Underfunded pension plans are primarily a problem with defined-contribution pension plans.

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Underfunded pension plans are primarily a problem with defined-benefit pension plans, where the employer guarantees a specific retirement benefit amount to the employee, and the funding responsibility lies with the employer. In contrast, defined-contribution plans, such as 401(k)s, place the investment risk on the employee, and the payout depends on the contributions and the performance of the investments, not on a predetermined benefit.

Underfunded Pension Plans Are Primarily a Problem with Defined-Contribution Pension