Defined benefit plans offer guaranteed salary-like payments and were historically offered in order to entice workers to stay with one company for years or even decades. Thanks to the rise of lower-cost defined contribution plans, defined benefit plans are much less prevalent today.
What are defined-benefit pension plans?
Defined-benefit pension plans are qualified retirement plans that provide fixed and pre-established benefits to plan participants when they retire.
How long does a defined benefit pension plan last?
In most cases, an employee receives a fixed benefit every month until death, when the payments either stop or are assigned in a reduced amount to the employee’s spouse, depending on the plan. A defined-benefit pension plan requires an employer to make annual contributions to an employee’s retirement account.
