Pension Plans Traditionally, when one thought of pension plans, the defined benefit plan came to mind. Defined benefit plans promise that a specified benefit will be paid to employees at retirement, usually defined as a percentage of the employee's compensation per year of service.
Statistics show that, in recent years, defined contribution plans have become more popular.
Although many reasons have caused the surge in defined contribution plans, one of the principal reasons is the Sec. Employer contributions also may be made to the plan, but they are not required. As the U.S. population ages, and uncertainty about future economic conditions persists, interest in defined benefit plans may grow. Concerns regarding the continued viability of the Social Security program, as well as the future performance of the stock market, are other considerations that may renew interest in defined benefit plans. These factors are likely to increase employee appreciation of benefits that are geared toward helping them meet their long-term income needs.