Defined Benefit Plan For Small Business

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In contrast, with a DC plan, the employer provides the employee with a fixed quantity of money; the employee uses these funds to purchase a health insurance policy of his or her own choice.

World War II-era policies led to today’s DB dominance.

With DB, the employer is an active participant, and the employee is mostly passive.

With DB, the employer chooses and administers the insurance plan.

Wartime and postwar price controls made it unlawful to give raises to employees.

Employers discovered that they could circumvent these controls by providing insurance rather than additional money.

Later tax and labor regulations cemented this scheme into place.

Employers have little bargaining power in the small-group market and usually have a narrow range of plans from which to choose.

DC health insurance could benefit employers significantly.

DC can free employers from a heavy load of administrative time.


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