Defined Benefit Plan

In a defined benefit plan, the benefits that employees will receive at retirement are determined by a formula based on such factors as employee length of service and compensation. Contributions are computed using actuarial estimates of future benefit payments based on factors such as the employee's compensation levels at or near retirement, the number of years of employee service, the number of years until the employee retires, the number of years the plan expects to pay benefits after an employee retires, etc. It is the sponsoring organization's responsibility to ensure that contributions to the plan are sufficient to pay benefits as they come due.