Variable Benefit Plan

AAA

DEFINITION of 'Variable Benefit Plan'

A type of retirement plan in which the payout changes depending on how well the plan's investments perform. Variable benefit plans, also called defined contribution plans, allow the plan holder to manage his or her own account. By contrast, a defined benefit plan provides the plan holder with predetermined payments upon retirement that do not change and which are based on an eligibility formula rather than on investment returns.

INVESTOPEDIA EXPLAINS 'Variable Benefit Plan'

Variable benefit plans shift investment risk from the employer to the employee. It is possible that the employee will end up with less money from a variable benefit plan if he makes poor investment choices. However, he also has the power to make superior investment choices and end up with better benefits. Therefore, the ability of the employee to make smart investment decisions is critical in variable benefit plans.

RELATED TERMS
  1. Withdrawal Benefits

    The rights of an employee who has a qualified pension plan to ...
  2. Vested Benefit Obligation - VBO

    The actuarial present value of pension plan benefits belonging ...
  3. Fully Funded

    A pension plan that has sufficient assets needed to provide for ...
  4. Accumulated Benefit Obligation

    An approximate measure of a company's pension plan liability. ...
  5. Pension Shortfall

    A situation in which a company offering employees a defined benefit ...
  6. Defined-Benefit Plan

    An employer-sponsored retirement plan where employee benefits ...
Related Articles
  1. Retirement

    An Overview Of The Pension Benefit Guaranty Corporation (PBGC)

    Find out how this "retirement lifeguard" can save drowning plans, and why it's unlikely to be a long-term solution to the pension problem.
  2. Retirement

    Keeping Track Of Retirement Plan Assets

    Maintain records of your pension benefits or risk losing them.
  3. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  4. Retirement

    Chipping Away At The Pension Freeze Trend

    Learn five steps that'll put your retirement back into your own hands.
  5. Retirement

    Pension Law Could Reduce Your Payout

    Discover how this act negatively affects your lump-sum withdrawals.
  6. Retirement

    Lump Sum Versus Regular Pension Payments

    If you're about to retire, you may be facing this dilemma soon. Find out what your options are.
  7. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  8. Retirement

    Will My Pension Impact My Social Security Benefits?

    So you're eligible for a pension, and you're eligible for social security. And the question is, will that pension impact your social security benefit?
  9. Professionals

    What are the main goals of human resources planning?

    Learn about human resource planning, a business strategy that heavily incorporates workforce considerations into long-term objectives.
  10. Professionals

    How are labor demand forecasts made in human resources planning?

    Discover how human resource planning might be used to estimate the correct demand for labor in a given market, both qualitatively and quantitatively.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center