Divorce Dex.com: Defined Benefit Plan

Definition Defined Benefit Plan - generally a retirement annuity, whereby employers set aside benefits for employees, with the employee-spouse entitled to share in the benefits after a vesting period, and payments made a predetermined retirement date for the life of the employee.

Application in Divorce This is the old-fashioned company pension and it is vanishing from the American corporate world. At one time, the company pension, Social Security and private savings stood like the three legs on a stool that many Americans imagined would give them a reasonable measure of security in what they once called the "golden years."

In these plans, the employee makes no contribution to his pension and there is no separate account in his or her name. After a period of employment, he or she is vested in the plan and upon retirement he or she is paid a fixed sum for the remainder of his or her life (and the life of a surviving spouse, if such benefits are elected).

These plans create large legacy costs for older companies. For this reason, the company pension now goes the way of trolley cars and afternoon newspapers.

A defined benefit plan is marital property.

See Defined Contribution Plan.

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What is a defined benefit plan?

A defined benefit plan provides a retiree with a monthly payment beginning at retirement for the remainder of the retiree’s lifetime. The benefit that is payable upon retirement is calculated using a formula. Such formula is defined within the context of the Plan. A defined benefit plan is the type of plan most commonly thought of when talking about pensions. It is paid monthly for the lifetime of the retiree starting at retirement.

Contributed on 9/19/2007 by: Pension Appraisers, Inc.Allentown, PA[Total Submissions: 12]

Category: Retirement Accounts (Applicable in All States)

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