Definition of "Defined Benefit Plan"

A pension plan that specifies the benefits an employee will receive after retirement. Benefits typically are based on length of service and salary, and usually are funded by the employer on behalf of each plan participant.

A retirement plan which provides a fixed or specific benefit to an individual at retirement, also known as final salary scheme. The benefit is often based on a percentage of income multiplied by the years of service. For example on an 1/80th scheme for an employee who has worked 20 years, they would qualify for 20/80ths of their final salary.

A type of retirement plan where the plan specifies the benefits that each employee will receive at retirement. The annual employer contribution is determined by the plan actuary.