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  • What does “Defined Contribution” mean, and how is it different from a regular pension plan?
    A traditional pension plan is called a “defined benefit” plan. The benefit (the amount of money you get each month) when you retire is defined by a formula. The benefit cannot be reduced under normal circumstances, even if the underlying investments of the plan do very badly. It is always paid in the form of a monthly annuity to the retiree.

    But, this plan is “defined contribution” because the benefit is totally dependent on how much money in contributions goes in, and how the investments of the plan perform. If the investments go way up, you share in the gain proportionately. If the go way down, your balance goes down too. The only thing that is defined is the amount of the contribution made per hour. Defined contribution plans include this plan, 401k plans, money purchase pensions plans, and profit sharing plans. These kinds of plans have a number of optional forms of payment, but most commonly pay the benefit in the form of a lump sum at the point of retirement.

  • Is this the same as a 401k plan?
    Not quite. 401k plans are by far the most common type of plan in the corporate world, but they are fairly uncommon within the union construction trades. 401k plans allow for voluntary contributions at varying amounts, which this plan does not. 401k plans also allow for the participant to direct their own investments which this plan does not. Also, 401k plans frequently have a loan provision, which this plan does not. There are certain differences in tax treatment as well. Contributions to a 401k are subject to Social Security and Medicare tax, but not to ordinary income tax. Contributions to your defined contribution plan are not subject to either Social Security nor Medicare taxes.
  • Can I Borrow from My Account?
    No. This Plan has only recently commenced, and all account balances will be comparatively small, the Board of Trustees has determined that it would be unreasonable to implement any loan program. It is doubtful that the Board of Trustees will even consider adoption of a loan program until the Plan has been in operation for 10 to 15 years.
  • Are Hardship Withdrawals Available Under this Plan?
    No. This Plan is designed as a “money purchase plan” under the provisions of the Internal Revenue Code and no hardship distributions are available under such a tax qualified plan.
  • May I Direct My Individual Account’s Investments?
    No. The Board of Trustees may consider Participant directed investments in the future, but only after the Plan has been in operation for 10 to 15 years.