There are several fundamental differences between defined-benefit plans and defined-contribution plans. In the defined-benefit plan, the plan sponsor does which of the following?

Question

Quizplus · Accepted Answer

In defined-benefit plans, the plan sponsor is responsible for funding and guaranteeing a specified retirement benefit to the employee. This means that the sponsor bears the investment risk if the investments do not generate sufficient returns to fund the guaranteed retirement benefits. In contrast, in defined-contribution plans, the investment risk is borne by the employee, as the employer typically only contributes a fixed amount, and the investment returns are dependent on the employee's investment choices. Therefore, option D is the best choice as it correctly identifies the sponsor's responsibility for investment risk in defined-benefit plans.

There Are Several Fundamental Differences Between Defined-Benefit Plans and Defined-Contribution