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 ?
Redefining pension benefits for new teachers using a cash-balance approach serves the practical needs of existing defined-benefit pension plans.
About half of the legislation deals with traditional defined-benefit pension plans, but other parts discuss the more popular defined-contribution plans and IRAs, which affect more taxpayers than do the traditional pension rules.
1 million American workers and retirees in 30,330 private single-employer and multi-employer defined-benefit pension plans.
Belt, spoke a week after Senate leaders broke an impasse over the legislation, allowing the House and Senate to begin talks on how to safeguard the promised benefits of millions of Americans with defined-benefit pension plans.
As of December 2005, the company had held seven seminars throughout the country--each attended by hundreds of independent advisers--to help them understand that the retirement needs of baby boomers will be different due to their expected longevity and the decline of defined-benefit pension plans.
Hawaii's Aloha Airlines has been granted court approval to terminate its employees' defined-benefit pension plans.
Earlier versions of the survey have collected data separately on traditional defined-benefit pension plans and account-based plans, such as 401 (k) accounts.
One of the most important issues facing the pension world today involves companies replacing their traditional, defined-benefit pension plans with cash-balance plans.
Assumed discount rates for defined-benefit pension plans declined sharply in 1993, apparently in response to (1) an across-the-board interest rate decline and (2) a statement by Securities and Exchange Commission Chief Accountant Walter Schuetze that public companies should use discount rates that reflect current market rates.
Plus a look at how defined-benefit pension plans are under attack; a Q&A with the chief risk and compliance officer at $1.
Cash-balance plans are defined-benefit pension plans that express participants' retirement benefits in the form of nominal "accounts" instead of as annuities, like more traditional pension plans.
By the year 2000, he added, there will be a shift away from defined-benefit pension plans that promise to pay a specified amount to each retiree in favor of defined-contribution plans, which he termed less "paternalistic" because employees can choose how much income to set aside into their retirement accounts.