Defined Benefit vs. Defined Contribution

Working on reviewing our options for medical/ dental/ vision plans. Does anyone have any knowledge, or experience with the concept of defined contribution for welfare benefits? My understanding is that the company limits the amount max to each employee and the employee chooses where ever they wish to purchase the services. Thus not being tied to any one hospital or provider. thanks

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  • We currently operate under a "defined contribution plan" which in our case simply means we have a set amount we contribute towards a persons cafeteria plan, based on a percentage of their salary, from which they have a choice of benefits to choose from. The choices, however, are not so broad that they can choose whichever health insurance they want, for example. There is a set "group plan" for each category we offer: health, life, vision, dental, 401(k) etc. If they opt for insurance coverage not within the group, it may not be purchased through the cafeteria plan. If someone does not want any of our benefits they have the option of taking any or all of their cafeteria in cash. This option is of course not pre-tax as all of the others are.
    Hope this example helps.
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