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What is a Split-Funded Plan? A Comprehensive Legal Overview
Definition & Meaning
A split-funded plan is a type of retirement arrangement that combines elements of life insurance and investment plans. In this arrangement, contributions are allocated separately for life insurance and for investments that are typically uninsured. Employers primarily fund these contributions, which are often invested in options that employees can choose from a provided list. However, employees may not fully own these contributions until they meet certain service duration requirements with their employer.
Table of content
Legal Use & context
Split-funded plans are often used in the context of employee benefits and retirement planning. They can be relevant in various legal areas, including employment law and tax law. Users may encounter forms or procedures related to these plans, which can be managed with the assistance of legal templates from US Legal Forms, drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, a company may offer a split-funded plan where employees can allocate a portion of their retirement contributions to a life insurance policy and the remaining to a selection of mutual funds. Employees will not fully own the employer's contributions until they have completed five years of service. (Hypothetical example).
Comparison with related terms
Term
Definition
Key Differences
Defined Benefit Plan
A retirement plan that provides a predetermined payout at retirement.
Split-funded plans involve both insurance and investment, while defined benefit plans are solely focused on retirement payouts.
Defined Contribution Plan
A retirement plan where contributions are defined, but the payout depends on investment performance.
Split-funded plans include life insurance, whereas defined contribution plans do not.
Common misunderstandings
What to do if this term applies to you
If you are considering a split-funded plan, review your employer's offerings carefully. Understand how contributions are allocated and the vesting schedule. If you need assistance, explore US Legal Forms for ready-to-use legal templates. For complex situations, consulting a legal professional is advisable.
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