Defined Benefit Plans

Traditional Pension Plan

• Lifetime monthly benefit at retirement
• Annual cost based on actuarial projections
• Past-service credits allowed
• Benefits may be off-set by social security benefits
• Favorable to older employees and long service employees
• Nondiscrimination rules generally apply to private sector employees
• Benefits based on salary and years of service
• Forfeitures reduce employer costs
• Limited benefit distribution rules
• Benefits insured by PBGC (governmental agency), if employer is a private entity
• Assets held in tax exempt trust and invested by Trustees in stocks, bonds, and short-term cash management
• Employer bears investment risk

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