Pleasant Company has established a pension plan for its employees that operates as follows: Each year, Pleasant Company places a ﬁxed dollar amount in a pension fund for each employee. The funds are then invested. Upon retirement, each employee is entitled to the cash value of the funds that have been invested in his/her name. This arrangement is an example of which of the following?
A) Deﬁned beneﬁt program.
B) Deﬁned contribution program.
C) Contingent program.
D) Deferred timing program.

Question

Quizplus · Accepted Answer

This arrangement is an example of a Defined Contribution Program because the employer contributes a fixed amount to each employee's pension fund, and the retirement benefits depend on the investment's performance, not on a predefined benefit formula.

Pleasant Company Has Established a Pension Plan for Its Employees