Defined Benefit Pension Plan vs. Target Benefit Plan

Defined benefit pension plans

Target benefit pension plans

Guarantees a set amount of benefits for life after retirement based on earnings and years of service.

Aims for a target amount of benefits, which can be reduced if the plan cannot fully fund those benefits.

Employers are responsible for covering funding deficits in the pension plans.

Employees assume all the risks and suffer the full impact of plan deficits.

Earned benefits are legally protected.

There are no legal requirements to fund target benefits.

 

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December 19, 2016
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