A company instituted an IRS approved plan to contribute monies to a plan that would pay each employee a percentage of his or her highest year of salary for each year of service upon termination of services.This plan is a

A) defined benefit pension plan.
B) defined contribution pension plan.
C) government sponsored pension plan.
D) postretirement benefit plan.

This plan is a defined benefit pension plan as it promises a specific benefit amount to each employee based on a formula that takes into account their highest year of salary and years of service. This is in contrast to a defined contribution pension plan where the amount contributed is fixed and the benefit received depends on the performance of the investments.