Which type of pension plan typically has a fixed benefit amount upon retirement?

A defined benefit plan is designed to provide employees with a predetermined, fixed benefit amount at retirement, often based on factors such as their salary history and length of service with the company. This type of pension plan ensures that the employee receives a specific benefit, which can be seen as a guarantee of income in retirement, typically expressed as a monthly payment.

In this system, the employer assumes the investment risk and is responsible for ensuring that there is enough funding to meet the promised benefits. The benefits are calculated using a formula that often considers years of service and average salary, providing predictability and security for employees as they prepare for retirement.

While some other plans, like defined contribution plans, count on the contributions made to investment accounts with the final retirement benefit depending on investment performance, the defined benefit plan offers a solid commitment from the employer, ensuring that employees know exactly what they will receive when they retire.

Noncontributory and cash balance plans also present variations in pension structure, but they do not primarily focus on providing a fixed amount as a benefit in the same way a defined benefit plan does. They may include different funding mechanisms and benefit calculations that do not guarantee fixed payments like the defined benefit plan.