Defined Benefit Plan
A defined benefit plan is a formula retirement plan based on the employee's years of service and final average earnings. Separate accounts are not established for each employee. Instead a promise to pay a specific benefit at retirement is made by the plan and the benefit is funded from a retirement investment fund that is established for all participants. An actuary determines the amount that is needed to fund the trust fund to ensure that there is enough money available for all employees at retirement. This type of plan is insured by the federal government through the Pension Benefit Guaranty Corporation. Examples of defined benefits plans are the Retirement Income Plan and the Pilots Minimum Monthly Retirement Income Plan.
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