What is a defined benefit plan in regard to retirement pensions?

A defined benefit plan is a retirement plan that provides a guaranteed payout at retirement, calculated based on the employee's years of service and average salary during their working years. This type of plan ensures that employees receive predictable and stable income after they retire, which allows for better financial planning in their later years.

Employers are generally responsible for funding these plans and managing the investments needed to provide the promised benefits, often through a formula that takes into account factors such as total years of service and average earnings. This creates a sense of security for employees, as they do not have to worry about fluctuating investment returns or outliving their savings, which can happen with other types of retirement plans.

In contrast, other options describe retirement plans that are not defined benefit plans. For instance, plans based on personal contributions or requiring employees to manage their own investments are characteristic of defined contribution plans, where the retirement benefits depend on the amount contributed and investment performance. Managing fluctuations based on market conditions is also indicative of defined contribution plans rather than the stability offered by defined benefit plans. Therefore, the focus on fixed payments based on service years and average salary distinctly defines option B as the correct choice.