What are the differences between defined contribution plans and defined benefit plans? Why are defined contribution plans gaining in popularity, while defined benefit plans are trending downwards?

What are the differences between defined contribution plans and defined benefit plans? Why are defined contribution plans gaining in popularity, while defined benefit plans are trending downwards?

A defined contribution plan is a plan where the employee puts a percent of their compensation in an account and the employer matches it. The most popular defined contribution plan is a 401(K).

A defined benefit plan is a benefit plan that promises a specified monthly benefit at retirement. This plan will state exactly how much per month you will receive after retirement, typically 1% of average salary for the last 5 years of employment for every year of service with an employer (Types of Retirement Plans, 2023, para.1).

While a defined benefit seems like it may be a better option it also may provide a lot smaller payout of benefits than a defined contribution plan. Some pros of DCP over DBP are contributions are discretionary with a DCP but required for a DBP. Assets may be individual accounts or pooled with a DCP but must be pooled for a DBP. Another reason defined contribution plans may be becoming more popular are that the benefit depends on level of contributions and investment returns where with a benefit plan the retirement benefit is predefined and the contributions are calculated yearly. (Defined Benefit Plan vs Defined Contribution Plan. How They Stack Up., 2023)

what are your thoughts on this?