Defined benefit plan


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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

Defined-Benefit Plan

A retirement plan in which the retiree receives a set amount in benefits each month once he/she begins receiving benefits. That is, the benefits the retiree receives are not dependent on the performance of the portfolio in which the contributions are invested; the company sponsoring the plan assumes the entire liability. The amount of the benefit is determined according to some formula that usually accounts for the amount of contributions and the length of time the retiree worked for the company. The disadvantage to a defined-benefit plan, from the company's perspective, is the possibility that the investment portfolio will not perform as expected, forcing the company to make payments from its earnings, or, worse, to borrow money. See also: Defined-contribution plan.

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.

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.
References in periodicals archive ?
The benefit of this is twofold: The owner gets a substantially higher initial tax deduction and the defined benefit plan now has some extra cushion to allow the owner to reduce future contributions should the business suffer a slowdown.
For example, the chart shows that 39 percent of all workers in the broad financial activities industry are covered by a defined benefit plan.
The 412(e)(3) defined benefit plan receives $80,000, and the 401(k) profit sharing plan receives $20,000.
If it is appropriate for your situation, a defined benefit plan can help you reduce taxes, strengthen your business, and secure your financial future.
Service's ruling: The IRS concluded that the demutualization assets could be treated as defined benefit plan assets for Sec.
Public employers who have moved from a defined benefit plan to a defined contribution plan have found that the new program can offer better cost control, greater flexibility and increased employee satisfaction in their retirement program.
Governmental employers are using a variety of alternative approaches for making their defined benefit plan obligations more manageable and/or the plan design more responsive to employee needs.
According to Shapiro, the key advantages of defined benefit plans for small business owners are:
Retirement plans that we think of as traditional pensions are called defined benefit plans.
New TowerGroup Research Explores Pension Protection Act's Impact on Defined Contribution and Defined Benefit Plans
The Treasury and IRS issued final regulations regarding minimum distribution rules for defined benefit plans and annuity products purchased with account balances in other types of qualified retirement plans and IRAs.
And as employees seek to hold their employers accountable for past pension plan losses during the market slide, the rules could also provide more information to fuel fiduciary lawsuits--one more blow to already beleaguered defined benefit plans.

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