What is a defined benefit plan?
| What is a defined benefit plan? |
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A defined benefit plan is any retirement plan that is not a defined contribution plan. Under a defined benefit plan, retirement benefits must be definitely determinable, e.g., a proposed monthly pension for life equal to 30% of monthly compensation. A plan formula is geared to retirement benefits; the annual contribution is usually actuarially determined; certain benefits may be insured by the Pension Benefit Guaranty Corporation; early termination of the plan is subject to special rules; and forfeitures reduce the employer's cost of providing retirement benefits. |
