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Defined Benefit Pension Plan
Definition
A defined benefit pension plan delivers a set amount of cash to the plan participant on a monthly basis for retirement. The amount of paid benefit is often calculated according to a formula such as years of service and salary when retiring. The Pension Benefit Guaranty Corporation (PBGC) a U.S. Government organization watches over the DB Plans in the U.S.
Using the term Defined Benefit Pension Plan :
After 40 years of service at the local factory, Mr. Smith receives his defined benefit pension of $1500 per month which will be adjusted annually for inflation. This pension payment will continue for the rest of his life and will provide for his living expenses.
Pay Special Attention To :
Unfortunately, for a variety of reasons, there are becoming fewer companies in the U.S. that offer DB plans to their employees. Somewhat controversial are the large pensions that are paid to city and municipal workers after 20 or 25 years of service as many tax payers feel that they fund these pensions partially from higher tax increases and the general population does not receive this DB benefit.
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Related terms
Defined Contribution Plan
'Defined Benefit Pension Plan' appears in the definitions of these other terms:
Defined Contribution Plan Social Security
