Defined-Benefit Plan

An employer-sponsored retirement plan where employee benefits are sorted out based on a formula using factors such as salary history and duration of employment. Investment risk and portfolio management are entirely under the control of the company. There are also restrictions on when and how you can withdraw these funds without penalties.

Also known as "qualified benefit plan" or "non-qualified benefit plan".

This fund is different from many pension funds where payouts are somewhat dependent on the return of the invested funds. Therefore, employers will need to dip into the companies earnings in the event that the returns from the investments devoted to funding the employee's retirement result in a funding shortfall. The payouts made to retiring employees participating in defined-benefit plans are determined by more personalized factors, like length of employment.

A tax-qualified benefit plan, shares the same characteristics of a defined-benefit plan, but also provides the beneficiary of the plan with added tax incentives. These tax incentives are not realized under non-qualified plans.


Investment dictionary. . 2012.

Look at other dictionaries:

  • defined benefit plan — de·fined benefit plan n: a pension plan in which the amount of benefits paid to an employee after retirement is fixed in advance in accordance with a formula given in the plan Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. defined… …   Law dictionary

  • defined benefit plan — A pension or other employee benefit plan that provides specified amounts of benefits to eligible participants. The specified amounts of benefits are usually determined based upon age, years of service, and/or levels of compensation. American… …   Financial and business terms

  • defined benefit plan — /dɪˌfaɪnd benefɪt plæn/, defined contribution plan /dɪˌfaɪnd ˌkɒntrɪ bju:ʃ(ə)n plæn/ noun US a pension plan set up by corporations for their employees …   Dictionary of banking and finance

  • Defined benefit plan — A pension plan in which the sponsor agrees to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. Related: defined contribution plan …   Financial and business terms

  • defined benefit plan —    A type of occupational pension in which the pension provision is defined (e.g., a fixed monthly amount for each year of service) and guaranteed. The employer has to make up the difference if the scheme fails to perform as well as expected.… …   Business law dictionary

  • Defined Benefit Plan — Altersvorsorgeplan mit festen Leistungen, bei dem die Versorgungsleistungen, die nach einer bestimmten Rentenformel ermittelt werden, typischerweise am Einkommen des Begünstigten während der Beschäftigungsdauer orientiert sind… …   Lexikon der Economics

  • defined contribution plan — n: a pension plan in which the amount of the contributions made by the employer is fixed in advance and earnings are distributed proportionately Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. defined contribution plan …   Law dictionary

  • Defined contribution plan — See also: Defined benefit plan In economics, a defined contribution plan is a type of retirement plan in which the amount of the employer s annual contribution is specified.[1] Individual accounts are set up for participants and benefits are… …   Wikipedia

  • defined contribution plan — A pension or other employee benefit plan that provides a specified contribution amount for the benefit of eligible employees. The participants ultimately receive amounts that depend on both the accumulated contributions and the investment returns …   Financial and business terms

  • Defined contribution plan — A pension plan in which the sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: defined benefit plan …   Financial and business terms

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.