Defined Benefit Plans

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).