Although defined benefit plans such as pensions have formed the backbone of the U.S. employer-sponsored retirement plan system for many decades, they have been on the decline in recent years as more and more employers shift to defined contribution plans. Here are some attributes of a defined benefits plan:
- Historically prevalent, primarily employer-funded
- Benefit at retirement is guaranteed
- Employer bears risk
- Example: Pension plans
The plans discussed here are defined contribution plans, the most common types of plans in the small business market.