Defined Benefit Plan

Definition - What does Defined Benefit Plan mean?

A defined benefit plan is a method for employees to give out benefits to employees. Under defined benefit plans, the benefits an employee receives depends on factors like their salary history and length of employment. In the context of insurance, employees often offer employees health care in a defined benefit manner. Also, defined benefit plans can be used in conjunction with life insurance to plan for retirement.

Insuranceopedia explains Defined Benefit Plan

Defined benefit plans are an alternative to defined contribution plans. With defined contribution plans, employers allow their employees to receive benefits based on a contribution made by the company at certain periods. In other words, defined benefit plans allow employees to have certain benefits, whereas defined contributions allow employees to have certain contributions to spend on their own benefits themselves. Both types of plans aim to supplement the incentive to work for the company by offering the employee more than just a salary.

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