Characteristics of Defined Benefit Pension Plans

XYZ Corporation offers a defined benefit pension plan to its employees, which provides retirement income based on a formula that considers the employee's salary and years of service.

The company's actuaries are working to project the future benefits that will need to be paid out under this plan. This includes establishing the appropriate assumptions for discount rates, expected salary increases, and retirement age.

Given these parameters, the accounting treatment for the pension plan is crucial for accurately representing the company’s financial position.

Which of the following statements correctly describes a key characteristic of a defined benefit pension plan?