Defined benefit plans provide a benefit at retirement based on a formula specified by the plan document. A typical traditional DB plan might describe the benefit as a monthly annuity payable at normal retirement age (age 62-65), based on the participants average compensation and years of service. 

For employers, these types of plans were once very popular and the primary retirement plan offered to employees in the United States. For many reasons these plans have been phased out over the last two deceased in favor of 401(k) plans. However, they are increasingly popular for small employers since they allow business owners to make retirement plan contributions that are significantly higher than any other type of tax qualified retirement plan.

For example, a defined contribution plan (such as a 401(k), profit sharing or SEP-IRA), allows a maximum contribution $66,000 per year. The maximum contribution to a DB plan is dependent on your age and compensation levels. For a 53 year old making at least $265,000 in 2023, the initial contribution to a DB plan can be as large as $226,000. The annual contribution is expected to increase as the business owner ages and gets closer to retirement age. Solo Pensions will design a retirement program for you at no cost based on your age and expected earnings.