Definition of defined-benefit pension plan

Pension plan that commits to paying a specified amount to each employee on retirement, depending on the years of work and salary level. The employer contributes a regular amount to the plan, normally a percentage of the employee's pay. Employee contributions are mandatory or voluntary depending on the scheme (see non-contributory pension plan). Companies may have to invest the contents of the pension fund to ensure the fund is large enough to meet retirement payments, and carry full liability for investment performance.