Defined Benefit Plan
Frequently Asked Questions

A defined benefit pension plan is one of the most complex types of retirement plans and allows for little or no flexibility in employer contributions. Its main features are:

• Reasons for Establishment: To reward older employees more favorably than younger employees and to produce a benefit related to retirement needs.
• Contribution: The contribution is the amount necessary to meet funding requirements and is actuarially determined.
• Allocation of Benefit Among Participants: This is often weighted more favorably to older employees.
• Forfeitures: This reduces employer cost.
• Investments: Employers bear the financial risk of favorable or unfavorable investments.
• Distributions: Generally made at normal or early retirement age, although smaller defined benefit plans frequently allow for payment on termination of employment.