $265,000.

Q: What is the lifetime contribution limit for a defined benefit plan?
A: The lifetime contribution limit for a defined benefit plan is $1.5 million.

Q: Are defined benefit plans a good option for employees?
A: Defined benefit plans can offer a number of benefits to employees, including a guaranteed retirement income stream and tax savings. However, defined benefit plans can also be less flexible than defined contribution plans, and they may not provide as much investment growth potential.

Conclusion

Defined benefit plans are a type of retirement plan that can offer a number of benefits to both employers and employees. However, it is important to weigh the benefits and drawbacks of defined benefit plans before deciding if one is right for you.

Tables

Table 1: Defined Benefit Plan Contribution Limits

Table 2: Benefits of Defined Benefit Plans

Table 3: Drawbacks of Defined Benefit Plans

Table 4: Is a Defined Benefit Plan Right for You?