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 ?
For the right person, a qualified defined-benefit plan that uses life insurance as a funding tool can be very effective in helping individuals reach their retirement goals.
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.
A REPORT FROM the Employee Benefit Research Institute found that having a defined-benefit plan at age 65 reduces the risk of retiring with inadequate income for boomers and Generation X workers by almost 12 percentage points.
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.
companies, offers this advice for those considering a move to cash balance: "If you have plan that's not well-funded, the defined-benefit plan would need to be up to snuff from a funding perspective.
The Colorado Education Association (CEA) is fighting all of them, along with a proposed referendum that would put new state employees into a "defined-contribution" plan instead of the existing defined-benefit plan, which guarantees a set retirement income based on years of service and salary.
Arnold Schwarzenegger's proposal on public-employee pensions would make it unconstitutional for any city government to offer a defined-benefit plan to its employees.
A cash-balance plan is a hybrid pension plan with features of both a defined-benefit plan and a defined-contribution plan.
Allowable deductions are also increased for employers that maintain both a defined-contribution and defined-benefit plan.
411 (b) (1) (G), a defined-benefit plan is not qualified if it reduces a participant's accrued benefit on account of any increase in his or her age or service.
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'.