A defined benefit plan is a type of employee sponsored retirement plan where the amount an employee will receive is fixed. When retired, the employee will receive the same periodic amount of money agreed upon with the employer unlike plans that vary based on the amount the employee contributes. Like with other pension plans, the employer must follow the guidelines set out by ERISA, and the government will back the pensions should the employer become insolvent. For more information on pension plans, click here.
[Last updated in July of 2021 by the Wex Definitions Team]