A retirement plan wherein an employer makes contributions for each employee to supply them with a particular benefit. The total benefit is expressly stated but the amount of each contribution is not.
Insurance Encyclopedia
Defined benefit pension scheme
Occupational scheme under which the retirement benefits are fixed by formula (e.g. 1/60th or 1/80th of final pensionable pay for each year of pensionable service). The employer undertakes to make whatever contributions, taking account of any employee contributions, are necessary to secure the pensions. Most schemes are final salary schemes, and are subject to Inland Revenue limits if they are exempt approved schemes.
Defined benefit plan
A pension plan providing a specific benefit for each employee. The employer is required to make adequate contributions to the plan to fund the promised benefits. No individual accounts are maintained as is done in defined contribution plans.
Defined contribution formula
Calculation used to establish the amount of money that is to be deposited into a pension plan each year for each participant. Contributions are based on a certain percentage of the participant’s compensation.
Defined contribution pension plan (Pensions)
A pension plan wherein contributions are predetermined, either as a flat amount or as a percentage of the employees pay. The benefit amount is the total of the contributions.
Defined contribution plan
A pension plan calling for definite annual contributions by the employer but with no specific benefit promised to the employee. The employee’s benefits are ultimately determined by the amount contributed plus the investment income.
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US: A pension plan calling for definite annual contributions by the employer but with no specific benefit promised to the employee. The employee’s benefits are ultimately determined by the amount contributed plus the investment income.
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MEDICAL,USA: Retirement plan that states the amount of yearly contributions that the plan sponsor will make on behalf of a plan participant such as a 401(k), Keogh, or individual retirement account (IRA). This type of plan does not guarantee a certain amount of retirement benefits. A participant’s benefits when retired are based on the amount that was contributed to the participant’s account plus any investment earnings. Under a defined contribution plan, the employee directs the investment of his or her retirement savings. These kinds of plans are not covered by the Pension Benefit Guaranty Corporation.
Defined contribution scheme
Occupational pensions scheme where an employee’s retirement benefits depend on (a) the amount of contributions and investment income on these contributions, and (b) the annuity rate available when the member retires. There is no set formula, as in the case of defined benefit schemes, for determining benefits. These schemes are also called money purchase schemes
Definite Advice
An advice showing the correct, as opposed to provisional, figures.
Definition clause
A clause whereby insurers define the meaning they intend to assign to various words and phrases in the policy. This is particularly important when the ordinary meaning of the word is not appropriate. The term ’employee’ is widely defined in public and employers’ liability policies with the intention of removing doubt that might otherwise cause disputes.
Definitions
Section of an insurance policy where terms with specific meanings relative to coverage are defined.