defined benefit retirement plan

A Defined Benefit Retirement Plan is a pension plan for employees that provides income after retirement on the basis of a set formula. In contrast, most other retirement funds have been based on making a return on an investment, where money is put inwards with hopes of optimal return. The Defined Benefit Retirement Plan takes into account several factors related to employment, such as their salary and the term of employment. Although the company does make investments, the burden is completely theirs; they maintain the responsibility to deliver the formula calculated amount in the end. Therefore, if a bad investment is made by the employer, they may even need to take out of their own profits to ensure all plans are fulfilled. Because of the risks, defined benefit plans are becoming less of a common choice by employers. As of now, these plans are used mostly by government employers.

Fast Facts

Full time employees using these plans (at mid to large businesses)in the United States had fallen from 59 to 33 percent between 1991 to 2003

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