Unlike defined benefit pension plan,which guarantees nothing,the 401(k)plan guarantees payments based on years of service.

Question

​Unlike defined benefit pension plan,which guarantees nothing,the 401(k)plan guarantees payments based on years of service.

Quizplus · Accepted Answer

The statement is incorrect. 401(k) plans do not guarantee payments based on years of service. Instead, the amount of retirement income depends on the amount of contributions and investment returns accumulated in the account. Defined benefit pension plans, on the other hand, do guarantee a specific retirement income based on years of service and salary history.

​Unlike Defined Benefit Pension Plan,which Guarantees Nothing,the 401(k)plan Guarantees Payments

Unlike Defined Benefit Pension Plan,which Guarantees Nothing,the 401(k)plan Guarantees Payments