While defined benefit plans often have mandatory employee contributions, their contributions provide workers with a secure retirement. Death and disability insurance, which are typically provided under defined benefit plans, provide income security for participants. Defined benefit plans provisions can allow for portability with shorter vesting periods, reciprocity agreements, and buybacks for prior or related service. Defined benefit plans may also allow employee borrowing. Defined Benefit Pension Plans are Better for Employers Defined benefit plans allow employers to set and to guarantee income-replacement goals for their workforce.
Employers benefit from the favorable investment performance of pooled pension fund assets.
The wide range of investment options open to large funds makes it possible for employers to provide adequate benefits to employees while limiting contributions. Studies of some pension funds show that investment earnings have exceeded both actuarial assumptions and the interest credited to employee accounts over the last two decades. Defined contribution plans are not more efficient at providing benefits equal to defined benefit plans. Comparable benefits often require comparable employer contributions. Plus, features such as employee loans, investment options, education and information obligations, and periodic statements can make defined contribution plans expensive to administer.