A defined benefit plan promises a benefit, traditionally an income for life starting at normal retirement age. The employer funds it, and an enrolled actuary works out each year how much must go in to keep the promise on track. The tax code defines it by exclusion: any plan that is not an individual account plan (IRC 414(j)).
There are two common designs. A traditional plan states the benefit as a monthly pension, often a percentage of pay for each year of service. A cash balance plan states it as an account balance. Legally both are defined benefit plans, subject to the same 415(b) limit of $290,000 a year in 2026 and the same minimum funding rules.
Because the cap is on what may come out rather than on what goes in, these plans allow far larger contributions than a defined contribution plan for owners in their 40s, 50s and 60s. The trade-off is commitment: the business must contribute at least the minimum every year. For how the two designs compare for one person, see cash balance vs traditional defined benefit plans.