RST Company offers a qualified retirement plan. Each employee contributes 4 percent of his or her pretax income to the plan, and RST matches the employee's contribution. An employee's benefit at retirement is determined by his or her account balance at the time of retirement. What type of retirement plan does RST offer?

Question

Quizplus · Accepted Answer

RST offers a defined contribution money purchase plan, where the employee and employer both contribute a specific percentage of the employee's income to the plan, and the retirement benefit is determined by the account balance at retirement. This is different from a defined benefit plan, which guarantees a specific retirement benefit based on a formula that considers factors such as years of service and final average salary.

RST Company Offers a Qualified Retirement Plan