A defined benefit plan is a form of retirement plan that is sponsored by the employer. Employee benefits are calculated through a specific formula that takes into account additional factors like salary history and length of employment.
The investments of this retirement plan are the responsibility of the company. Many organizations choose to hire an investment manager to be in charge of these funds. Employees usually can’t withdraw from a defined-benefit plan but instead must wait until they are eligible, often at the time of retirement. Unlike many other retirement funds, the payout does not depend on investment returns but instead on the formula used.