What is a defined benefit pension plan?

“A defined benefit plan is a type of pension plan that is fully funded by employer contributions and is a promise to pay benefits at retirement based on various factors such as age, salary and years of service with the company,” says Valerie McClendon, a financial advisor at Boston Wealth Strategies.

What is a defined benefit (DB) plan?

Understanding defined benefit (DB) plans, commonly referred to as a pension, can help you better plan your retirement. A pension, a defined benefit plan: Both terms refer to a unique program, less used now than in the past, that offers employees a retirement income stream after they work a certain number of years.

What are the different types of defined benefit plans?

There are two main types of defined benefit plans: pensions and cash balance plans. People typically understand a defined benefit plan to be a pension: A guaranteed monthly benefit starting at retirement, based on a formula that factors in how long a worker remained with a company and how much they earned.