·
Defined
Benefit |
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 $100 per
month at retirement.
Or, more commonly,
it may calculate
a benefit through
a plan formula
that considers
such factors
as salary and
service —
for example,
1 percent of
average salary
for the last
5 years of employment
for every year
of service with
an employer.
The benefits
in most traditional
defined benefit
plans are protected,
within certain
limitations,
by federal insurance
provided through
the Pension
Benefit Guaranty
Corporation
(PBGC).
|
|
|