The sector for private defined benefit (DB) pension plans includes the assets of DB plans sponsored by private employers for the benefit of their employees and retirees. Under a DB plan, workers accrue promises for retirement payments, typically according to a formula based on age, years of service, and salary. Employers and employees contribute assets that are set aside to cover the promised payments; however, workers do not own or direct the assets until the funds are paid in retirement, typically as an annuity. The sector includes all DB "qualified plans" that are required to file form 5500 with the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation.
This sector does not include DB assets that have been transferred to insurance companies for the purposes of paying pension benefits to retirees; those assets are included in the life insurance sector. However, unallocated insurance contracts held at life insurance companies, such as variable annuities and guaranteed investment contracts, are included in the private DB pension sector rather than in the life insurance company sector.
Liabilities of the private DB pension sector are equal to the value of the assets, not the actuarial liabilities of DB plans (that is, accrued benefits to be paid in the future). These liabilities are assets of the household sector.
These data are a component of total private pension funds shown on tables F.116 and L.116.