Some defined benefit (DB) plans are sponsored by many employers, not just one. These are called multi-employer plans and they allow employees who frequently switch employers within the same industry to continuously maintain their pension coverage.
For example, individuals working in a construction trade – who frequently move from project to project and employer to employer – might be covered by a single multi-employer pension plan that covers all trades. A portion of their hourly wage is automatically contributed to the plan.
Plans can vary
Some multi-employer plans have relatively straightforward plan formulas and operate much like single-employer DB plans. Others are complex, with elements of both DB and defined contribution plans – these are often called target benefit plans.
Target benefit plans
These plans guarantee a pension, but provide a “target” amount for the benefit. The actual benefit received could be higher or lower than the target, depending on the investment performance of the pension plan.
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