Defined-Benefit 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.
References in periodicals archive ?
Some employers seem to have concluded that the administrative hassles of sponsoring a pension plan are so large that the only way they can win is by not offering a defined-benefit plan at all," he said.
Defined-benefit plan assets were allocated 62% to equity, 28% to fixed income and 10% to other investments.
With a defined-benefit plan, the employer contributes and deducts an amount that, together with accumulated contributions and expected income, will produce the defined retirement benefit.
company with some operations in country C did not exclude nonresident aliens (NRAs) from its qualified defined-benefit plan.
Beginning next January 1, it will freeze accrued pension benefits for some 42,000 managers under the existing defined-benefit plan and begin a shift to defined-contribution (DC) plans, such as 401(k)s.
411(d)-2(b)(1) provides that whether or not a partial termination of a defined-contribution or defined-benefit plan has occurred depends on the facts and circumstances.
Allowable deductions are also increased for employers that maintain both a defined-contribution and defined-benefit plan.
The measure is certain to face stiff resistance from members of the state's powerful public employee unions, who feel the current pension system, called a defined-benefit plan, provides better benefits than Richman's defined-contribution plan.
Boston, has launched a full-service defined-benefit plan for older small-business owners who haven't planned for their own retirements or their employees'.
In 1985, nearly nine out of 10 Fortune 100 companies offered a traditional defined-benefit plan.
The defined-benefit plan economics are shifting and will afford employers the opportunity for lower funding costs, thereby positioning [them] to once again become one of the most cost-effective methods of providing adequate retirement income," Rausser said.
But a defined-benefit plan is more efficient than most people's 401(k)s because it takes advantage of economies of scale that permit professional management.