The only difference between a defined-benefit plan and a defined-contribution retirement plan is the tax deduction for the defined-contribution plan.

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The main difference between a defined-benefit plan and a defined-contribution plan is how the retirement benefit is determined. In a defined-benefit plan, the employer guarantees a specific benefit amount to the employee upon retirement based on a formula that typically includes salary and years of service. In a defined-contribution plan, the employer and/or employee contribute to an individual account, which is then invested, and the retirement benefit is based on the amount of funds in the account at the time of retirement. The tax treatment of these plans is different, but it is not the only difference between them.

The Only Difference Between a Defined-Benefit Plan and a Defined-Contribution