Which is better defined benefit vs defined contribution?
Sarah Duran
Published Feb 17, 2026
What’s the difference?
| PSPP defined benefit | Defined contribution |
|---|---|
| Your pension is managed by a team of investment experts. | You make your own investment decisions. You are responsible for investing your own contributions and take on all associated risks. |
Which of the following is typically the most significant OPEB other postemployment benefits )?
Typically retiree medical insurance is the most significant OPEB offering, though other benefits such as life insurance are also covered by this umbrella term.
Why are defined benefit plans better?
Defined benefit plans offer greater assurance of some returns, although you could achieve higher earnings by managing your own retirement funds. Defined contribution plans are much more common than defined benefit plans, with 43% of private sector, state and local government workers participating in one.
Who bears the risk in a defined benefit plan?
RISKS. Under a defined benefit plan, an employer promises an employee an annuity at retirement. The employer, not the employee, bears the most risk in a defined benefit plan.
What is the treatment of actuarial gains and losses?
Actuarial gains and losses comprise the difference between the pension payments actually made by an employer and the expected amount. A gain occurs if the amount paid is less than expected. A loss occurs if the amount paid is higher than expected.
What are the risks of a defined benefit plan?
Only defined-benefit pension plans can be at risk of underfunding because an employee, not the employer, bears the investment risk in defined-contribution plans.
What are actuarial gains or losses?
What is an Actuarial Gain Or Loss? Actuarial gain or loss refers to an increase or a decrease in the projections used to value a corporation’s defined benefit pension plan obligations. This means there are periodic updates to the pension obligations, the fund performance and the financial health of the plan.
What is expected return on plan assets?
The ARR is the total amount of expected return on plan assets and actuarial gains and losses that occurred in the period divided by plan assets in the beginning of the period. 5 The ARR is much higher than ERR in both fiscal 2013 and 2014, because Japanese and foreign stock prices increased during these time-spans.
What are some examples of postretirement benefits other than pensions?
Other post-retirement benefits include benefits that employees are paid when they retire that are not pension distributions. Employees often share the cost of these benefits through co-payments. Other post-retirement benefits might include dental, legal services, and tuition credit.
What is the main reason many employers are no longer using defined benefit plans?
That’s due to a mix of reasons, including risk, costs, declining union power and the rise of 401(k)-style defined-contribution plans, which require workers to kick in their own funds for retirement investments, often with a company match. Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
How will actuarial gains and losses be treated?
When companies adjust for actuarial gains or losses, they must amortize increases or decreases over time such that new changes align with the expected pension payments for current recipients.
