Defined benefit plan

• Refers to a retirement plan that has a quantified amount to be disbursed or paid out each year. Depending on the plan, there may be maximum and minimum benefit dollar amounts. Often, these benefits depend on years of service, age that benefits start, and possible other income constraints. Some popular plans are pensions or Social Security. Here, benefits are defined in advance but there may not be inflation or cost of living adjustments. Also, better than average investment performance does not increase the level of plan benefits. Compare to Defined Contribution 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