An employee enrolls in a pension plan that will pay out 3% of the employee's average salary for the last 3 years the employee worked.What type of pension plan does the employee have?

Question

Quizplus · Accepted Answer

The pension plan mentioned in the scenario pays out a percentage of the employee's average salary for the last 3 years worked. This indicates a defined benefit plan where the benefit is predetermined based on a formula, rather than depending on employee contributions or investment returns (defined contribution plan) or a normal payout plan which does not have a specific formula for determining benefits.

An Employee Enrolls in a Pension Plan That Will Pay