Defined-benefit definitions
| Word backwards | tifeneb-denifed |
|---|---|
| Part of speech | The part of speech of the word "defined-benefit" is an adjective. |
| Syllabic division | de-fined-ben-e-fit |
| Plural | The plural of "defined-benefit" is "defined-benefit plans" or "defined-benefit pensions." |
| Total letters | 14 |
| Vogais (2) | e,i |
| Consonants (5) | d,f,n,b,t |
Defined-benefit plans are employer-sponsored retirement plans that provide a specific, predetermined monthly benefit to employees during retirement. These plans are calculated based on factors such as salary history and years of service with the employer.
Key Features
One of the key features of a defined-benefit plan is that the employer bears the investment risk and is responsible for ensuring that there are enough funds to pay the promised benefits to retirees. This sets defined-benefit plans apart from defined-contribution plans, where the employee bears the investment risk.
Guaranteed Income
With a defined-benefit plan, retirees receive a guaranteed income for life, which provides financial security and peace of mind. This contrasts with defined-contribution plans, where retirees must manage their retirement savings and face the risk of outliving their assets.
Employer Contributions
Employers make contributions to the defined-benefit plan on behalf of employees, typically based on a formula that considers factors such as salary and years of service. These contributions are invested by the plan's trustees to generate returns and fund future benefit payments.
Employee Retirement
When employees retire, they receive a monthly benefit from the defined-benefit plan based on the formula established by the plan. This benefit is typically calculated using a combination of the employee's salary history and years of service with the employer.
Actuarial Assumptions
The funding requirements of a defined-benefit plan are determined by actuarial assumptions, such as investment returns, inflation rates, and life expectancies. These assumptions help ensure that the plan has enough assets to cover future benefit payments.
Regulatory Requirements
Defined-benefit plans are subject to regulatory requirements aimed at protecting the interests of plan participants and ensuring the financial stability of the plan. Employers must comply with these regulations to maintain the tax-qualified status of the plan.
In conclusion, defined-benefit plans offer employees a secure retirement income based on a predetermined formula and provide financial stability during retirement. Employers play a crucial role in funding and managing these plans to fulfill their promise of retirement security to their employees.
Defined-benefit Examples
- John's retirement plan offers a defined-benefit pension, guaranteeing him a set amount of income after he retires.
- Many government employees enjoy the security of a defined-benefit plan, knowing that they will receive a steady stream of income in retirement.
- Defined-benefit plans are becoming less common in the private sector, as companies shift towards defined-contribution plans.
- The defined-benefit plan provided by the company includes healthcare benefits for retirees.
- Workers with a defined-benefit plan don't have to worry about market fluctuations affecting their retirement income.
- Some argue that defined-benefit plans are more reliable than defined-contribution plans, as they provide a guaranteed income stream.
- Public sector employees often have access to defined-benefit plans, which are funded by taxpayers.
- Employees should carefully review the specifics of their defined-benefit plan to understand how their retirement benefits will be calculated.
- Companies may offer a mix of defined-benefit and defined-contribution plans to provide employees with retirement options.
- The switch from a defined-benefit plan to a defined-contribution plan can have significant implications for employees' retirement savings.