What defines a Defined Benefit Plan?

A Defined Benefit Plan is characterized by promises to provide specific retirement benefits to employees based on predetermined factors, rather than the performance of investment funds. This means that the plan guarantees a certain amount of benefits to participants at retirement, typically calculated based on factors like salary history and years of service. Importantly, the financial responsibility for ensuring that these benefits are met lies with the employer, regardless of how well the investment fund performs.

In contrast, other options describe different types of plans and funding arrangements. An arrangement where benefits vary based on fund performance signifies a Defined Contribution Plan, where the payouts depend on the investment growth over time rather than guarantees. Plans that provide benefits solely based on employee contributions typically represent a more individual-focused plan rather than a defined benefit structure. Lastly, an arrangement defined by fixed annual contributions also leans towards a Defined Contribution Plan rather than the guaranteed nature of a Defined Benefit Plan. Thus, option B clearly and accurately captures the essence of what defines a Defined Benefit Plan.