Which of the following accurately describes a pension plan?

A pension plan is fundamentally characterized by its defined benefit nature. This means that the plan guarantees a specific payout to retirees based on a predetermined formula, which typically takes into account factors such as salary history and years of service. Unlike other types of retirement plans, such as 401(k)s or IRAs that are more reliant on individual contributions and the performance of investments, a pension plan provides a stable income during retirement that is not directly impacted by fluctuating market conditions.

In essence, the defined benefit outcome is the hallmark of a pension, as it reassures employees that they will receive guaranteed benefits upon retirement, based on the plan's formula rather than their investment decisions. This certainty can significantly influence employees' perceptions of financial security in their post-retirement life.