When I start talking how great pension plans are for small businesses, I generally hear one of two things: “I thought pension plans were dead?”, or “you mean a 401(k), right?”
No, pension plans aren’t dead. And no, I don’t mean a 401(k), although there could be a 401(k) in there as well for employees to contribute.
A qualified pension plan, officially, is an employer-sponsored plan governed by ERISA (the Employee Retirement Income Security Act) and the Internal Revenue Code. There are pages and pages of rules that these plans have to follow, which aren’t very understandable. So let’s break it down into two pieces – the basics of pension plans, and a few case studies of businesses that decided to sponsor a plan.