Employer-Sponsored Plan

AAA

DEFINITION of 'Employer-Sponsored Plan'

A type of benefit plan that an employer offers for the benefit of his/her employees at no or a relatively low cost to the employees. If employees participate in the plan, they will benefit from its low-cost method of obtaining discounted services. The benefit to the employer is that initiating these plans usually has some tax-deductible component, and sponsoring benefits is generally a good method of retaining valuable employees.

BREAKING DOWN 'Employer-Sponsored Plan'

Different classes of employer-sponsor plans include retirement saving plans and group healthcare plans.

Employer-sponsored retirement savings plans are useful for the employees because it presents them with an automatic savings device, provides tax breaks and, in some cases, offers free money in terms of employers matching the employee's contributions. Some examples of retirement employer-sponsored savings plans are 401(k)s and the some forms of IRAs.

Group healthcare plans are often seen as a premium for employees due to the rising cost of healthcare services.

RELATED TERMS
  1. Unemployment Compensation Amendment ...

    A law in the United States that allows a terminated employee ...
  2. Allocation Of Plan Assets On Termination

    The procedure that occurs upon the termination of any kind of ...
  3. Allocated Funding Instrument

    A specific type of insurance or annuity contract that pension ...
  4. Salary Reduction Contribution

    A cash- or deferred-contribution arrangement of an employer-sponsored ...
  5. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  6. Individual Retirement Account - ...

    An investing tool used by individuals to earn and earmark funds ...
Related Articles
  1. Retirement

    It’s Never too Early to Think About Retirement

    See why it is never too early to think about retirement, to plan for a healthy financial future and how to start healthy financial habits in your 20s.
  2. Retirement

    7 Tools For Rebuilding Retirement Savings

    If your nest egg has taken a hit, these conservative investments could help get you back on track.
  3. Taxes

    Can You Deduct Your IRA Contributions?

    We help you answer this important question, which is determined by whether you are considered an "active participant".
  4. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  5. Retirement

    How To Cure An Ailing 401(k)

    High-cost, outdated plans can prevent your retirement portfolio from thriving.
  6. Taxes

    Common Questions About Retirement Plans

    We offer some solutions for the individual taxpayer as well as the small business owner.
  7. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  8. Retirement

    403(b) Plan Tutorial

    Learn about the set-up, the contributions to and the distributions from this retirement plan for certain employees of public schools and tax-exempt organizations.
  9. Options & Futures

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  10. Retirement

    Retirement Planning for Entrepreneurs and Small Businesses

    If your business has receiveables, here's a smart way to leverage them to build up your retirement fund fast.
RELATED FAQS
  1. How do you rollover/transfer a 401(k) to another 401(k)?

    When an employee leaves a job due to retirement or termination, the question about what to do with the accumulated balance ... Read Full Answer >>
  2. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
  3. Are Roth 401(k) plans matched by employers?

    Roth 401(k) plans are typically matched by employers at the same rate as they match traditional 401(k) plans. Some employers ... Read Full Answer >>
  4. Is a person an active participant in an employer-sponsored retirement plan if he ...

    Yes. An individual is considered an active participant even if his or her participation in the plan has been for only a ... Read Full Answer >>
  5. Can I contribute to my company-sponsored 401(k) after the company's year-end but ...

    Unlike IRAs, where contributions can be made for the previous year up to April 15 of the current year, salary deferral contributions ... Read Full Answer >>
  6. Can my IRA be garnished for child support?

    Though some states protect IRA savings from garnishment of any kind, most states lift this exemption in cases where the account ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!