Defined Benefit Plan

A form of retirement plan under which the counterparty, often your employer, promises to pay you a stated amount of money, sometimes adjusted for inflation, on a periodic basis usually from when you attain a certain age until you die. The name “defined benefit” comes from the feature that the benefit or amount you receive is determined in advance by some formula. The amount of contributions, generally made by your employer though often with employee contributions if you work for a public entity, varies depending on the investment returns of the retirement plan. Defined benefit plans are often called pension plans in the US.