Defined Benefit Plans

What this video covers

• Why the employer, not the employee, bears all investment risk in a defined benefit plan, and how the promised benefit stays fixed regardless of market performance
• What "actuarially determined" really means: the contribution amount is variable year to year, with no fixed flat dollar contribution from the employer
• The maximum annual benefit formula for 2026: $290,000 or 100% of average compensation for the highest three consecutive years, whichever is less
• Vesting rules: employer contributions follow a vesting schedule, while employee contributions are always 100% vested immediately
• Why employees do not direct investments in a defined benefit plan, and the role of plan trustees in managing the pooled portfolio
• The Pension Benefit Guaranty Corporation (PBGC): what it covers (private-sector defined benefit plans, both single-employer and multiemployer), how it is funded, and the three categories it explicitly does not cover
• The critical distinctions between defined benefit and defined contribution plans across five dimensions: what is defined, who bears investment risk, individual accounts, PBGC insurance, and how contributions are determined