What is a primary feature of a Defined Benefit Plan?

A primary feature of a Defined Benefit Plan is that it guarantees a specific benefit expressed as an annuity at retirement age. This means that the plan provides a predetermined monthly benefit to the retiree, which is calculated based on factors such as salary history and years of service. This predictability allows employees to have a clear understanding of their retirement income, making Defined Benefit Plans particularly attractive for long-term financial planning.

In contrast, other types of plans, such as Defined Contribution Plans, depend on individual account balances influenced by contributions and investment performance, which can lead to uncertainty regarding retirement benefits. Furthermore, participants in Defined Benefit Plans do not typically have control over the investment choices, as the plan sponsor manages the investment strategy to ensure the promised benefits are funded. Lastly, Defined Benefit Plans are not limited solely to highly compensated employees; they can cover a broad range of employees within an organization, making them more inclusive than the final option suggests.