A defined contribution plan is an employer commitment to make specific future payments to participants upon retirement.

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A defined contribution plan is actually an employer commitment to make contributions to an individual account for each participating employee. The amount of contributions is usually based on a percentage of the employee's salary or a fixed dollar amount. The plan does not guarantee any specific future payments upon retirement, as the retirement benefits will be determined by the amount of contributions made and the investment returns earned on those contributions.

A Defined Contribution Plan Is an Employer Commitment to Make