New companies and those with volatile earnings and uncertain cash flows generally prefer defined-contribution plans to defined-benefit plans.

Question

Quizplus · Accepted Answer

Defined-contribution plans allow companies to make contributions to employee accounts without promising specific benefits, which can be more flexible and less risky for companies with unpredictable finances. In contrast, defined-benefit plans require employers to provide a specific payout to employees upon retirement, regardless of the company's financial performance.

New Companies and Those with Volatile Earnings and Uncertain Cash