Final answer:
An employee with a defined benefit plan would receive a guaranteed percentage of their wages post-employment. Defined contribution plans like 401(k)s, in contrast, rely on a fixed contribution from both employer and employee, and the retirement benefit depends on the account's performance. Defined benefit plans also include protections through the Pension Benefit Guarantee Corporation.
Step-by-step explanation:
In a defined benefit plan, the employee would receive a percentage of their wages post-employment. Unlike a 401(k) or an IRA, which are types of defined contribution plans, a defined benefit plan promises a specific monthly benefit at retirement that can be either a set dollar amount or based on a calculation that usually includes factors such as salary history and length of employment. While defined contribution plans require the employer to contribute a fixed amount into a retirement account for the employee's future use, defined benefit plans focus solely on the guaranteed payout in retirement, and they are not directly tied to individual contributions like a 401(k).
To further safeguard these benefits, employers offering pensions are required to contribute to the Pension Benefit Guarantee Corporation to ensure at least some benefits are paid if the company cannot fulfill its promises. This additional layer of protection is exclusive to defined benefit plans.