Once the purpose of the plan and funding are determined, the next issue is the general plan design. The pros and cons of each design should be weighed and a decision made consistent with the purposes and goals of the retirement plan. Some design issues for you and your client or advisor to consider follow.

Should the plan benefits be based on salary only, or should the age of the participant be considered?
If salary is chosen as the basis for plan contributions an older employee with long service would retire with a much lower benefit than a younger employee with fewer years of service. This result seems to be just the opposite of what logic dictates.

Should the target plan be a specific level of income replacement at retirement?
This decision in part would determine the type of plan to be used. A defined contribution plan would provide a higher percentage of income replacement to younger rather than older employees because they have more time to accumulate money in their accounts. A defined benefit plan is perfectly suited to provide a specific level of income replacement to all employees.

Should the plan allow for lump-sum pay outs at termination or retirement or only monthly income payments at retirement?
Monthly income payments are common in the larger plans (several hundred or more participants) because the focus is truly on retirement income.

Should there be retirement age options other than age 65?
Some plans provide for retirement after a specified number of years of service to reward long-service employees.

Should the plan have a loan provision?
This provision is common to smaller plans offering benefits in addition to retirement income and can be as liberal or as your company decides. The loan may be available for any purpose or for only specific limited purposes.