Defined benefit pension plan

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A defined benefit pension plan promises a specified monthly benefit at retirement.

The most common type of monthly benefit is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns. It is 'defined' in the sense that the formula for computing the employer's contribution is known in advance.

In the United States, 26 U.S.C. § 414(j) specifies a defined benefit plan to be any pension plan that is not a defined contribution plan where a defined contribution plan is any plan with individual accounts.

A traditional pension plan that defines a benefit for an employee upon that employee's retirement is a defined benefit plan.

The benefits in most traditional defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC).

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