Defined Benefit versus Defined Contribution—Understanding Your Pension

As Alberta teachers receive their annual plan member statements, some members may have questions about the calculations and the terms used in the statements. In some cases, teachers, both new and experienced, use the terms defined benefit and defined contribution interchangeably. It is important to note that these two terms are not the same. Understanding the distinction is essential to understanding how your pension through the Alberta Teachers’ Retirement Fund (ATRF) works.

What Is a Defined Benefit (DB) Pension Plan?
A defined benefit pension plan promises a predictable lifetime pension, calculated using a formula.

For Alberta teachers, the ATRF pension is
• registered under the Income Tax Act;
• sponsored jointly by the Government of Alberta (GOA) and the Alberta Teachers’ Association (Association), as representatives of plan members; and
• designed to provide a secure, lifetime income in retirement.

The key feature of a DB plan is that your pension benefit is defined in advance. It is typically based on
• years of pensionable service,
• average salary (often highest years) and
• a benefit accrual rate set out in legislation and plan rules.

Investment performance does not affect the formula that determines your pension entitlement. The plan sponsors (Government of Alberta and the Association) nominate trustees to sit on the ATRF board, who have the fiduciary responsibility for the plan’s well-being and longevity. Specifically, the ATRF is responsible for 
• plan design, benefits and setting contribution rates for plan members;
• sharing in plan gains and losses; and
• managing long-term sustainability.

In other words, the plan absorbs investment volatility—not the individual teacher.

What Is a Defined Contribution (DC) Pension Plan?

A defined contribution plan works differently. In a DC plan
• the fixed contribution amount is defined (for example, X% from employer + X% from employee).
• contributions are invested in an individual account.
• the retirement income depends on o investment performance, o market conditions and o how the funds are withdrawn.

There is no guaranteed lifetime pension formula. Further, in a DC plan, the individual member bears
• investment risk,
• longevity risk (risk of outliving savings) and
• market timing risk at retirement.

The core differences between the two types of pension plans are outlined below.

Defined Benefit (DB)
• The pension amount is defined.
• Lifetime income is predictable.
• Risk is shared by plan sponsors.
• It is designed for long-term income security.

Defined Contribution (DC)
• The contribution amount is defined.
• Retirement income depends on market returns.
• Risk is borne by the individual member.
• It functions more like a retirement savings account.

Why This Matters for Alberta Teachers

Your ATRF pension is a defined benefit plan. That means:
• You are earning a lifetime pension entitlement, not building an investment account.
• Market fluctuations do not change your earned pension formula.
• While the commuted value of the pension will change over time with the fluctuation in interest rates, this only applies to those under 55 years of age who withdraw their pension.
• The ATRF board is responsible for funding decisions and benefit structure.
• Gains and losses are managed collectively over time.

This structure is fundamentally different from private-sector retirement savings vehicles, such as RRSP-based group plans or many corporate DC pensions.

A Long-Term Design

Defined benefit plans are built for stability, predictability, intergenerational equity and lifetime retirement security They are not short-term investment products.

Their performance and sustainability are measured over decades—not quarters. For teachers early in their careers, understanding this distinction is critical. A defined benefit pension is one of the most significant components of your overall compensation package.

Teachers, both nearing retirement and new to the profession, who want more information about their defined benefit plan should register to attend a virtual Understanding Your Pension session on March 18, 2026, at 7–10 PM. The registration form is available on the Association website. 

WORTH SHARING
Alberta teachers participate in a defined benefit pension plan through the Alberta Teachers’ Retirement Fund (ATRF). This means your pension is calculated using a formula based on your years of service and salary—not on individual investment returns. Unlike a defined contribution plan, where retirement income depends on market performance and personal investment decisions, the defined benefit model provides predictable lifetime income and shares funding responsibility between the Government of Alberta and the Association, the plan sponsors. Understanding this difference is essential to appreciating the long-term value and security of your pension.

If you have general pension-related questions, please contact Teacher Employment Membership Support at 1-800-232-7208 for assistance. Specific questions about your annual member statement should be directed to the ATRF at 1-800-661-9582. Read the full Worth Knowing. #WeAreATA