Employees with fewer years of service and those with longer-term employment are treated equally. Here the same percentage of compensation is allocated to all accounts although a plan may be designed to favor higher-paid employees and owners. Employees who die before their retirement are assured that their beneficiaries will receive their account balance. Many defined benefit pension plans do not provide a pre-retirement death benefit. Older employees may receive a larger percentage of employer contributions since their retirement benefit must be funded over a shorter period of time than that of the younger employees.
Older employees are to receive credit for past years of service.
Employees who live until retirement age are normally due regular income guaranteed to last for their lifetime, or for that of the participant and the spouse, or for a specified period, such as 120 months. The amount received by the employee at retirement is a definite amount based on a specific formula that does not depend on investment results, as is the case with a defined contribution plan. Choice of returns on investments vs. guaranteed returns on investments. Employer costs can vary with options, investments and benefits. Costs can be passed along to employees.