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in this video were going to talk about the difference between a defined benefit in a defined contribution pension plan and the differences as follows with a defined benefit plan basically the employer is promising a series of annuity payments to the employee for the rest of the employees life after the employee retires so these annuity payments can be calculated in an infinite number of ways but Ill just give you one example so lets say that the employer says look for every year that you work for the company and lets say that the employee works 25 years at the company so for every year of service that you give to this company you can multiply that by two percent and then take that times the highest salary that you ever have when youre working at this company and lets say that thats a hundred thousand dollars right so let this is just hypothetical for an employee they work for this company twenty five years and their max salary that they ever made was a hundred thousand they mu
