Defined-Benefit Plan

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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 ?
With just 13% of credit unions offering their employees defined-benefit plans, is a shift underway that could potentially open up the window for employers to increase participation?
We may as well scrap defined-benefit plans because over time taxpayers will pay the same for public services either way.
Risk may increase if large defined-benefit plans begin to struggle or fail, especially if the Pension Benefit Guaranty Corp.
412 (1)(7)(C)(ii) (and parallel Employee Retirement Income Security Act of 1974 Section 302(d)(7)(C)(ii)) to determine current liability for participants and beneficiaries (other than disabled participants) of defined-benefit plans for plan years beginning in 2007.
Lincoln said the bear market in stocks had created a renewed interest in these defined-benefit plans.
According to the Pension Benefit Guaranty Corporation's (PBGC) annual report for 2000, the number of PBGC insured defined-benefit plans has declined from about 114,000 in 1985 to about 38,000 in 2000.
There is a general assumption that many companies have abandoned traditional defined-benefit plans, but the survey shows that the largest companies clearly haven't," said Allen Reed, committee chairman and president of General Motors Investment Management Corp.
Hybrid pension plans are defined-benefit plans in which employees' benefits are expressed in terms of immediate lump-sum payments instead of as annuities after retirement.
While some benefits specialists predicted defined-benefit plans, including traditional pensions, would be relegated to history's dust bin--along with rotary phones and typewriters--others asserted companies were mistaken in relying on defined-contribution plans, such as 401(k)s, to meet retiree needs.
Congress has been considering a special airline-specific provision that would permit carriers that have frozen their defined-benefit plans to extend the amortization period for full funding to 14 years, and it also includes the ability to use a "reasonable interest rate" while doing so.
RCG's focus includes optimizing retirement savings by minimizing taxes through a complementary combination of qualified defined-contribution and defined-benefit plans, as well as nonqualified deferred compensation plans.
411 (d)-2(b)(2) for determining whether a partial termination has occurred is limited to defined-benefit plans.