A defined benefit plan can be said to be a retirement plan that an employer sponsors. This is a retirement benefit plan in which employee’s retirement benefits predetermined by the compensation, years of service and age in a company. An example of such plan may be upon retirement an employee may decide to receive 2% of his or her average salary for the last 5 years of employment for each year of service with the employer. The said promised benefits may be in dollar amount such as $200 per month at retirement. They are also known as pension plans or qualified benefits plans. Most times the employees prefer the defined benefits plans. And in this plan, there are restrictions on how and when an employee can withdraw his funds without penalties.
