Defined Benefit Plan

Defined benefit plan

A pension plan obliging the sponsor to make specified dollar payments to qualifying employees at retirement. The pension obligations are effectively the debt obligation of the plan sponsor. Related: Defined contribution plan

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Defined benefit plan. A defined benefit plan -- popularly known as a pension -- provides a specific benefit for retired employees, either as a lump sum or as income for the rest of their lives. Sometimes the employee's spouse receives the benefit for life as well.

The pension amount usually depends on the employee's age at retirement, final salary, and the number of years on the job. All the details are spelled out in the plan.

However, an employer may end its defined benefit plan or replace this traditional source of retirement income with defined contribution or cash balance plans.

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Defined Benefit Plan

A defined benefit plan is any employer-provided retirement plan that is not a defined contribution plan (defined elsewhere). The most common type of defined benefit plan is a pension plan.