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.

How long does a defined benefit pension plan last?

In most cases, an employee receives a fixed benefit every month until death, when the payments either stop or are assigned in a reduced amount to the employee’s spouse, depending on the plan. A defined-benefit pension plan requires an employer to make annual contributions to an employee’s retirement account.

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.