A Defined Benefit Plan
promises a specified monthly benefit at retirement. The plan may state this
promised benefit as an exact dollar amount, such as $1,000 per month at
retirement. Or, more commonly, it may calculate its benefit through a plan
formula that considers such factors as salary and service. Employer
contributions are actuarially determined, and the benefits in most traditional
defined benefit plans are protected, within certain limitations, by federal
insurance provided by the Pension Benefit Guaranty Corporation (PBGC). |