NEBF is a defined benefit pension plan because it promises a specific monthly benefit at retirement.

NEBF is a defined benefit pension plan because it promises a specific monthly benefit at retirement.

• A. Defined Contribution
• B. Defined Benefit
• C. Hybrid
• D. Cash Balance

Answer: (B)

The key idea here is a guaranteed retirement payout. A defined benefit plan promises a specific monthly amount during retirement, calculated by a formula that typically uses years of service and final earnings. Because the benefit is defined in advance, the plan sponsor bears the investment risk and must fund the promised payments. That’s why this NEBF example fits defined benefit classification. In contrast, a defined contribution plan does not guarantee a fixed monthly retirement check; benefits depend on contributions plus investment returns, so the payout can vary. A hybrid or cash balance arrangement involves mixtures of features, but the essential distinction for this question is the promise of a fixed monthly benefit, which aligns with defined benefit.

The key idea here is a guaranteed retirement payout. A defined benefit plan promises a specific monthly amount during retirement, calculated by a formula that typically uses years of service and final earnings. Because the benefit is defined in advance, the plan sponsor bears the investment risk and must fund the promised payments. That’s why this NEBF example fits defined benefit classification.

In contrast, a defined contribution plan does not guarantee a fixed monthly retirement check; benefits depend on contributions plus investment returns, so the payout can vary. A hybrid or cash balance arrangement involves mixtures of features, but the essential distinction for this question is the promise of a fixed monthly benefit, which aligns with defined benefit.