Also known as a defined benefit plan. A qualified retirement plan under the Internal Revenue Code (Code) that provides a definite formula under which the amount of a participant's benefit is determined. In defined benefit plans, the employer bears the investment risk because its contributions are actuarially determined each year based on the benefit formula and factors that include:

For more information, see Practice Note, Minimum Funding Standards for Defined Benefit Plans.

Benefits in most defined benefit plans are guaranteed by the Pension Benefit Guaranty Corporation up to a minimum level determined annually. Defined benefit plan sponsors are assessed an annual premium to fund the guaranty.

Given the employer costs associated with defined benefit plans, many employers are freezing or terminating these plans. For more information on freezing defined benefit plans, see Practice Note, Freezing Defined Benefit Plans.