Benefits
Retirement plans may be classified as defined benefit or defined contribution according to how the benefits are determined. A defined benefit plan guarantees a certain payout at retirement, according to a fixed formula which usually depends on the member's salary and the number of years' membership in the plan. A defined contribution plan will provide a payout at retirement that is dependent upon the amount of money contributed and the performance of the investment vehicles utilized.
Some types of retirement plans, such as cash balance plans, combine features of both defined benefit and defined contribution plans. They are often referred to as hybrid plans. Such plan designs have become increasingly popular in the US since the 1990s. Examples include Cash Balance and Pension Equity plans.
Read more about this topic: Pension System
Famous quotes containing the word benefits:
“While greedy good-doers, beneficent beasts of prey,
Swarm over their lives enforcing benefits ...”
—Robert Frost (1874–1963)
“One of the benefits of a college education is, to show the boy its little avail.”
—Ralph Waldo Emerson (1803–1882)
“It is too late in the century for women who have received the benefits of co-education in schools and colleges, and who bear their full share in the world’s work, not to care who make the laws, who expound and who administer them.”
—J. Ellen Foster (1840–1910)